What is a distribution order system? What is the difference?

Since 2006, clothing brands in China have gradually changed from distribution system to order system. Dealers at all levels should also adapt to the general trend and change their operating modes. However, after several years of reform and the baptism of its economic crisis, the order system is not as dominant as predicted by the industry. After a period of silence, the distribution system is back. What is the rationality of the return of distribution system?

Since 2006, clothing brands in China have gradually changed from distribution system to order system. Dealers at all levels should also adapt to the general trend and change their operating modes. However, after several years of reform and the baptism of its economic crisis, the order system is not as dominant as predicted by the industry. After a period of silence, the distribution system is back. What is the rationality of the return of distribution system?

A few days ago, when interviewing a well-known underwear brand franchisee in China, the author learned that many underwear brands began to adopt distribution system when cooperating with franchisees. "Why is this replaced business model revived?" Faced with this problem, franchisees are noncommittal, only saying that the distribution system seems to be more conducive to franchisees' sales and operations than the orders in the previous two years.

"Gorgeous" Ordering System

At the beginning of 2006, the order system began to replace the distribution system and became the main operation mode of the industry. It is advanced in both management and production methods. But we should also see that the ordering system optimizes more brand resources.

Choosing distribution system often makes brand owners tread on thin ice in production planning, because brands lack first-hand market information, which makes it difficult for brands to place orders accurately. If the order quantity is too small to meet the market sales, it will not reach the best market sales rate; Once the order quantity is too large, it will lead to the backlog of products due to unsalable sales.

At the production level, due to the low order volume, the production cost rises and the profit rate drops; Time is tight, the order turnover takes one to two weeks, and the delivery of goods to franchisees takes seven days to 10 days, which cannot meet the market demand and the quality cannot be guaranteed. Procurement, production and distribution are often delayed, and products should not be listed in this season, and the result can only be a backlog.

If you choose the order operation mode, the brand will avoid the above problems. The order management mode has simple operation system and strong production planning, but it requires a higher degree of specialization for franchisees. After the market terminal management level is improved, the company only needs to do a good job in market maintenance management and supporting services, and the remaining manpower can be used for market expansion and investigation, market research and analysis. The market management system of brand enterprises has customer service center, statistical analysis department and warehousing and distribution center, which is fully competent.

On the other hand, due to the implementation of the order system, the workload has been reduced, and the brand can do more useful work in market development, planning and publicity.

At the same time, there is also a larger discount range, thus improving the difficult situation faced by franchisees in shopping malls with high deduction points and narrow profit margins. Franchisees have a greater chance to choose shopping malls and can also achieve the purpose of brand image promotion.

In addition, choosing the ordering system can buy time for the brand. All the products were ready two months or even earlier before the launch. Even if there are quality problems, they can be solved in advance, and generally will not affect sales.

However, we should also see that the ordering system is more conducive to the overall resource optimization of the brand. Compared with the brand, the benefits that dealers get from the order system are not so rich. The buyout order system often brings great pressure to the dealer's capital chain, and at the same time, the digestion of inventory is also facing great challenges.

In addition, ordering food has become mainstream for historical reasons. Brand awareness began to sprout in the 1990s. After more than ten years' accumulation, brand enterprises have accumulated a certain amount of capital and gained a certain strength. Therefore, they are more active in implementing the order system. The distribution system that has been taken away is still valuable to dealers.

It can be seen that the single order system can't really make brands and distributors win-win, and the way of transferring risks is unsustainable.

What is the revival of the distribution system?

Compared with dealers, the distribution system still has its advantages, such as relatively low professional knowledge requirements, low input and low inventory. In addition, the distribution system is also beneficial to the brand. Therefore, the return of the distribution system is reasonable.

Dealers try their best to choose the mode of operation, with the purpose of avoiding market operation risks, reducing inventory and ensuring their healthy growth.

The distribution system seems to be exactly what dealers want, with the advantages of low inventory and smooth capital chain. It should be said that inventory and capital flow are the biggest headaches for dealers. If the product is bought out by order system, although the dealer has more sales autonomy, the risk will also increase. Once there is a problem in sales, it often leads to a large backlog of inventory. Inventory backlog directly leads to problems in dealers' capital turnover, which threatens the whole operation process and even leads to bankruptcy.

Nowadays, in the industry, the click rate of the word "buyer" is quite hot. It can also be seen that experience and related knowledge are very important in the channel market. Many dealers have never been exposed to clothing before entering the business, and they don't know much about professional knowledge and related products, which makes them have doubts about entering the clothing circle. However, if you choose the distribution system, the brand is "recommended", which can often enhance the confidence and success rate of dealers.

Furthermore, the profit return of the ordering system is about 35% ~ 38%, while the profit return of the distribution system can reach 42% ~ 45%. It can be seen that the yield of distribution system is obviously higher than that of order system. In addition, it can not be ignored that brand operators are now paying more attention to cultivating franchisees, and franchisees have been able to reach the same distribution level as direct stores. So many dealers are willing to "worry" about making money.

Dealers can benefit from the distribution system, and brands are no exception.

In the initial stage of brand operation, the scale of market operation is not too large. In the case that brand maturity and customer loyalty are not too high, brands should use this method more to expand the market and expand market share as soon as possible. This method is conducive to the brand's market expansion, and the brand can timely and accurately grasp the market sales situation. Because the initial total investment of franchisees is not large, it is particularly attractive to first-line franchisees (franchisees in key cities).

Secondly, franchisees do not need too much capital investment, have low requirements for professional knowledge and skills, and have no financial pressure and inventory risk brought by blind ordering, so they can concentrate on selling products. In this way, enterprises can quickly open the market and occupy a certain market share in the shortest time.

Third, under the premise that the brand has enough best-selling models, the distribution system can effectively manage the franchisee market, and the brand has absolute autonomy in commodity distribution and can effectively manage franchisees with high cooperation.

The reporter's eyes

Brands and channels have to go through different stages of development. A single development model cannot adapt to all stages of development. Therefore, brands and distributors should be clear about their current development stage, capital, operation and other specific conditions when choosing ordering system or distribution system.

As far as the brand is concerned, if it is in the period of market share expansion, it is necessary to make timely use of the distribution system in order to better occupy the market and develop contacts. And if the brand is mature and has certain capital, it should be a two-pronged approach, not a single ordering system or distribution system. Because a single system can't adapt to the market, the order system is simple and fast, but it is not as powerful as the distribution system, and the yield of 5% ~ 10% is relatively low; Although the distribution system is conducive to the construction of brand maintenance channels, its cumbersome operation requires the brand to invest a lot of manpower and material resources. Therefore, it is a shortcut to identify the stage of brand development and implement the corresponding system.

Compared with dealers, inventory and capital are the most important issues, so they will be more inclined to choose distribution system. But now the initiative of ordering and distributing goods lies in the brand, so dealers should pay attention to cultivating their own buyers while looking forward to cooperating with the distribution system of big brands.

The advantage of training buyers is that both the ordering system and the distribution system lag behind the market. The ordering system was fully prepared two months or even earlier before listing, so that although it can deal with quality problems, it may have a forward-looking mistake in grasping fashion.

The distribution system takes a short time to pursue orders, and it takes half a month to reach franchisees, so the quality is difficult to guarantee. But if you have your own elite buyers, you can adjust your products at any time according to the changes in the market. The so-called "three caves of cunning rabbits" properly use the order system, distribution system and buyer system with only one purpose: to reduce inventory, speed up capital circulation and earn maximum profits. (Source: China Clothing News)