Thinking about the Distribution Mode of Construction Machinery Industry

      The distribution mode of China's construction machinery industry has undergone great changes in the past few decades. The development of the Chinese market has grown from small to large, and the distribution mode of various OEMs has also changed from direct sales to the widespread use of agents to distribute products and provide Serve.

       After the reform and opening up, foreign brands represented by Caterpillar entered the Chinese market, and also brought the agency form of foreign mature markets. When the shopping mall enters a rapid upswing cycle, the advantages of the agent form fully emerge. They understand the local market, are closer to customers, and operate more flexible. Therefore, for products with large sales such as loaders and excavators, the proxy form has proved to be a high-efficiency distribution form, and is chosen by more and more Chinese and foreign brands.

      During the round of market adjustment in 2012, many agents encountered problems in their operations. In order to avoid the appearance of blank areas, some brands have begun to use the direct sales model of manufacturers, and the mixed distribution model of direct sales and agency has also appeared in the market.
      The author believes that the direct sales form is more suitable for the sale of products with high value, small sales, and strong professionalism. The direct sales of excavators and loaders is actually a helpless choice for manufacturers.
      Generally speaking, the operating cost of the direct-operated form is higher than that of the proxy form. The quality of the operation depends to a large extent on the ability and character of the general manager of the direct-operated company. Many direct-operated companies have operating losses, and their cash flow also depends on the delinquency of the headquarters. Pay for the goods. Some brands adopt the form of mixed distribution of direct sales and agents, and the policies for direct sales companies and agents are different inside and outside. The sons and sons are always different. This approach makes it difficult for the agents and the manufacturers to be of one mind.

       In general, the responsibilities, rights, and benefits of the direct sales model are not clear, and in the long run, it seems that it lacks market competitiveness. However, even in the proxy system, there are two forms of proxy in China with different operating concepts.
       The first is the "cooperative partner" agency form, which is dominated by foreign brands . This form has been practiced in sophisticated European and American markets for nearly a hundred years and has proven to be a successful form. Many agents and manufacturers have cooperated for several generations. People, like Lei Shing Hong Machinery, Xinchang Machinery and Yichu Mingtong, Caterpillar's agents in China, they have been cooperating with Caterpillar in the international market, and they are very common in terms of values ​​and operating concepts. The exchange cost is very low.
      This kind of agency mode regards the agent as a cooperative partner, long-term cooperation, mutual benefit and win-win, share risks, ensure the interests of the agent, and put the health and sustainable development of the agent in the most important position.
     

   The other is the "wolf-like progress" agency form represented by domestic brands . The main features are: growth is the main market development policy of agents, and the relationship between manufacturers and agents is the distribution of interests. The pressure on the agents to insist on satisfaction forces the agents and the manufacturers to maintain a high degree of commonality in their market goals. After completing the market goals, the profit distribution will be won. The agents who fail to meet the market goals will be eliminated.
In this form of agency, the tasks of the whole machine and accessories are very heavy every year. Even if everyone has doubts about the market prospects this year, the sales policy of the agent is still higher than that of last year. Sometimes in order to get the year-end rebate, the agent has to adopt Excessive acquisition of complete machines and accessories that cannot be sold in the short term will affect the cash flow and future of the company.
       Under the increased pressure, anxiety, staying up late, drinking alcohol, and sub-health have become the norm, and it is difficult to balance work and life. Employees work overtime to complete the workload of two people, allowing companies to continuously lay off employees, and the introversion is becoming more and more serious.

       The second form of agency makes the agent more wolf-like, and more aggressive in terms of market share. This kind of rash behavior that forces the agent to rush into the market share reminds me of the novel "The Chicken Crows in the Middle of the Night". The manufacturer is like Landlords and agents are like long-term workers, but if the long-term workers are tired, the landowners will have to go to the fields themselves ! In
recent years, the market share of domestic brands of excavators has been increasing, while foreign brands have been declining. The choice of different operating concepts is closely related. On the surface, the second form completely beats the first form, which makes many domestic brands believe that this is a better proxy form.
      However, the author believes that: the construction machinery industry is very cyclical, and the second type of agency is more suitable for the upward cycle of the market. The incremental market sales are large, and enterprises need to seize the "window period" of development opportunities. When the market enters a downward cycle, this form of The risks may outweigh the benefits. The lessons of the market decline a few years ago have now proven this, and many agency business owners still have lingering fears.
      Some practices in the form of "wolf progress" have made the industry enter a "dead end" of irrational development, and this development cannot be sustained, which has become a consensus in the industry. Manufacturers adopting this form need to consider more about the anti-risk ability of agents in the down cycle, rather than only pay attention to their own market policies, and pay more attention to win-win and not just their own surplus, otherwise they will be too hasty, and even May lead to the collapse of the agent system.
       The first form of agency emphasizes risk control and sustainable development, and it seems that there is a lack of progress in the upward cycle of the market. In the past few years, some foreign brands have also begun to learn the year-end rebate policy of domestic brands.
When the industry enters a downward cycle, the first form becomes more stable. Instead of fighting a price war, it is better to maintain the big and old customers in a down-to-earth manner, develop the post-market in a solid manner, ensure the survival of agents, and wait for the next opportunity. After all, "buy one, lose one" is a serious violation of basic business principles.
       Which form is better ? There is no standard answer. In different periods, choosing the most suitable development form for your own enterprise may be the best answer.
       The industry will face great changes in the next few years . Electrification under the "dual carbon" policy will be a new opportunity and challenge for many companies. The cost of electric equipment will increase, sales will decrease, and the down cycle of the industry will be superimposed. The market is returning to rationality, and agents will also undergo a new round of reshuffle. As for which agency form is more suitable for the Chinese market, let us answer.
       Whatever the answer is, what stays is the best.