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Marketers understand that there are harmful, natural, and beneficial goods. Often, we focus on the harmful ones, which can also be a bad habit to manage. However, proper stockpiling isn’t always detrimental to the market; sometimes, it can bring dual benefits to both dealers and market growth.
Picking up Goods to Strengthen Weak Markets
Guangdong Z Paper Group is among the leading global players in household paper, yet its sales management has historically been in a broad, unrefined phase, relying heavily on large dealer systems with minimal detailed or process-oriented management.
For the past five years, the monthly sales volume in Nanning, Guangxi, hovered around 800,000 yuan, while other provincial capital markets had already surpassed 3 million yuan per month. At the start of 2006, Sales Director Wu took office and reviewed the market, discovering that the Nanning dealer and sales team worked hand-in-hand for mutual benefit. Supermarket product price increases were 25-35%, while dealers demanded less than 15% profit on special prices. The typical reel income was 15 yuan at the factory price, with a supermarket retail price of 23 yuan. The product’s price competitiveness was weak, keeping sales stagnant for a long time. The dealer admitted, “Less investment, more output.†Salespeople found no motivation to improve the situation.
In February 2006, Director Wu first moved the salesperson from Nanning and hired a new manager. The task? Resolve the excessive pricing issue within three months. Manager Chen, an experienced salesman who once created a national model market in Xiamen, Fujian, was appointed.
After Chen's appointment, he tried negotiating with the Nanning dealer to adjust prices. However, the dealer wasn't easily swayed. He argued that if he could adjust the price, why hadn’t others done it already? Supermarkets didn’t allow adjustments, and he claimed to be powerless against larger forces. Past sales reps had also exploited him, leaving him resentful. Salespeople thought, “It’s easier to transfer blame later,†and were complacent.
But Manager Chen wasn’t deterred. Trained by Wu, he was determined to solve this issue.
Seeing negotiation was futile, Chen resorted to a “smuggling†tactic. He mobilized Qinzhou dealers to supply Nanning with a 6% markup. Qinzhou dealers had already infiltrated Nanning, causing shock as the price gap was significant. Chen then supplied two batches of merchants directly to supermarkets. Within two months, these merchants covered over 50 supermarkets of various sizes, selling at 20 yuan retail instead of the usual 23 yuan. This created a 3-yuan difference from the Nanning dealers' suggested retail price. When supermarkets noticed such a discrepancy, they questioned the Nanning dealer. In response, the Nanning dealer blamed Qinzhou dealers. Chen countered, pointing out that without the price disparity, Qinzhou dealers wouldn’t have entered. The dealer had to reflect on his pricing strategy.
After some persuasion, the Nanning dealer conceded and agreed to adjust prices.
Chen issued a price adjustment notice from the manufacturer, citing reduced raw material costs. Starting May, the national price adjustment would begin. The new price list specified wholesale, suggested retail, and special offer prices. The supermarket chaos subsided, and the price adjustment proceeded smoothly.
Using this approach, Chen boosted Nanning’s sales from 800,000 yuan/month to 2.3 million in less than six months. He later developed the market by focusing on brand and sub-channels, creating a model market for the company.
Picking up Goods to Improve Dealer Management
Dongguan Lide Paper Distribution Department, established in 1986, is run by “Big Fat Cai,†a seasoned distributor in his 40s. Known for distributing three major paper brands, including A-brand with 3.5 million yuan monthly sales, he also handles five second-tier brands and other household items. He relies on five secondary distributors, who handle traditional channels and avoid modern supermarket chains. Big Fat Cai finances these distributors, fostering loyalty, though they rarely engage directly with manufacturers.
Dongguan, with over 13 million residents, has a thriving consumer market. Its eight local supermarket chains include Jiarong, Meiyijia, and China Resources. Distribution flows through secondary and tertiary merchants to thousands of retail outlets.
Lide’s distribution model relied on these five secondary merchants. Big Fat Cai never considered direct supermarket sales until 2007.
By late 2006, a Shenzhen dealer decided to expand into Dongguan. Initially, Big Fat Cai dismissed the threat, believing Shenzhen dealers lacked the financial reach to impact his distribution channels.
By March 2008, Fat Cai realized Shenzhen dealers were targeting both supermarkets and secondary channels. Prices dropped, and competition intensified. He complained to A-brand’s headquarters, but they ignored his concerns, even tacitly supporting Shenzhen dealers.
Realizing complaints were futile, Fat Cai decided to revamp his operations. He hired professional managers, recruited skilled salespeople, purchased five delivery trucks, and launched direct sales to seven major supermarkets. For medium-sized stores, he initiated direct distribution. He sought manufacturer support for terminal guidance.
This shift forced Fat Cai to reconsider his outdated model and adopt innovative strategies. Despite initial challenges, this transformation improved his management and operational efficiency.
These case studies show how strategic stockpiling can strengthen markets and improve dealer management. While stockpiling has pros and cons, it can be a powerful tool when used wisely.
June 21, 2025