Gree self-built channels to control the terminal market

2010 is the 15th year for Gree air conditioners to sell well. This year, Gree Air-conditioning continued to lead the domestic air-conditioning industry with a sales revenue of 60 billion yuan. In the field of home appliances, many brands are hesitant to move forward, but Gree can buck the trend and maintain a high profit margin. Summarizing the achievements of Gree Electric Appliances, President Dong Mingzhu believes that it should be attributed to the distribution network established over the past 20 years, "We have created a unique channel model of 'Gree Specialty Store', and through years of operation, it has gradually formed an urban center. A three-level marketing network centered on prefectures and counties and relying on towns and villages ensures that Gree's self-built channels in the air-conditioning market have improved its control over the supply chain terminal. Under the situation, sales have increased year after year." The channel advantage that Gree has established has become the key to other competitors' hard to catch up.

Forming a community of channel interests through regional sales companies

Gree controls the channel terminal, which is the result of being forced to help. In 1997, Gree's four major distributors in Hubei competed to reduce prices in order to seize territory and pursue profits in the air-conditioning war in the entire industry. As a result, Gree's market price system in Hubei was rushed to pieces. Gree and dealers lose both.

In desperation, Dong Mingzhu, who was the general manager of Gree Sales at the time, put forward a bold idea: to establish a joint operation entity with interests as the link, Gree brand as the banner, and mutual benefit and win-win situation. As a result, Hubei Gree Air Conditioning Sales Company birth. The regional sales company is jointly funded and established by the enterprise and the channel dealers, each of which holds shares and implements joint dividends at the end of the year. Its core concept is to achieve unity of channels, networks, markets and services, and to work together in the market and seek common development. Among them, Gree only exports brand and management, and holds a small share in the sales branch. In the second year after its establishment, Hubei Gree Air Conditioning Sales Company made sales to a new level, with an increase of 45%, and sales exceeded 500 million yuan. In the following three years, the sales of Gree air conditioners achieved a leap-forward growth, from 4.2 billion yuan in 1997 to 6 billion yuan in 1999, and reached 13.832 billion yuan in 2004.

With the support of these regional companies, Gree has more and more control over retail terminals. In March 2004, Gree Electric and Gome had a dispute over the sales of Gree air conditioners. Gree Electric believed that Chengdu Gome's unauthorized price reduction had destroyed the long-term stable and unified price system of Gree air conditioners in the market, and decided to stop supplying to Gome. Gome said that because Gree Electric was unwilling to make concessions on price, it was contrary to Gome's principle of "small profits but quick turnover", and required local branches to clear the inventory of Gree air conditioners. The dispute eventually led to Gree's withdrawal from Gome's sales channels. However, Gree's sales were not greatly affected by this. At that time, there were nearly 10,000 specialty stores all over the country.

Gree's channel system has a clear top-down division of labor and strict organization. The provincial joint venture distributors of Gree air conditioners are composed of the largest wholesalers in the province and Gree Electric Appliances. They are responsible for monitoring the local market, standardizing the price system and purchasing channels, and wholesale the products to the next-level distributors at a unified price; Local municipal wholesalers have also formed corresponding joint venture branches to be responsible for the sales of Gree air conditioners in their regions, but Gree has no shares in them. In addition, Gree is responsible for implementing nationwide advertising and promotion activities, while local advertising and promotion activities and store decoration are handled by the joint venture sales company. The Gree specialty store system is directly managed by regional channel joint ventures and built by regional joint ventures or lower-level distributors. Gree has successively established regional sales companies in 32 provinces and cities, and these multi-branch branches have opened up nearly 10,000 specialty stores.

Gree's "joint-stock regional sales company" model, through a relatively clear shareholding property relationship, has well solved the problem of creating and sharing interests. At the same time, it has cultivated the loyalty of all dealers to the Gree brand, unified the price system, and became a community of interests.

Controlling distributors by means of capital

After 2000, the strength of Gree's distribution companies in various places has grown, and the control rights have also increased, and there have been more "frictions" with Gree. To this end, Gree has taken strong measures.

In 2001, Gree cleaned up its original dealers in Hubei and Anhui successively. In August 2003, Gree began to take the initiative to operate on the channel. In the first step, Gree injected funds into the Guangzhou and Shenzhen branches for the first time, and increased the shares of the two branches to achieve the purpose of holding. In the second step, Gree directly dispatched the chairman and sales director from the headquarters, and the general manager was also served by the new shareholder. Third, the re-division of the sales area will directly transfer the branches from Conghua, Panyu, Huadu and Qingyuan to the Guangzhou branch, and the Huizhou and Dongguan branches to the Shenzhen branch. As a result, the sphere of influence of the Guangzhou and Shenzhen sales companies has been strengthened. Since then, similar methods have been adopted in Hubei, Anhui, and Guangxi.

Gree channel is simply a "three-level system" plan, manufacturer-manufacturer joint venture body-channel body. Here, the manufacturer is the decision-making layer, the manufacturer's joint venture is the executive layer, and the channel body is the platform and bridge for Gree to reach the final consumer. Gree takes the specialty store as the leading retail form, in order to make the future service of Gree specialty store become professional and standardized. According to Dong Mingzhu’s words, this specialization and standardization requirement is: as long as a certain consumer buys an air conditioner in a Gree store, Gree’s nationwide business outlets will know what type of air conditioner he bought in which store, and what type of air conditioner he bought. No matter when and where the air conditioner purchased by the consumer has quality problems, as long as they make a phone call, Gree's service will be in place immediately.

The investment of regional sales companies in brand and service can be quickly deducted from the payment according to the proportion of sales, which greatly enhances the motivation of dealers to invest in "brand and service". For the Gree brand, it is even more benign. The Gree store channel model supported by brand and quality is not only conducive to enhancing the brand image of the manufacturer, but also the marketing model of the store is conducive to integrating advantageous resources and providing consumers with more thoughtful and professional pre-sale, during-sale and After-sales service fundamentally protects the interests of manufacturers, merchants and consumers. In 2007, Gree established a "4S+1" professional store on the basis of the specialty store, and built a powerful retail terminal through "4S" professional services.

Multiple channels coexist

In the area under the jurisdiction of the regional sales company, the terminal channels of Gree air conditioners include not only specialty stores, but also home appliance chain enterprises, shopping malls, supermarkets, wholesalers, retailers and other forms. The main "multi-channel coexistence" sales model.

The home appliance chain enterprises cover about 70% of the market in China's first-tier cities and about 30% of the second- and third-tier cities. Therefore, although Gree "reluctantly" gave up Gome in 2004, it has achieved the same curve with home appliances. Cooperation of chain enterprises. Gree continues to maintain growth in the primary market through home appliance chains. In 2006, in addition to continuing to strengthen the comprehensive cooperation with Five Star, it also achieved normal cooperation with Yongle. At the same time, in the regional market, it also entered the stores of Suning and Gome through the agents of Gree Electric Appliances. In this regard, Dong Mingzhu showed shrewd flexibility: "Gree's greatest success lies in its ability to adapt to changes in the market. Gree has chosen a path that can adapt to market demand." Transparent sharing of information and sharing of risks and benefits between manufacturing, logistics, sales and service links, thus avoiding the squeezing competition relationship between suppliers and home appliance retail enterprises centered on "price negotiation", improving their own The ability to control the supply chain. The channel management model of joint ventures of manufacturers improves the overall efficiency of the supply chain, which in turn allows Gree to maintain a high profit margin.

Interactive questions:

1. Can home appliance manufacturers completely break away from the "hypermarkets" of home appliance retailers and rely on self-built channels to ensure market share growth?

2. Can the Gree channel model be replicated?

3. What opportunities and risks exist in the upstream and downstream of the extended supply chain of the manufacturing industry?