BCG的中國(guó)渠道戰(zhàn)略報(bào)告

1、opportunities for action in consumer markets wholesale distribution changes for a winning china strategy wholesale distribution changes for a winning china strategy hypermarkets, supermarkets, and convenience stores are blanketing chinaor so it seems. global players carrefour and wal-mart are openin

2、g new stores at an aggressive pace. local retailer lianhua has amassed some 2,000 new outlets in 16 provinces. and regional chain hongqi has more than 200 supermarkets in sichuan province alone. during the past few years, sales in the new retail formats have grown more than 50 percent a year. nevert

3、heless, this modern trade accounts for less than 30 percent of retail sales in china, and it serves only one-quarter of the 500 mil- lion consumers who live in or near chinas more than 3,000 cities and 20,000 towns. these consumers, who are reaching threshold spending levels for many products, repre

4、sent a market with huge growth poten- tial. and because most of them still shop at mom-and- pop markets and small, local department stores, tradi- tional trade channels will remain a significant part of the economy for at least the next decade. yet only a small fraction of western consumer-goods com

5、panies in china have fully explored traditional trade beyond the largest cities. despite the great potential for profits, most global players have been discouraged by the difficulty of controlling distribu- tion in those channels. companies that are able to clear this hurdle will find that tradition

6、al trade offers an important source of growth, with superior eco- nomics and decisive competitive advantage. of the various methods for dealing with the distribution challenge, active management of the wholesale chan- nelan approach that has been underleveraged by global consumer-goods companiespres

7、ents an opportunity well worth considering. approaches to sales and distribution in china most western consumer-goods companies have em- braced chinas modern-trade channel, and theyve brought to it management experience with key ac- counts in other countries. but outside the largest cities, chinas v

8、ast, heterogeneous markets make the sales and distribution of consumer goods problemat- ic. the expense and resources required for retaining firm control of selling and promotional activities across a broad geographic area with a fragmented retail structure force most companies to choose either focu

9、s or breadth. for a few premium categories, such as cosmetics and imported wines, the tradeoff is easy since demand is concentrated in major cities among affluent con- sumers. but for most consumer productssnacks and ready-to-drink beverages, home-care and personal- care products, and durables, such

10、 as television sets and microwave ovensat least half of the demand comes from the highly fragmented traditional chan- nels. (see exhibit 1.) yet even in those categories, most global companies in china give up broad cover- age and penetration in favor of control. usually, they choose between two typ

11、es of sales and distribution models: the direct model and the distributor model. sometimes they combine the two. the direct model focuses on managing key accounts and provides the most assurance to manufacturers, since they remain in full control of the sales force and selling activities. depending

12、on the category and size of the business, however, the direct model is only cost- effective for targeting modern trade in the top cities in china. western companies in small categories or exhibit 1. most of the demand in china comes from traditional trade percentage of sales percentage of sales thro

13、ugh modernthrough traditional categoryexampletrade channelstrade channels personal careshampoo5050 products durablestv sets,30 to 3565 to 70 microwave ovens home carelaundry3070 productsdetergent ready-to-drink carbonated2575 beveragessoft drinks snacksrice crackers1585 source: bcg analysis. with mo

14、re modest ambitions in china tend to choose this model. larger global companies in china often deploy the distributor model to serve traditional trade. although this model has been quite effective in western markets, it has not yielded the same results in china. in most developed markets, distributo

15、rs are profes- sional-services companies that assume selling and other value-added activities on behalf of the manufac- turer. in china, however, most distributors are passive and have little experience in sales or service. (see exhibit 2.) for this reason, many manufacturers have invested considera

16、ble time and money in upgrading the capabilities of their chinese distributorsproviding them with training (classes and trips), tools (trucks and personal computers), and sales resources (subsi- exhibit 2. how chinese distributors compare with their western counterparts chinese distributorswestern d

17、istributors are less focused on salesprovide value-added and serviceactivities have skills limited tohave strong selling and order taking, stock keeping,promotion capabilities and physical delivery are not interested inare interested in long-term exclusive relationshipsrelationships have relatively

18、smallhave large-scale businesses$1 millionbusinesses$5 million to to $2 millionwith limited$10 millionwith broad working capital and productproduct portfolios range have few it capabilities:have it capabilities, such as poor data make it difficultelectronic data interchange, to measure distributorto

19、 provide up-to-date performanceinformation source: bcg analysis. dized sales reps, merchandisers, and promoters). but since most distributors refuse to work exclusively with one company, some of the training and resources given to them also benefits the competition. other manufacturers use their own

20、 sales teams and promo- tions to generate downstream demand. yet that has the effect of reducing chinese distributors to “box movers.” whats more, it is extremely difficult to piece together a distributor network for covering smaller citieslet alone towns. as a result, the distributor model in china

21、 turns out to be less effective and more expen- sive than manufacturers anticipated. not surprisingly, some companies that have chosen the distributor model are now rethinking their decision, whereas oth- 250 ers are struggling to find a way to make the current model work. the advantages and challen

22、ges of the wholesale channel the wholesale channel, which has been largely ignored by global companies, is a far-reaching multi- layered structure built up over decades of central state planning. the wholesale structure replicates the hierarchy of cities in china, with products flowing from first-ti

23、er wholesalers located in provincial capi- tals and large prefecture cities, to second-tier whole- salers supplying small prefecture cities and county- level cities, to third-tier wholesalers in towns, most of which also supply nearby villages. during the past ten years, the state planning apparatus

24、 has evolved to the point where many of todays more successful whole- salers are private enterprises. (see exhibit 3.) exhibit 3. the wholesale channel structure replicates chinas hierarchy of cities and towns approximate number in 2002 manufacturer key accounts provincial capitals31 first-tier larg

25、e prefecture30 to 50wholesalers cities small prefecture cities second-tier wholesalers county-level cities3,000 towns20,000 third-tier wholesalers villagesunknownrural consumers source: bcg analysis. exhibit 4. a pilot program ensures effective implementation pilot: getting it right design sales and

26、 distribution model 1. create model for regions and customer segments observe key factors 1. monitor sales turnover 2. watch coverage and penetration 3. check price stability 4. scrutinize margins 5. examine sales team execute pilot design operations 1. map the process 2. set trade terms and targets

27、 3. monitor the systems, rules, and penalties 4. align the organization with performance indicators and incentives 5. plan logistics and administrative support performance 1. develop clear pilot objectives 2. select representative cities and regions 3. determine pilot duration and resource allocatio

28、n 4. plan reporting process to ensure high project visibility source: bcg analysis. the wholesale channel offers several unique advan- tages: it is, arguably, the only channel that can deliver high penetration into traditional retail outlets across almost all of china. it is the only economically vi

29、able way to serve chinas many cities and towns (and, depending on the product, even some rural villages). it is by far the lowest-cost channel. there is as much as a 20 to 30 percent difference in costs between the wholesale-channel and distributor approaches. the savings are driven by lower sales a

30、nd marketing costs (fewer sales reps and promot- ers, lower trade spending) and higher price realiza- tion (fewer discounts and returns). consider the example of want want, a leading snack- foods player in china with revenues reaching $450 million in 2003. it has leveraged the wholesale channel and

31、achieved operating margins of 22 per- cent. today this channel contributes more than 70 percent of the companys total business, with distribu- tion and selling costs accounting for approximately 25 percent of its overall cost structure. given these benefits, why havent more global compa- nies taken

32、advantage of the wholesale channel? we believe it has been neglected because of misconcep- tions western managers might harbor about whole- sale in china. weve encountered arguments like the following: the majority of wholesalers have sales turnovers of less than $100,000 per month and serve a relat

33、ively limited geographic area. how can we manage hun- dreds of wholesalers when we cant even manage a few dozen distributors? we have absolutely no control over product flow. once we sell our products to the first-tier whole- saler, we have no way of telling whether they actual- ly flow to the count

34、y and town levels as intended or whether they are simply sold off at a low price with- in the large cities. wholesalers dont care about marginsthey just want fast product turns. we tried to motivate them with higher margins, but rather than keep the extra profits, they pass them on to the next tier

35、of wholesalers. that completely destroys our pricing structure. the more we sell into the wholesale channel, the more likely we are to encounter problems with fake products. modern trade retailers would never jeopardize their relationship with us by carrying fake products. our sales reps have never

36、dealt directly with whole- salers before. were not sure they can do it. although these perceptions and doubts are not com- pletely unfounded, the challenges of managing the wholesale channel can still be overcome. the managed wholesale approach from many years of experience helping companies with sa

37、les and distribution of consumer products in china, we have identified five critical factors for suc- ceeding in the wholesale channel. although any approach will vary according to product category, the general principles we outline are universal and have been tried and tested. map the process. mapp

38、ing consists of identifying a network of the best wholesalers and putting them together to provide maximum coverage for a particu- lar region. the map details how products flow from first-tier wholesalers at the provincial-capital and pre- fecture levels to second- and third-tier wholesalers in coun

39、ties and towns, and from wholesalers to retailers. one big advantage of mapping is that it identifies relationships in which trust has been established among wholesalers across the different tiers. mapping also helps you avoid signing up more wholesalers than can be accounted for. in fact, it is pre

40、ferable to work with only one or two wholesalers in each territo- ryeven if it means occasionally bypassing a low- value-added first-tier wholesaler and selling directly to the second tier. otherwise, competition among whole- salers could lead to a price war. for the inexperienced, however, mapping

41、can be an extremely daunting undertaking. one food manufac- turer took three months and six sales reps to compile several thick binders profiling all the wholesalers in just one province. (data included number of sales per month, sales to the top 25 retail customers, and sales to the top 10 cities a

42、nd towns.) a key factor in suc- cessful mapping is to collect the right level of infor- mation and avoid wasting time and resources. for managers unfamiliar with the mapping process, we recommend first testing and refining the mapping approach in a few selected locations. set trade terms and targets

43、. setting trade terms is one of the trickiest elements in wholesale. your goal should be to maintain a consistent market price and not to use higher margins or volume incentives to try to motivate wholesalers. prices in the wholesale mar- kets are highly transparent, and they are sensitive to even t

44、he slightest movements. therefore, unless you play an active role in monitoring and controlling wholesale prices, wholesalers margins can be compet- ed away. volume-based incentives can be particularly damaging because wholesalers are often willing to sell at a loss in order to achieve their monthly

45、 or quarter- ly targets and earn rebates. some manufacturers compound the problem by following the common western practice of setting stretch targets. in china, this often has the unintended consequence of encouraging wholesalers to cut prices rather than increase their selling efforts to reach thei

46、r targets. monitor the systems, rules, and penalties. you need to ensure that wholesalers comply with their designated territories and prescribed pricing structure. that requires systems to monitor for infractions and strict rules and penalties (at the extreme, termination of the contract) to punish

47、 frequent offenders. pepsico, for example, has sales reps whose sole responsibility is to monitor the movement of prices in wholesale mar- kets and track down wholesalers who undercut the agreed prices. other companies use markings or stamps to trace products flowing out of their pre- scribed territ

48、ory. unilever even has a swat team whose role is to investigate and report counterfeiting activities. align the organization with performance indicators and incentives. a company must have the right capabilities to make a successful transition to the wholesale model. we have found that with the prop

49、er training and tools, it is possible for most sales representatives to work well with wholesalers. the key is to determine early on whether reps are capable of adapting to the new system and to replace the ones who cannot. fortunately, there are plenty of reps in china who are experienced and skill

50、ed in dealing with wholesalers. most work for local chinese companies. for them to succeed in a global company, you must provide orien- tation and training programs. plan logistics and administrative support. many com- panies dont do the kind of thorough preparation that can mitigate implementation

51、risks. given the vast differences across chinas huge territory, any approach to implementation must accommodate local variations of the model. our experience suggests that it is much better to test and tweak the approach with a few pilots. exhibit 4 illustrates how a pilot might “go around the loop”

52、 a few times before a pro- gram is rolled out across the country. we recommend that you assign a small team with experience in sales and business analysis to the pilot for its duration. the team can then become the core resource for dis- seminating knowledge from the pilots during the rollout phase. because it takes time to design and implement a good wholesale approach, most companies can create a sus- tainable advantage over