Security distributors face the era of low gross margins

Once upon a time, security manufacturers have sprung up in Shenzhen, Beijing, and Shanghai, the three security industry development centers. Especially in Shenzhen, as long as there are three or five people and a few phones, they can become so-called "manufacturers." They hold a list of several telephones and directly call customers at all levels. The same products and the same quotation, the market order has fallen into a period of serious chaos, and dealers in the region are facing many so-called "manufacturers" The market squeeze, from the profiteering era of operating products quickly into the era of low gross profit margins, many experience providers have not yet responded, and the closest partners have turned to other channels to purchase. The world of the security industry has become really fast. Those who respond slowly have been eliminated by the market, and those who respond quickly have to face the reality of low gross profit. So many product distributors laughed: Selling security products is like selling cabbage.

The reality is already like this, there is no way to change, then we have to face it. In the words of Mr. Lu Xun, "Dare to face the bleak life", dealers must face the advent of the era of the first gross margin.

2. Challenges and outlets facing dealers

Dealer challenges:

a Distributor's own management, especially when the distributor has already started to develop branches or cooperate with downstream customers, this problem is particularly prominent.
b The manufacturers directly set up offices in various places to directly cover the local market. How can distributors cooperate with the manufacturers? It's still the manufacturers' independent development of the market, which is a challenge for the dealers. According to the practice of some mature industries, the factory salespersons work with the local dealers. In order to make wedding dresses for manufacturers, this kind of channel takeover not only reduces the profits of dealers, but also robs some customers who originally belonged to dealers.
c The manufacturer's support for the dealer is not in place. Many manufacturers only give the dealer's company product information support, and technical support and management level support are still far away, so the dealer also chooses the manufacturer Look at product prices, which leads to chaos in the industry.
d The pressure on profits caused by the decline in profits. The operating costs of operating dealers for many years have been basically fixed. In the case of falling profits, the survival space of dealers has been further compressed.
e Manufacturers do not recognize the value of dealers. Many manufacturers even use dealers as tools for market development, which greatly affects the enthusiasm of dealers.
f Large system integrators want to purchase directly from the manufacturer to obtain more profit space, which is also the most common thing in the industry. Originally, the dealer has been following the project for a long time, and finally the integrator has a phone, the manufacturer will ship directly The efforts have paid off and there is no compensation, and there is no output. I believe many dealers have experienced similar experiences.

Dealer outlet:

a To reduce your own costs, you need to make full use of existing resources and draw on the resources of others.
b Cooperate with the contractor to directly sell to customers in the industry, which can accumulate resources and can reduce the cost of relationship development. c Expand the distribution product line to provide customers with more profit points, especially when the security product line is relatively long.
d Provide customers with value-added solutions and better services to improve customer loyalty and improve the company's core competitiveness.
e Strengthen the distribution of third and fourth-tier markets, the security market has begun to spread in this part of the market especially in the South.
f To be your own brand, many dealers have been under pressure to start being their own brands, maybe a way out.

3. How can distributors cooperate with strong manufacturers to integrate industry resources?

The role of distributors in the channel system is nothing more than a few points: a. Logistics; b. Capital flow; c. Market development; d. Information support for manufacturers; e. Can provide packaging services for distributors; f. The sales capacity of industry customers. These will not be analyzed separately.

The development of the security industry has involved many products. For example, a single monitoring system sometimes involves dozens or even hundreds of products. That is to say, sometimes a project, if all the goods are imported by the manufacturer, Then at least there are dozens or even hundreds of suppliers, which will undoubtedly reduce the efficiency of the engineering business. Therefore, dealers use their resource platform to serve engineering companies, which was originally a reasonable model, but often some companies always think that it is more favorable to take the price from the manufacturer. In fact, combining various costs, it may not be much lower. If an engineering company is interested, a comparison can be made in this regard. Through the actual situation of operating a project, which cost is more reasonable within a year. Of course, this is troublesome. In fact, there are a lot of hidden costs directly in the purchase of manufacturers, which are often ignored by engineering companies.

Therefore, distributors' cooperation with manufacturers according to their own advantages is a trend of future industry development, and even weak distributors can find corresponding weak manufacturers to grow together.

4. How can dealers improve efficiency?

One of the efficiency improvement modes: scale

For dealers, scale is not a panacea, but no scale is impossible. Distributors must cover the national market, and the establishment of platforms and the sharing of hard costs such as rent must have a certain scale as the basis. Scale reduces fixed costs to the cost of each product line, and the advantages of upstream resources brought by large-scale procurement can also reduce costs. Moreover, the perfect information system of these distribution giants reduces a lot of manual operations and reduces the error rate. All these give the company a cost advantage.

This model cannot be learned by every dealer. At present, the more successful one is Intel. They have established branches in various provinces across the country through cooperation. Through this model, Guangzhou Baolong Huadatong quickly developed into an influential domestic dealer.

The second mode of improving efficiency: underwriting

Exclusive distributors used to be a very popular channel model. With the transparency of the market, the channel model of many distributors became the mainstream. But Samsung's general agent Wei Hao and EL's general agent have always adhered to this model, which is also a relatively successful underwriting case in the domestic security industry.
It requires a strong ability to grasp and manipulate the market. Otherwise, if you are not careful, a huge loss will occur.

Small area exclusive agency is a similar model.

The third mode of improving efficiency: focus

Focusing on a certain type of product, the most typical case in the industry is Beijing Mascon. They have always insisted on the positioning of the distribution of alarm products. No matter what changes occur in the alarm market, they always insist.

The risk is that this market is becoming saturated, so they need to further strengthen their strong position in alarm products.

The fourth mode of improving efficiency: reducing hidden costs

Explicit costs such as personnel, telephone bills, and rent are relatively easy to see, while hidden costs such as inventory loss, capital loss, and risk are not easy to be ignored because of concealment, so it seems that the profitable business eventually becomes a loss.

Inventory, accounts receivable, cost control, cash flow, product structure, customer structure, etc., these factors will bring various risks, some are short-term, such as cash flow; some are long-term, such as customer structure. If you can't develop in a balanced manner in all aspects, just to develop scale for scale, it is easy to bring huge risks. Especially in the distribution of security products, product updates and price changes are very fast, without good inventory and cash flow management, the risk will be great.

Risk avoidance is the most important issue facing dealers, especially to avoid the huge potential risks brought by excessive pursuit of scale. After all, as far as the distribution industry is concerned, with scale and sufficient market share, it can bring more market opportunities to itself and channels, so that it has more opportunities for revenue in the future. However, if the scale is only large, all areas are doing something, and no strong competitiveness is formed in the market segment, or the scale of distribution exceeds the tolerance of various resources of the enterprise. Shock. These are the contents that some provincial distributors need to seriously consider.

The fifth model of improving efficiency: sales efficiency

Improving efficiency can be done from the perspective of reducing transaction costs, that is, the average transaction volume between you and each channel customer is large or the transaction cost is low.

The concept of effective channels: Put the company's resources, including manpower, capital, prices, services, and many other very limited resources into those areas with the fastest output, that is, the field of effective channels.

The first step is to see where the 20% of the channels that contribute the most value to product sales are? And seize this part of the channel, put limited resources first into the construction and maintenance of such channels with the largest output.

The second step is to carry out the construction of small and medium-sized channels and expand the number of channels. This is the "face" of channel construction. According to the characteristics of product lines in different regions, different channel models are adopted. Even if there is no core channel that can make a large order, the performance can be achieved even if the small and medium channels are completed. For example, the current low-end product market is booming. Although the distribution profit is low, it can occupy more customer resources, and can suppress some small competitors and compress their living space.

This model is implemented by both dealers and manufacturers, and is more effective.

Sixth mode of improving efficiency: incubator

For a large number of emerging manufacturers, they have established channels nationwide, with high costs and high risks. They hope that dealers with strong promotion capabilities will undertake the promotion work and will also give dealers very good returns.

Of course, as a pioneer, you must have a certain ability to take risks. And it should have strong ability in sales model and sales management.

In short, facing the actual situation of low-margin industry development, dealers need to consider their future direction and what they should do now if they want to survive better. How to do it? I hope you can log on to our forum for further communication. The next issue we will give you is "channel marketing". In view of the chaotic sales situation in the security industry, dealers are needed from the status of dealers in the industry and market refinement , Channel management is the basis of channel marketing, sales policy is the guarantee of channel marketing, the comparison between channel marketing and non-channel marketing introduces the benefits of the security industry in building channels, if you have good ideas, please log in to our forum to post your Insights.