DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...

 
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DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
DISTRIBUTION
EXCELLENCE
IN CHINA
How to overcome major challenges in China’s
complex distribution environment and excel in
e-commerce?

                                      Shanghai, March 2021

                            EAC I China Distribution Excellence I March 2021
DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
INDEX

 1      CHINA DISTRIBUTION EXCELLENCE
        Key challenges, consumer insights and how EAC can support

 2      BRIEF EAC INTRODUCTION
        Key facts and global references

                                          2
                                                                    EAC I China Distribution Excellence I March 2021
DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
CHINA DISTRIBUTION (1/2) – KEY OBSTACLES FOR BRANDS IN 2021
In dynamic Chinese market, distributors are often ‘gatekeepers’ to drive growth – EAC experience shows
that reasons range from reliance on legacy distributors, lack of transparency and e-commerce experience

                                     Reliance on Legacy Distributors
                                     §   Unstructured selection of only one general distributor
                                     §   Lack of critical review and frequent benchmarking
   Distributors are often
     ‘Gatekeepers’ for               Low Distributor Capabilities
                                     §   Lack of financial support from distributors
      growth in China                §   Lack of product/ technical expertise and capabilities to provide service

                                     Limited Experience in New Channels (e.g., E-Commerce)
                                     §   Missing understanding of key growth channels (i.e., e-commerce, social commerce)
                                     §   Unclear alignment on opportunities and responsibilities of distributor(s)

                                     Poor Distributor Incentivization & Motivation
                                     §   Missing transparency of industry incentivization standards
                                     §   Lack of distributor incentivization concepts

                                     Lack of Market and Data Transparency
                                     §   Distributors work independently limiting channel, accounts & POS transparency
                                     §   No access to valuable end-customer data (i.e., e-commerce and offline sales)

                                     Unclear (End Customer) Pricing
                                     §   Lack of pricing transparency throughout the distribution chain (online and offline)
                                     §   Lack of enforcement of pricing policies

                                                         3
                                                                                                       EAC I China Distribution Excellence I March 2021
DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
CHINA DISTRIBUTION (2/2) – SUCCESS FACTORS
Many foreign companies are faced with complex distribution challenges in China – Choosing the right
distribution approach and managing distribution partners most efficiently is crucial

                                            KEY STRATEGIC QUESTIONS                                   SUCCESS FACTORS
                      § Have we selected the right distribution business model?
                      § How to assess and select right distributors according to our product
 DISTRIBUTION

                        portfolio and business model? How are they performing against others?         Clear formulation of
   STRATEGY

                      § How to evaluate the distributor’s motivation fit to company’s business     distribution strategy and
                        model and company culture?                                                    selection of best-fit
                      § How can we best access and use end-customer data (online and offline)              partners
                        for our business model and product portfolio decisions?

                      § How to incentivize and motivate distributors according to their
 MANAGEMENT
 DISTRIBUTOR

                        performance (monetary and non-monetary)?                                       Development and
                                                                                                   implementation of tailored
                      § How to avoid regional distribution conflicts?
                                                                                                    distribution processes
                      § How to monitor distributor’s performance? What are thresholds for                  and tools
                        replacing distributors?

                      § Who are my end-customers and which products are they buying?
       TRANSPARENCY

                      § Many B2C brands e-commerce sales accounts for >50% of China sales              Distributor sell-out
 CHANNEL

                        – do we participate in growth potential with our current set-up?           transparency that enables
                      § Which online channels (B2B and B2C) are the most relevant for each         management and control of
                        product? Should online channels be managed by distributor or separately?      end-customer needs
                      § How to deal with counterfeits and grey markets in my distribution model?
                                                                          4
                                                                                                       EAC I China Distribution Excellence I March 2021
DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
EAC SOLUTION – HOW EAC HELPED OTHER CLIENTS IN CHINA
EAC has leveraged its holistic distribution product offering to help numerous clients with their complex
distribution challenges in China – most recent developed solution enables online channel transparency

                                                                                                              EAC Digital Solution
                     DISTRIBUTION STRATEGY                                 DISTRIBUTOR MANAGEMENT           CHANNEL TRANSPARENCY

 1D    ISTRIBUTION STRATEGY
          HEALTH-CHECK             2D    ISTRIBUTOR SCREENING
                                            & ASSESSMENT                  3     DISTRIBUTOR MGMT.
                                                                                    EXCELLENCE            4    E-COMMERCE STRATEGY

 § EAC best-practice sharing       § Regional distributor                 § Utilization of EAC            § Mapping & quantification
 § Competitor distribution           landscape assessment                   distributor management          of key online channels
   model benchmarking              § Distributor screening process          tool                          § Channel prioritization &
 § Distributor and model fit to      (long-list database)                 § Definition of distributor       strategic fit assessment:
   key industry trends and                                                  KPIs and thresholds              – Domestic platforms
                                   § Initial assessment of sales                                             – Cross-border
   impact of COVID-19                and distribution fit to derive       § Definition of distributor
                                                                            monitoring processes/               platforms
 § Joint workshop-based              short-list                                                              – Social commerce
   development of best-fit                                                  frequency and tools
                                   § In-depth analysis of short-                                             – B2B platforms
   distribution model, e.g.:         listed distributors with EAC         § Implementation of
                                                                            incentivization tools (e.g.   § Platform comparison, e.g.
    – Layers of distributors         distributor assessment tool                                            key customers, costs
                                                                            distributor awards)
    – Responsibilities per layer   § Distributor risk assessment
                                                                          § Definition of reporting       § Define e-commerce
    – Integration model                                                     standards                       operating model and role
    – Regional/ product                                                                                     of distributors
      portfolio coverage

 Selected EAC
 Distribution References
                                                                      5
                                                                                                                 EAC I China Distribution Excellence I March 2021
DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
EAC SOLUTION – DISTRIBUTION STRATEGY HEALTH-CHECK
To assess the current distribution model and identify major short-comings, EAC conducts intense 1-2
days joint ‘Distribution Strategy Health Check’ workshops

     JOINT DISTRIBUTION                                                                                                          1
         WORKSHOP
                                                                                                                                 2
 ¡ 1-2 days joint workshop to                                                                                                    3
   review current distribution
   model and identify major short-                                                                                               4
   comings

 ¡ EAC best-practice sharing of
   direct competitors and
   companies from adjacent
   industries

 ¡ Joint definition of concrete
   improvement initiatives and       § Review of current distribution model and
   required action items, e.g.:        EAC insights on best-practices
   – Distributor monitoring and      § Assessment of China and distributor
      review mechanism                 performance
   – Distributor incentive           § Product portfolio performance
      standardization
                                     § Key industry/ channel trends and fit of
    – Assessment of legacy             distributors (especially after COVID-19)
      distributors
                                     § Regional and channel white spot analysis
    – Distributor performance
      transparency                   § Review of distributor management set-up
                                       and KPIs
                                     § Current distributor bottlenecks
                                                                 6
                                                                                    EAC I China Distribution Excellence I March 2021
DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
EAC SOLUTION – DISTRIBUTOR SCREENING & ASSESSMENT
In-depths EAC distributor filter process consists of several filter process steps, consisting of secondary
and primary research supported by proven EAC distributor assessment tools

       EAC DISTRIBUTOR SELECTION (FILTER PROCESS)                                                             EAC DISTRIBUTOR ASSESSMENT TOOLS                                                                                                                                                                                                                                                                                    1
                                                                                                                                                                                                                                                                                                                                                                                                                                  2
                                                                                 Comprehensive Distributor Assessment Tool                                                                                                                                                                                                                                                                                                        3
              Distributor Screening
                                                                                                                                                                                                                                                                                                                                                                                                                                  4
                                                                                                                                                                                                                                                     Shanghai Area                                                                                    Beijing Area                                    Guanghzhou Area
                                                                                                                  Key food importers in 3 tier1 cities                                            Sinodis                      Sims                    Shanghai Dapei            Shanghai Qinzhou                 Pinlive              Beijing Huadelong Beijing Sheng Feng Guang Yuan
                                                                                                                                                                                                                                                                                                                                                                                    GOODWELL Guangzhou Branch Shenzhen PSB Trading Co., Ltd

         (Long-list of potential distributors)
                                                                                                            Weight                                                            Weight         Value          Score        Value             Score        Value      Score           Value       Score          Value          Score       Value        Score        Value      Score      Value      Score         Value          Score
                                                                                 1.1 General information     5%     1.1.1 Years in food distribution                           10%            > 10            5           > 10               5           > 10         5             > 15         5             > 10            5          > 10          5        > 8 years      4     Over 10 years   5           4 years           2
                                                                                                                    1.1.2 Turn-over in Y 2011 (mio RMB)                        15%            400             4          1,300               5           400          5             250          4             400             5           40           3            65         3         640         5              80             1
                                                                                                                    1.1.3 Gross margin requirement of new coming brand         20%            40%             1           18%                3           40%          1             40%          1             40%             1          40%           1           40%         1         40%         1             40%             1
                                                                                                                                                                                            Normal                    Aggressive to                    Normal                     Normal                     Normal                   Aggressive to               Normal              Aggressive to              Normal
                                                                                                                     1.1.4 Management style                                    20%                            3                              5                        3                          3                             3                        5                       3                     5                             3
                                                                                                                                                                                         (Stay same)                    grow up                      (Stay same)                (Stay same)               (Stay same)                   grow up                (Stay same)              grow up                (stay same)
                                                                                                                                                                                            Normal                                                                                                           Normal
                                                                                                                                                                                        (Require to be                                                                                                   (Require to be
                                                                                                                     1.1.5 Cooperation willingness (exclusive requirement)     35%                            3           Strong             5           Weak           2         Normal          3                            3         Strong         5          Weak          1          Strong         5         Normal           3
                                                                                                                                                                                           exclusive                                                                                                        exclusive
                                                                                                                                                                                          distributor)                                                                                                     distributor)
                                                                                                                                                                                                             3.0                            4.6                         2.8                       3.0                         3.1                       3.9                      2.0                       4.2                      2.2
                                                                                 2.1 Product portfolio       10%     2.1.1 Share imported dry food in total business (%)       60%           50%              3       Strong (90%)           5       Strong (85%)        5          90%            5          80%              4           95%           5          60%           3          50%            3         100%           5
                                                                                                                     2.1.2 Contribution all biscuit brands (%)                 30%           10%              4             0                5            0              5          40%            1          15%              4            3%           4           7%           4          10%            4          0%            5
                                                                                                                     2.1.3 Other biscuit brands in negotiation                 10%           Yes              1         2 brands             1           Yes             1          Yes            1          Yes              1            No           5          Yes           1           No            5          no            5
                                                                                                                                                                                                             3.1                            4.6                         4.6                       3.4                         3.7                       4.7                      3.1                       3.5                      5.0
                                                                                 3.1 Key account coverage    25%

                                                       FILTER I (SECONDARY)
                                                                                                                                                                                                                                                                                                        Over 95% of the
                                                                                                                                                                                          > 70% key                                                                                                                                                                                                                 Over 70%
                                                                                                                                                                                                                                                   90% of Shanghai                                       key account                  80% of the key
                                                                                                                                                                                           accounts                  ~95% in 3 tier1                                           Over 90% key                                                                                              Over 90% in               coverage in
                                                                                                             70%     3.1.1 HM/C&C/SM store coverage,                           50%                            3                              5      area, except of     4                         5       covered in           5     account covered    4           0%           1                         4                          3
                                                                                                                                                                                          covered in                     cites                                                account covered                                                                                            Guangzhou                Shenzhen and
                                                                                                                                                                                                                                                         Lotus                                            Beijing and                   in Beijing
                                                                                                                                                                                           Shanghai                                                                                                                                                                                                                Guangzhou
                                                                                                                                                                                                                                                                                                           Shanghai
                                                                                                                                                                                          > 80% key
                                                                                                                                                                                                                                                                                                        ~ 100% covered                                                                                           70% coverage in
                                                                                                                                                                                           accounts                  ~ 95% in 3 tier1                                                                                                100% covered in          100% covered in

                                                       Initial product and
                                                                                                                     3.1.2 Premium/department store coverage.                  20%                            4                              5     ~ 100% covered       5     ~ 100% covered      5      in Beijing and        5                        5                        5      100% covered       5     Guangzhou and        4
                                                                                                                                                                                          covered in                      cites                                                                                                          Beijing                  Beijing
                                                                                                                                                                                                                                                                                                            Shanghai                                                                                               Shenzhen
                                                                                                                                                                                           Shanghai
                                                                                                                                                                                          > 70% key                                                    60~70%                                                                                                                                                     Only 20~30%
                                                                                                                                                                                                                                                                                                                                       Beijng: 70%             Beijing: 50%,
                                                                                                                                                                                           accounts                  ~ 95% in 3 tier1              (except Kuaike,              ~ 90% of CVS             Shanghai : 40%                                                                                           coverage in
                                                                                                                     3.1.3 CVS/drug store                                      15%                            3                              5                          3                         4                            3     covered, (7-11,    4      only 7-11 and     3      100% covered       5                          2
                                                                                                                                                                                          covered in                      cites                     Kede, Haode,                   covered                Beijing: 70%                                                                                           Guangzhou and
                                                                                                                                                                                                                                                                                                                                        Wanning)                 Wanning
                                                                                                                                                                                           Shanghai                                                   Wuyuan)                                                                                                                                                      Shenzhen

                                                       company fit assessment
                                                                                                                                                                                                                                                                                                                                                                                       Currently ~10%
                                                                                                                                                                                                                                                   2.5% of total sale                                     Total ~ 10%,
                                                                                                                                                                                                                                                                                                                                     ~ 15%, mainly in                                    of total sales
                                                                                                                                                                                       ~ 3% among the                                                value, mainly              7~8% of total            mainly in TM,
                                                                                                                                                                                                                     Mainly focus on                                                                                                 1HAODIAN, 360,                                     value, through
                                                                                                                                                                                          total sales,                                                  focus on                 sales value,            1Haodian, 360
                                                                                                                     3.1.4 on-line shopping                                    15%                            3       1Haodian and           4                          3                         3                            5         Zhuoyue,       5     no on line sales   1       major on line     4          none            1
                                                                                                                                                                                       mainly through                                               1HAODIAN and                  mainly in                jingdong,
                                                                                                                                                                                                                      Jingdong 360                                                                                                      Dangdang,                                        channel, e.g.
                                                                                                                                                                                           1Haodian,                                                its own on line            1haodian, 360,             Zuoyue, etc.
                                                                                                                                                                                                                                                                                                                                     Zhongliang, etc                                   1HAODIAN, 360,
                                                                                                                                                                                                                                                        platform                                        TV: Dongfang CJ
                                                                                                                                                                                                                                                                                                                                                                                              etc
                                                                                                                                                                                                             3.2                            4.9                         3.9                       4.6                         4.7                       4.4                      2.1                       4.4                      2.8
                                                                                                                                                                                          80% stores                                                                                                                                                                                                             70% coverage in
                                                                                                                                                                                                                    All store in 3 tier1           95% of Shanghai                                                                                            No coverage in
                                                                                 3.2 Store coverage          30%     3.2.1 HM/C&C store/SM                                     70%        covered in          3                              5                          4      100% covered       5      100% covered          5      80% covered       4                        1       90% covered       4     Guangzhou and        3
                                                                                                                                                                                                                           cities                       Area                                                                                                      Bejing
                                                                                                                                                                                           Shanghai                                                                                                                                                                                                                Shenzhen
                                                                                                                                                                                          80% stores
                                                                                                                                                                                                                    All store in 3 tier1
                                                                                                                     3.2.2 CVS/drug store/premium store                        30%        covered in          3                              5      70% coverage        3      100% covered       5       70% covered          3      70% covered       4      80% covered       4       95% covered       5     20~30% coverage      2
                                                                                                                                                                                                                           cities
                                                                                                                                                                                           Shanghai
                                                                                                                                                                                                             3.0                            5.0                         3.7                        5                          4.4                       4.0                      1.9                       4.3                      2.7
                                                                                                                                                                                                             3.1                            4.9                         3.8                       4.7                         4.6                       4.2                      2.0                       4.3                      2.7

                                                                                                                                                                                               ~ 70
                                                                                 4.1 Sales & marketing support
                                                                                                            20%      4.1.1 No. of distributor SR                               20%      (will outsource       3             110              5            25            3            30           4            175             5           16           4           20           4           100           5            40            5
                                                                                                                                                                                       the sals SR soon)

                                                  FILTER II (EAC PRIMARY)
                                                                                                                                                                                                                    Yes, with total 10
                                                                                                                     4.1.2 Availability customer service department            25%           Yes              5                              5            Yes           5           Yes           5            Yes             5           Yes          5           Yes          5           Yes           5           Yes            5
                                                                                                                                                                                                                         people
                                                                                                                                                                                                                                                                                                                                          1 brand
                                                                                                                                                                                       1 brand manager                                                                                                                                                          Separate the
                                                                                                                                                                                                                                                                                                                                     mamager will be                                   Only categoried
                                                                                                                                                                                        takes care of 10              1 team with 3                                                                     1 brand manager                                          marketing
                                                                                                                                                                                                                                                   1 people will be           1 brand manager                                         responsible for                                   by channel in
                                                                                                                     4.1.3 No. of marketing team will service for Bahlsen      25%          brands,           2     peoople in charge        4                          5                         5     will be arranged       5                        2        source by       2                         2           2~3            5
                                                                                                                                                                                                                                                       arranged               will be arranged                                          all brands'                                      stead of by

                                                                                 Performance Evaluation of Potential Distributors
                                                                                                                                                                                           including                   of 2~3 brand                                                                        for Bahlsen                                        channel instead
                                                                                                                                                                                                                                                                                                                                      marketing and                                         brand

                                                  Cooperation willingness,
                                                                                                                                                                                            Bahlsen                                                                                                                                                             of by brands
                                                                                                                                                                                                                                                                                                                                     promotion issue
                                                                                                                                                                                              Yes
                                                                                                                                                                                         (Sensitive to
                                                                                                                     4.1.4 Willingness on joint control on ANP                 30%     discuss expense        4             Yes              5            Yes           5           Yes           4            Yes             5           Yes          5           Yes          5           Yes           5           Yes            5
                                                                                                                                                                                          details with
                                                                                                                                                                                           Bahlsen)

                                                  customer access, SWOT
                                                                                                                                                                                                             3.6                            4.8                         4.6                       4.5                         5.0                       4.1                      4.1                       4.3                      5.0
                                                                                                                                                                                         Yes, while all               Yes, 6,422 s.q.                                         Yes, around 30%           Yes, around 30%                                       Yes, around 30
                                                                                 5.1 Supply chain performance
                                                                                                            15%      5.1.1 Any area with refrigerated W/H                      15%                            3                              5            Yes           5                         4                            5           No           1                        3           Yes           5           No             1
                                                                                                                                                                                       rented from TPL                   meters                                                of total (2,400)         in total (13,000)                                      s.q. meters
                                                                                                                                                                                                                    Yes, while not all                   TPL                                                   TPL                                                                      Yes, not all of
                                                                                                                     5.1.2 Ownership of the logsitc                            15%           TPL              2                              4                          2           TPL           1                            2       Self owned       4       Self owned       4                         3           TPL            2
                                                                                                                                                                                                                     the warehouse                 (High flexbility)                                    (High flexibility)                                                                  them

                                                                                                                                                                                                                                                    Normal truck                                                                     4 normal trucks                                     Only 3 normal
                                                                                                                                                                                       7 normal trucks,             Normal trucks: 61                                                                                                                         6 normal trucks,
                                                                                                                     5.1.3 No. of normal trucks/No of A/C trucks               15%                            3                              5           s: 64          4          NONE           1          None              1        1 A/C truck     4                        4       truck, the rest   3           TPL            2
                                                                                                                                                                                       the rest rented               A/C trucks: 53                                                                                                                              1 A/C truck
                                                                                                                                                                                                                                                    A/C trucks: 12                                                                       pending                                       rented from DCH

                                                                                                                                                                                           CC: 1 week                SC: 2~3 weeks                                                                         CC: 5 days                  CC: 3 days               CC: 1 Week               CC: 1 month                CS: 3 days
                                                                                                                     5.1.4 Speed to get the related Sanitary certification/custom35%
                                                                                                                                                                                  clearance                   3                              5        Very weak         1          Good           4                            4                        3                        3                         5                          5
                                                                                                                                                                                          SC: 2 months                CC: 1 weeks                                                                       SC: 1~1.5 month              SC: 2-3 months            SC: 2-3 month              CS: 1 week               CC: 15 days
                                                                                                                                                                                                                    Yes, so far only in
                                                                                                                     5.1.5 Provide the service of repackaging                  20%           NO               1           Xinhui             5            No            1           No            1            Yes             5           Yes          5           No           1           Yes           5           No             1
                                                                                                                                                                                                                       warehouse
                                                                                                                                                                                                             2.5                            4.9                         2.2                       2.5                         3.6                       3.4                      2.9                       4.4                      2.7
                                                                                                                                                                                       Accuracy:                    Accuracy:                      Accuracy:                                                                                                                           Accuracy:
                                                                                                                                                                                       depends on the               depends on the                 depends on the             Usually 1 month,          2~3 months due                                                                 depends on the
                                                                                                                                                                                                                                                                                                                                        1.5 months
                                                                                                                                                                                       negotiation with             negotiation with               negotiation with           dpends on the             to the                                                                         negotiation with
                                                                                                                                                                                                                                                                                                                                       according to             2~3 month
                                                                                 6.1 Data exchange           10%     6.1.1 Accurate and timely Ex-D data exchange (monthly)    50%     former                 4     former                   3     former               3     cooperation         3     cooperation            3                        4                        3     former              3.0    No experience       1

                                            FILTER III (JOINT VISITS)
                                                                                                                                                                                                                                                                                                                                          former                  usually
                                                                                                                                                                                       distributor,                 distributor                    distributor                level of former           level of former                                                                distributor
                                                                                                                                                                                                                                                                                                                                       experience
                                                                                                                                                                                       Timely: 1.5                  Timely: 2~3                    Timely: 2~3                distributor               distributor                                                                    Timely: 2~3
                                                                                                                                                                                       months                       months                         months                                                                                                                              months
                                                                                                                                                                                           1 time per                                                                                                      1 time per                  2 times per             1 time every 2
                                                                                                                     6.1.2 Distributor Stock information (1 time 2 weeks)      20%                            4     1 time per week          5     1 time per week      5     1 time per week     5                            4                        5                        3      1 time 2 weeks     5      Weekly base         5
                                                                                                                                                                                             month                                                                                                           month                        month                    months
                                                                                                                                                                                           1 time per                                                                                                      1 time per                  2 times per             1 time every 2
                                                                                                                     6.1.3 Store stock data availability                       20%                            4     1 time per week          5     1 time per week      5     1 time per week     5                            4                        5                        3      1 time 2 weeks     5      Weekly base         5

                                            Cooperation model,
                                                                                                                                                                                             month                                                                                                           month                        month                    months
                                                                                                                                                                                           1 time per                                                                                                      1 time per                  2 times per             1 time every 2
                                                                                                                     6.1.4 Delivery report                                     10%                            4     1 time per week          5     1 time per week      5     1 time per week     5                            4                        5                        3      1 time 2 weeks     5      Weekly base         5
                                                                                                                                                                                             month                                                                                                           month                        month                    months
                                                                                                                                                                                                             4.0                            4.0                         4.0                       4.0                         3.5                       4.5                      3.0                       4.0                      3.0
                                                                                 7.1 Finance performance     15%     7.1.1 Total capital in operation (mio RMB)                25%           ~ 70             4           ~ 500              5          ~ 80             4         ~ 50            3        80~100             5           6             3          25            3            80           4            10          2
                                                                                                                     7.1.2 Capability in collection from trade                 25%           90%              5        Stong (95%)           5      Good (70~90%)        4       Over 95%          5       Over 95%            5        Over 95%         5       Over 90%         4          100%           5          90%           4
                                                                                                                     7.1.3 TT payment                                          20%            No              1            No                1           No              1         Yes             5          No               1          Yes            5         No             1           Yes           5           Yes          5

                                            motivation, cultural fit
                                                                                                                                                                                                                                                                                                                                                                                                                 Tight during the
                                                                                                                     7.1.4 Cashflow situation in peak season                   30%         Normal             3      Very sufficient         5           Tight          2        Sufficient       5        Sufficient          5         Normal         3          Tight         2        Sufficient       5                          2
                                                                                                                                                                                                                                                                                                                                                                                                                   peak season
                                                                                                                                                                                                             3.4                            4.2                         2.8                       4.5                         4.2                       3.9                      2.6                       4.8                      3.1
                                                                                 Total score                                                                                                                 3.2                            4.6                         3.6                       4.0                         4.2                       4.1                      2.8                       4.3                      3.5

                Best-fit Distributors
         (Short-list of potential distributors)

                                                                             7
                                                                                                                                                                                                                                                                  EAC I China Distribution Excellence I March 2021
DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
EAC SOLUTION – DISTRIBUTOR MANAGEMENT EXCELLENCE
Customized distributor management tool will be developed according to agreed-upon key criteria to
ensure continuous tracking and improvement of distribution capabilities

                                                                          EAC DISTRIBUTOR MANAGEMENT TOOL                                                                                              1
                                                        GENERAL INFORMATION & CONTACT DETAILS                                                                                                  #   2
                                                                                                                                                                                                       2
         DISTRIBUTOR MANAGEMENT                         Company / Dealer Name                                                        Province                             City

                                                                                                                                                                                                       3
                                                        [Dealer Name]

                                                        Dealer Number                Year Founded                                    Province Map with POS

 ¡ Once key distributors are selected, a detailed
                                                        [Dealer Number]

                                                        Name of Contact Person            Title                     Mr./Mrs.                                                                           4
   management process and underlying tools are
                                                                                                                                                      i

                                                                                                                                                  i

   required to ensure transparency and best-            Function & Department

   possible performance of distributors, incl:          E-Mail

    – Definition of distributor KPIs and                Phone Number                   Full Address

      thresholds as basis for incentives and
      ‘kick-out’ criteria
                                                        Homepage

    – Definition of distributor monitoring and      Score Weighting Set-Up

      review processes/ frequency                       #
                                                        1
                                                             Scoring Section
                                                             Company Profile
                                                                                      Weight
                                                                                      5.00%
                                                                                                  Complete?
                                                                                                     No
                                                        2    Revenue                  20.00%         No

    – Implementation of incentivization and sales
                                                        3    Global Project           20.00%         No
                                                        4    Trade                    20.00%         No
                                                                                                    Overall Score

      push tools (e.g. distributor awards, joint
                                                        5    New Business             20.00%         No
                                                        6    Training                 15.00%         No
                                                        7                                             0
      marketing campaigns)                              8
                                                        9
                                                                                                      0
                                                                                                      0
                                                        10                                            0

 ¡ Utilization of EAC distributor management            11
                                                        12
                                                                                                      0
                                                                                                      0
                                                                                                                      REVENUE OVERVIEW

   tool for ‘daily’ management of all distributor                                S    100%                                                                    2017       2018    2019   2020
                                                                                                                               Overall
                                                                                                                      Gross Sales in [KEUR)
                                                                                                                          Scoring Result
                                                                                                                      By Channel                                -          -       -     0

   related issues enables structured distributor
                                                                                                                         GP
                                                                                                                         Trade                             Mode
                                                                                                                         DIY                              Weighted

   coordination, management and review and                                                                               E-Commerce
                                                                                                                      By Brand
                                                                                                                         ….
                                                                                                                                                                -
                                                                                                                                                          1 Score:
                                                                                                                                                              Score:
                                                                                                                                                                Score:
                                                                                                                                                                           -       -     0

   performance reporting                                                                                                 ….
                                                                                                                         …
                                                                                                                      By Segment                                -          -       -     0
                                                                                                                         ….
                                                                                                                         ….
                                                                                                                         …
                                                                                                                         Good
                                                                                                                                          TOTAL

                                                    8
                                                                                                                                                      EAC I China Distribution Excellence I March 2021
DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
EAC SOLUTION – E-COMMERCE STRATEGY
Wide range of different B2B and B2C e-commerce platforms in China leads to need for careful assessment
of options based on strategic fit as well as integration with overall distribution strategy

ONLINE PLATFORMS IN CHINA                                                                  EAC E-COMMERCE CHANNEL                                            1
Online distribution strategy needs to be aligned with overall distribution     Comprehensive Platform Assessment                        EAC                  2
                                                                                                                                            D
                                                                                                                                        Solu igital
model, e.g. operations responsibility split between distributor & company,                                                                  tion             3
access to customer data, initial investment (i.e. for listing and marketing)
                                                                                                                                                             4
DOMESTIC E-COMMERCE
Domestic platform with comprehensive or
specialized (vertical) product portfolio, dominated
by Alibaba group & JD

CROSS-BORDER E-COMMERCE
International e-commerce, available for companies
outside of China, international logistics need to be
considered                                                                     Operation Model Integration with Distributors

SOCIAL COMMERCE
Involves social media that supports social
interaction & user contributions to assist buying/
selling of products

B2B-FOCUS COMMERCE
Platforms focused on B2B customers with holistic
or vertical (e.g. chemicals, electronics, FMCG)
product offering

                                                                          9
                                                                                                                EAC I China Distribution Excellence I March 2021
DISTRIBUTION EXCELLENCE IN CHINA - How to overcome major challenges in China's complex distribution environment and excel in e-commerce? ...
INDEX

 1      CHINA DISTRIBUTION EXCELLENCE
        Key challenges, consumer insights and how EAC can support

 2      BRIEF EAC INTRODUCTION
        Key facts and global references

                                          10
                                                                    EAC I China Distribution Excellence I March 2021
USP OF EAC – PROFOUND EXPERTISE IN KEY REGIONS
With a clear vison we provide first-hand know-how and experience with the highest standard –
we work with culturally mixed teams to achieve maximum results in our offices around the globe

LONG-TERM MANAGEMENT EXPERTISE IN ASIA                            IN-DEPTH INDUSTRY KNOWHOW
¡ With >25 years of local presence EAC is a pioneer in the        ¡ No “off the shelve”-projects: tailor-made project
  emerging core markets China and India                             solutions for the individual requests of our clients

¡ Strong project track record stems from long-standing            ¡ EAC is supported by a high-caliber advisory board of
  relationships with global and regional industry                   former, internationally active CEOs in China and Europe
  stakeholders

WE CREATE VALUE                                                   MORE THAN A VISION – A PROMISE

¡ “Single-Shop-Services guaranteed through high cross-            ¡ We are overachieving the expectations of our customers with
  regional flexibility – no risk of “profit center fences”          individual consulting approaches and innovative strategies

¡ Strong global network of independent experts in all             ¡ We are a strong strategy partner – also during execution
  relevant growth markets through EAC regional hubs                 stage. Our project philosophy: “Walking the last mile”

                                                             11
                                                                                                        EAC I China Distribution Excellence I March 2021
OUR OFFERING – SUCCESS WITH TAILOR MADE SOLUTIONS
EAC offers holistic consulting solutions from strategy development to roll-outs and
operational efficiency programs for mid-cap and multinational companies in growth markets

                                                                                           OPERATIONAL
              STRATEGY                                  M&A
                                                                                           EXCELLENCE

¡ Go-to-market Strategy                      ¡ Acquisition                        ¡ Performance & Cost Improvement
¡ Product Design-to-value Initiative         ¡ Divestures                         ¡ Sales Push & Distribution Excellence
¡ Portfolio Diversification                  ¡ Corporate Finance Services         ¡ Global Footprint Advisory
¡ Innovation Strategy                                                             ¡ SCM & Sourcing
¡ Strategy Execution Cockpit                                                      ¡ Human Resources

                 DIGITALIZATION                                                SUSTAINABILITY

                 ¡ Digital Business Models                                  ¡ Sustainable Supply Chains
                 ¡ Digital Transformation                                   ¡ Circular Economy Potential
                 ¡ E-Commerce Strategy                                      ¡ Climate Protection
                 ¡ Digital Empowerment                                      ¡ Waste Reduction

                                                             12
                                                                                                EAC I China Distribution Excellence I March 2021
TRACK RECORD – EXAMPLES OF CUSTOMER REFERENCES

    > 25 years consulting experience
    > 50 countries
    > 2,000 projects

    = our expertise

                                       13
                                                 EAC I China Distribution Excellence I March 2021
EAC – YOUR LOCAL DISTRIBUTION EXPERTS
Our local team in China possesses extensive experience in distribution and channel management –
We are happy to assist you, feel free to reach out to us!

      Mr. Uwe Haizmann                   Mr. Raphael Eder                     Mrs. Emma Ye
            Partner                      Managing Consultant                 Senior Consultant
         EAC Shanghai                       EAC Shanghai                       EAC Shanghai

                                                   14
                                                                                   EAC I China Distribution Excellence I March 2021
WHERE YOU CAN FIND US – EAC AROUND THE GLOBE

                                                                                                                         SIGN U
EAC AUSTRIA                                                                                                                         P fo
                                                                                                                          Newsle r our month
                                                                                                                                                         l
                                                                                                                       Briefin tters – Busin y
EAC International Consulting
Kohldorf 79 | Office Building                                                                                                    gs for C             ess
8323 Sankt Marein bei Graz                                                                                             https:/               hina &
                                                                                                                              /eac-co
                                                                                                                                      nsultin       India:
                                                                                                                                              g.d
                                                                                                                                             e/news
                                                                                                                                                      letter/
Phone +43 316 376155
christian.santner@eac-consulting.de

EAC SWITZERLAND
EAC International Consulting
Bleicherweg 10
8802 Zürich

Phone +41 791 558 884
roger.jann@eac-consulting.de

           EAC MUNICH                         EAC MOSCOW                                EAC MUMBAI                                 EAC SHANGHAI
           EAC - Euro Asia Consulting PartG   EAC - Euro Asia Consulting OOO            EAC - Euro Asia Consulting Pvt. Ltd.       EAC - Euro Asia Consulting
           Widenmayerstraße 29                Potapovskaya Roshcha 7/1,                 306-310 Peninsula Plaza                    Sunyoung Centre, Rm. 801
           80538 München                      office 37                                 A/16, Veera Industrial Estate              398 Jiangsu Road
                                              108814 Moscow / Russia                    Andheri (West), 400053 Mumbai / India      200050 Shanghai/ China
           Phone +49 89 92 29 93-0                                                      Phone +91 22 26 74 24 91                   Phone +86 21 63 50 81 50
           eac-muc@eac-consulting.de          eac-mos@eac-consulting.de                 eac-mum@eac-consulting.de                  eac-sha@eac-consulting.de

                                                    Find out more about EAC - www.eac-consulting.de

                                                                                                                                  EAC I China Distribution Excellence I March 2021
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