Preface For China's hardware manufacturing companies and brand operators, choosing the most optimized channel is conducive to the rapid sales of products and the stable development of the company; for the channel providers, choosing a reasonable model will help expand the number of buyers. The influence will also help increase the ability to negotiate with manufacturers. For China’s hardware and electronic machinery industry, a reasonable channel model is conducive to the increase of overall industry profits and the expansion of competitiveness. Therefore, the discussion and research on the channel model of China's hardware, machinery, and electronics industries are conducive to many urgent needs. We try to clarify the advantages and disadvantages and development prospects of each channel model through case analysis and comparative analysis. Through analysis, we found that the supermarket chain model development and profit space are the most, one is because of its own mode advantages, and the other is because of the current procurement characteristics of China's hardware and electromechanical products. Other models will still develop in the direction of specialization and scale.

U.S. O.O. Purchase began its expansion of the Chinese market in 2009, and supermarket chains were the model of their choice. For local Chinese companies, how to seize this opportunity to realize the "Blue Ocean" strategy affects both the ability of ethnic enterprises to control the channels and the security issues of China's entire hardware and electromechanical industry. Therefore, we call on local Chinese companies to enter this “blue sea” through joint, publicly listed companies.

The following is our research results for the industry reference!

First, channel status analysis model MRO

Comprehensive Hypermarket Supplier Distributor General Agent Terminal Purchaser Chain Supermarket Store b2b

As an industrial product, China’s hardware and electromechanical products have undergone continuous changes in their channel models and have various forms, but each has its own profit margin. The formation of the channel model of China's hardware and electromechanical industry has both historical and geographical factors, but capital and strategic awareness have played a decisive role in the current model development.

First, the MRO model: MRO is called the maintenancerepairandoperation, equipment maintenance, repair and operation. This model is derived from Europe and the United States, through the integration of supply, one-stop service, to meet the company's industrial products needed in equipment maintenance, repair and operation.

Competitive advantage: It is to meet high-demand corporate procurement through high inventory and high value-added services;

Supply positioning as: high-end products;

The target customer group is: large and medium-sized enterprises that are in need of industrial-grade products;

The mode of operation is to achieve various marketing and service functions through DC's exhibition display, sales, warehousing, logistics, and e-commerce.

Case:

1. Guinness. Grainger is the world's leading distributor of equipment maintenance, repair and operation (MRO) industrial products with over 80 years of credit guarantee. With sales of US$ 6.9 billion in 2008, Gu’an Jie’e has more than 600 stores, 18 distribution centers, and a large sales network. It has more than 110,000 daily deliveries from over 3,000 suppliers to 2 million customers in over 150 countries. Thousands of kinds of industrial products help their facilities to operate normally and reduce their purchase costs.

Gu Anjie landed in China in 2006. The head office (DC) is located in Shanghai and has offices in other major cities in China. It intends to establish multiple DCs in major industrial product demand regions, and the development trend is good.

2. Billion Express. Since MRO's operating model requires strong financial support, it is implemented separately for China's domestic channel distributors, and it is difficult to achieve a nationwide layout. Even geographically, there is a problem of lack of funds. But the MRO model does have many advantages. As a result, an MRO model with strong regional characteristics has emerged in China, Chongqing Yijietong.

Billion Express Mode: The President, Vice President, Board of Directors, and members of the Chongqing Chamber of Commerce and Industry (General Chamber of Commerce) Hardware and Electrical Machinery Chamber of Commerce Co., Ltd. jointly funded and established the company scale: registered capital of 50 million yuan, and an operating area of ​​approximately 10,000 square meters (Logistics Distribution Center , show sales center and management and service center);

Supply product positioning: tens of thousands of product lines cover a large number of domestic and international high-end brands of industrial products (hand tools, power tools and supplies, pneumatic and hydraulic, fasteners and seals, cutting tools and abrasives, welding and spraying, Test instruments and meters, pump valves and fittings, material storage and transportation, safety and protection, etc.).

Comparison between Guzhengjie and Yijietong:

the same:

Both are in the same mode of operation, through DC's exhibition display, sales, warehousing, logistics, e-commerce, etc. to achieve a variety of marketing and service functions;

The product covers all industrial products required by the company MRO;

All these are high-purchase, high-value-added services that meet high-demand corporate procurement.

the difference:

Gu’s strategy in China is to fully cover the Chinese market and establish DCs in key areas. However, Yijietong is only a distribution service provider in the Chongqing region. The strategic deployment and scale of the two companies in the country is obviously very different.

Service Product Positioning: Gu'anjie upholds the US market's supply orientation, and basically chooses mid- to high-end brand products for product procurement, mainly foreign brands and domestic ones. Although Yi Jietong is mainly engaged in the promotion of medium and high-grade products, it is From the market demand in Chongqing and the existing requirements for purchasing customers from Yijietong, its product positioning is obviously lower than that of Guinness. Corporate management: Gu Anjie uses advanced IT programs for information and convenience management. Starting from 4C theory, the company implements supply chain management in the form of service providers, and realizes a truly customer-centric marketing and service concept. The management of Jietong in the IT field is obviously not as good as that of Guzhengjie. The restriction of funds has a certain influence on the complete rational allocation of professionals. Compared with the mature and advanced management system of Guinness, some of the backwardness is also normal.

Problems encountered in the market: The operation mode and culture of Gu'anjie are basically in the form of the United States. In China's market development, it will meet the different needs and adaptations of China's procurement, marketing, promotion, advertising, etc.; Yijie General will encounter and contribute capital. Members have both business coordination issues and high-end customer experience and capabilities.

Second, the hypermarket model This model is generally a mixed supermarket for construction, home, hardware and other products, in the form of large-scale supermarkets similar to fast-moving consumer goods. Generally take the shop-style sales model, the key link lies in the store's location and supply chain management.

Competitive Advantages: High coverage of store cities, ease of procurement, and convenient logistics.

Supply product positioning: Professional and DIY product target customers: construction companies, families, etc. Operational mode: direct-operated chain store model:

B & Q:

B & Q, a typical enterprise in this type of model, has a large number of directly-operated stores in China. However, because of the busyness of accelerating the number and size of stores, it neglects to conduct in-depth research on the market and it is difficult to recruit suitable professionals for a short time. There have been problems with management. Recently, many poorly-operated stores have been closed.

The impact of B&Q on the hardware and electronic machinery industry lies mainly in the purchase and sales of mid-range products, and the types of procurement are limited, and the impact on the development of the entire industry is not very large.

Third, dealers general agency system model This model accounts for most of the hardware and electronic machinery industry sales, in the current Chinese hardware and electronic products, the dominant channel of distribution, but it is a relatively backward channel model.

The advantages of the agency system: The advantage of the agency system is that through this model, in the current Chinese market, under the circumstances that other models are not fully developed, it is possible to quickly distribute the company's products through a large dealer network.

Disadvantages of the agency system: The agency system is generally multi-level agency, with many channels, and the final sales price of the product is high; manufacturers have poor control over the channels, difficulty in channel management, and the price is easily confused; it is difficult to shape and maintain the terminal brand. Image and so on.

At present, most of the product distribution in China's hardware and electromechanical industry uses this channel model. There are both historical and procurement characteristics. However, the demand and procurement characteristics of Chinese hardware and electromechanical products are changing. This model has increased the difficulty of marketing for manufacturers, and it is difficult for buyers to obtain timely, convenient, adequate supply and professionalism. Services, not to mention consultant-style services and marketing. Therefore, for China's domestic channels, intensive and integrated supply has become an inevitable trend, which is somewhat similar to the Gome and Suning models in the field of electrical distribution. Overly decentralized channels are not conducive to the sales of manufacturers and are not easy for channel providers. To achieve high profits, it is even more difficult to meet the high-demand procurement requirements of buyers. Therefore, this type of reform must be implemented.

Fourth, the supermarket chain model Although this model is similar to the hypermarket model, but due to the limited purchase of hardware products like B&Q, it is not exactly the same as the hypermarket model.

This model uses the chain in full sense as the core model, management norms, and large-scale operations. Although there are some so-called chain stores similar to this model in China, it is only in the form of achieving the goal of opening stores in different regions. Product categories, scale, and management have not met the requirements of supermarket chains. For example, Zhejiang's Xianheng supermarket chain, today's hardware, Hong Kong Tong Yi Guo Hui Group, etc., although in many areas open stores, but it is only a relatively chain form.

Take Hong Kong Tongyi Guohui Group as an example. Although it has dozens of stores across the country and intends to adopt two operating models, namely, direct operation and franchise, due to low brand awareness and limited scale, it is difficult to achieve scale advantages and therefore cannot obtain many benefits. The direct agency rights of manufacturers cannot form advantages in prices, and they cannot form a unified, timely and integrated supply, and they do not have the conditions to form a supermarket chain.

Since the domestic channel providers themselves are unable to operate a nationwide real supermarket chain due to capital and management issues, this cake will naturally attract many well-funded foreign companies with mature experience.

Analysis of the advantages of the hardware chain supermarket model:

1. At present, the vast majority of products in China's hardware and electronic machinery industry are circulated through the agency distribution model. The size of dealers is small, it is difficult to form scale advantages, and they cannot meet the one-stop purchase requirements that buyers gradually increase; The more standardized and objectively, the higher the transparency of sales is, the more common dealer sales models have fallen behind, and they can only meet the market demands of ordinary DIY and civilian grades.

2. The hypermarket site selection is too centralized and the operating costs are high and cannot meet the different market demands in China; the scale of supermarket chains is smaller than that of hypermarkets, but the types of products can fully meet the requirements of procurement, and the cost of their operations is not high. The store has a wide coverage and flexible operation. It can start from the customer's needs in the operation, increase the added value of the service, and enhance the market competitiveness.

3. Since there are many storefronts and large sales of supermarket chains, they will naturally attract manufacturers to join. Therefore, their purchase costs will be reduced and they will have relative price advantages.

4, this model can take direct and join two forms, as long as the funds are sufficient, have a sufficient scale, brand awareness is high, there are no two types of risk.

Case:

U.S.A.O. Purchase: In 2008, U.S. hardware channel operator O.O.C., after examining the Chinese hardware market, found that the development of China's hardware chain stores lags behind and cannot meet the increasing demand of China's procurement market, with Kyushu International (Tianjin) Co., Ltd. The Kyushu Arcadia (Tianjin) Investment Management Co., Ltd., a joint venture established by the Building Materials Market League Co., Ltd., officially settled in TEDA recently. The company has a total investment of 40 million RMB and a registered capital of 20 million RMB. The company will be the first to open three hardware operation stores in the Binhai New Area, and gradually establish an independent distribution system. In the next two to three years, the company plans to form 20 free-chain hardware stores in Tianjin, and gradually develop more than 30 hardware retail store customers in Beijing, Hebei, and some cities in Shandong. Then occupy the national market, this will completely change China's hardware channel model, reduce circulation, build direct distribution bridges for manufacturers and buyers.

Fifth, the store model For industrial products, taking the store sales model is not easy. Industrial products are generally sold to manufacturers. Unlike fast-moving consumer goods, the target customer base is mass. Therefore, from the perspective of sales methods and the turnover of single stores, industrial products generally do not adopt the sales model of specialty stores, but they do not mean that industrial products cannot be imported into such models. If China's hardware and electronic machinery industry can form a store model, then manufacturers will get a huge monopoly profits.

The conditions for the establishment of hardware and electromechanical store model:

1. Location: Firstly, we must consider the target customer group, that is, the characteristics of procurement, and then we can select the site according to the customer's situation. According to the current procurement characteristics of China's hardware and electromechanical products, the first-tier and second-tier cities have seen a trend of diversification in procurement, and they have considerable demand for low, medium and high-end products. The existing dealers have stabilized and it is difficult for the single-factory-operated specialty store model to abandon existing agency brands. Therefore, the model of the store is difficult to promote among existing dealers. The purchasing characteristics of third- and fourth-tier cities and rural markets can exactly meet the operational needs of a single manufacturer. Because the three- and four-tier cities and rural markets have a dominant demand for products such as DIY, civil-grade and professional-grade products, and the specifications are not high enough, a single manufacturer can meet the market demand through its own production and OEM forms.

2. Product line: As the profit of the hardware products is limited, therefore, if the company wants to satisfy the operation of the store, the company needs to continuously expand the product line. In terms of general procurement characteristics, the store supply products need to cover hand tools and power tools. , pneumatic tools, hydraulic tools, and mechanical and electrical products. This can guarantee the high profit margin of the store.

3, management: store for manufacturers means strict control of the channel, this control requires the use of modern management systems, it is best to introduce ERP management software, so that manufacturers can always know the sales of various stores and potential needs , can supply products in time. Both can effectively supervise the store, but also better meet the customer's purchasing needs.

Case:

According to the needs of the market and the company’s own resource advantages, the Dali Store Group plans to start its own franchise in the third and fourth-tier cities of the country gradually through the start-up of college students joining in the business and transformation of old dealers. Rural market.

The effective implementation of this strategic model is mainly due to the existing product line, brand, cost advantages, as well as a keen market insight and courage.

Sixth, B2B mode E-commerce has gradually become an essential sales model in modern enterprise marketing. Many advantages, beyond time and geographical constraints, to maximize the convenience of procurement to meet the needs, and can reduce operating costs. China's hardware and electronic machinery industry usually uses the intermediary platforms Alibaba, Dunhuang.com, and HC.com to conduct e-commerce operations. Very few companies conduct e-commerce operations through their own websites.

For hardware and electronic products, only dealers and small businesses usually sell through e-commerce for many reasons: First, the purchasing habits are not fully networked; Second, companies have mature offline channels, set up e-commerce, and both There are channels of conflict of interest; Third, e-commerce requires mature logistics, the small amount of logistics costs is too high, and large quantities of orders generally do not trade from the Internet. Therefore, only dealers and small businesses will use e-commerce sales, and the sales share in the domestic market sales is very low, and there are few large-scale B2B companies.

Case:

The western region of the western region is a typical e-commerce service provider. Its positioning is also an MRO service provider, which is similar to that of Gu'an Jie, but its operating model belongs to B2B. This company started from general offline dealers and established a sound database of industrial supplier information required by MRO through venture capital investment. In addition, it has set up warehouse centers in major cities throughout the country, so it can meet the needs of logistics. The development is relatively smooth and the momentum is strong.

However, this model mainly uses the network's database and storage center. However, since it is a service provider, it is mainly necessary to proceed from the purchasing convenience of the customer and strengthen the warehousing and logistics functions. Therefore, the B2B core function still needs the assistance of the offline supply system. This model can only be counted as an electronic online service version of the MRO model. The potential for development is not very large. Unless the DC advantages of the Guinness mode are used, it can expand its scale and occupy a certain amount of channel space.

Comprehensive analysis:

Through analysis, we found that there are only five types of channel models in China's hardware and electronic machinery industry, and each has its own market and profit space. However, with the development of the entire industry and changes in the characteristics of procurement, various models have gradually revealed different potential and space for development.

1. The MRO model will become a medium and large-scale enterprise's procurement requirements for high-end industrial products. The development of Gu’anjie will inevitably become better and better. The advantages of its use of funds and mature management experience will surely become the leading enterprises of this model.

2. The hypermarket model has a certain contribution to the procurement of tools related to construction, but due to its limited market segmentation, it can only be an auxiliary model for the hardware and electromechanical industry.

3. The general agency system is the mainstream in all channels at present and occupies most of the sales. Its flexibility is strong, it can meet different market demands, the development space is certain, but it will be squeezed and impacted by other modes.

4. The advantage of the supermarket chain model is obvious. The scale of its single store is moderate and the product line is long enough to satisfy the purchase requirements for various products at the same time. The development potential is huge.

5. The store model is suitable for the procurement needs of third- and fourth-tier cities and rural markets. A single enterprise can implement this model as long as it has sufficient funds and has a long enough product line.

6. The B2B model occupies sufficient advantages in foreign trade. However, in the domestic market, the advantages are not yet obvious. It is mainly influenced by the characteristics of procurement and logistics, but there is room for future development.

Disclaimer: This article only represents the personal opinion of the author and has nothing to do with HC Hardware.

[This article is the hardware marketing expert - Huang Qizhi (official blog) authorized article, without permission is strictly prohibited reproduced]

Huang Qizhi: Law, consulting, media, industry. From sales director to media planner to marketing planner. Good at brand strategy planning \ management \ communication, marketing strategy and strategy formulation \ channel construction and management, etc., has a high degree of theoretical literacy and solid marketing of industrial products marketing.