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In recent years, the hardware industry and consumer goods have experienced significant transformations in their marketing strategies. Unlike traditional consumer goods, hardware marketing typically involves bulk trade with distinct sales characteristics and channel structures. The distribution channels have become more streamlined, with new hardware stores and large markets emerging. Some operators and major distributors have even launched their own brands, creating conflicts with their retail strategies. As a result, traditional industry channels are becoming more diverse, modernized, centralized, and globalized—shaping the mainstream direction of development.
According to insights from an e-commerce environment, some traditional channel dealers are now exploring mutual channel borrowing as a way to achieve win-win outcomes with other partners.
Here are four key points about mutual channel borrowing:
1. **Integrity as the Foundation of Cooperation**
In today’s business world, mutual channel borrowing can lead to beneficial collaborations if both parties act with integrity. Dealers should focus on what they can gain together rather than just what they can get individually. Channel sharing isn’t about handing over all existing customers; it's about classifying products by channel and exchanging those that fit each other’s market better. This requires trust and transparency. Without honesty, there is no real basis for long-term cooperation.
2. **Diverse Product Selection for Mutual Benefit**
When choosing products for channel borrowing, it's important to select items with different characteristics. If the product positioning is too similar, it could negatively impact original sales. Distributors should ensure that the product varieties are distinct, which benefits both sides and increases overall sales. A wider range of options allows for more purchasing choices, ultimately supporting the original product’s performance in the market.
3. **Control Over Channels During Collaboration**
While borrowing channels, it's crucial to maintain control over your own distribution network. The best practice is not to use cash settlements but instead exchange equivalent products. For example, large-scale distributors may profit by taking quantities from the other side, while terminal dealers can leverage distribution networks to boost sales. Although channels are shared, the control and operation remain with the respective distributors. It's important not to overstep or take over others’ channels, as no one would willingly give up their own.
4. **Clear Profit Distribution Agreements**
When two parties agree to collaborate, profits are generated, but the perception of these profits may differ. Large distributors often focus on rapid turnover and maximizing sales volume, while terminal dealers prioritize maximizing product margins. To avoid conflict, both sides must reach a consensus on how to distribute profits before starting any collaboration. This ensures a smoother and more harmonious partnership.
**Key Considerations in Channel Borrowing**
During the actual process of channel borrowing, there are two important factors to keep in mind:
1. **Product Positioning Alignment**
If both parties are borrowing channels, it's essential to understand whether their product positions align—whether they are high-end, mid-range, or low-end. Even though they work together, if their product distributions don't match, the benefit of channel sharing may be limited. For instance, if one distributor handles low-end liquor and the other deals with high-end beer, the overlap between their target markets may be minimal. Low-end products typically rely on vertical channels, while high-end products operate through horizontal ones. Therefore, the success of channel borrowing depends on whether the target markets of both sides are compatible.
2. **Learning Management Practices from Different Channels**
Through channel borrowing, dealers can gain valuable insights into different management practices. Large distributors can learn about the operations of terminal channels, such as how hotels manage staff, payment methods, risk control, and credit systems. Meanwhile, terminal distributors can explore downstream channels and terminals. This kind of collaboration is not just about selling products—it's also an opportunity to expand knowledge and develop into a more informed and strategic distributor.