How do SMEs borrow from the sea?

As a small or medium-sized enterprise, it's often necessary to "borrow the boat to sail the sea." This means that smaller businesses can leverage larger distribution channels to save time and effort. For example, instead of hiring a large sales team or opening multiple branches, they can simply integrate with an existing channel, handing over most of the logistics to the partner. This allows them to focus on production while the channel handles the rest. On the other hand, larger companies may seek out smaller distribution channels to maintain control. They need to make their own decisions, ensuring that the channel aligns with their brand and strategy. At the early stage of a business, the channel is often more important than the brand itself. When a company is still building its reputation, the priority is to get products into the market, not just build awareness. One effective strategy is to use high-margin pricing and low-margin sales to ensure that partners and dealers have enough profit to be motivated. The clothing industry has long mastered this approach, offering good margins to resellers in exchange for better visibility and support. Human resources promotion is also crucial. If a partner asks you to send someone to promote your product, it’s worth doing. Sending a representative might cost only tens of dollars a day, but the return in sales can be significant. Plus, it provides direct insights into the performance of the channel and helps identify areas for improvement. Innovation in sales channels is key. Don’t settle for one customer or one channel—focus on making one channel successful first before expanding. The international market, for instance, offers much larger opportunities. It’s usually four to five times bigger than the domestic market, with annual growth rates of 30–40%. Exporting can be faster and more efficient, as foreign markets often have concentrated distribution systems, making it easier to manage a few key players rather than many. Export sales are also safer due to mechanisms like letters of credit, which reduce the risk of non-payment. However, foreign customers can be demanding in terms of quality, delivery time, and price. Still, this allows companies to focus more on product development and less on marketing. Zhang Xuekui suggests that entrepreneurs explore international exhibitions, participate in foreign trade fairs, or use platforms like Alibaba’s English site to find export opportunities. Innovation in sales doesn’t stop at traditional channels. A meat product company in Shandong, for example, found success by targeting street vendors rather than big chains like Walmart or McDonald’s. By creating a hypermarket-style setup at local markets, they saw a dramatic increase in sales. Another example is a car repair shop that noticed customers wanted drinks while waiting. By adding a drink station, sales shot up. Even Coca-Cola’s president once sold tea eggs at a street stall, believing that convenience and accessibility are the future of consumer goods. For any business, increasing customer touchpoints is essential. The more people who know about your product, the more you sell. These touchpoints can be through ads, retail outlets, or online platforms. Industrial products, for instance, often rely on trade shows and exhibitions, which are critical for reaching buyers. In the 1950s, there were only three main sales channels: specialty stores, department stores, and direct mail. Today, there are over 20, with more specialized options emerging. While the number of channels grows, trends show that professional stores and chain retailers are becoming more dominant. Department stores, on the other hand, are shrinking, while chain specialty stores are on the rise. Zhang Xuekui emphasizes that finding and creating the right marketing channels is crucial. Once a channel is established, it can grow exponentially. Chain and export channels, in particular, offer explosive growth potential. For SMEs, breaking into these channels requires smart strategies. First, your product must be desirable and meet consumer needs. Only then will others be willing to sell it. Second, understand your competitors—know their pricing, promotions, and distribution methods. Third, find distributors who can open new markets for you and offer them enough profit to stay motivated. Finally, don’t forget to build your own e-commerce presence—it’s a cost-effective way to reach a wide audience. Ultimately, the key to success lies in finding the right channel. Whether it’s a supermarket, a dealer, or an export route, the goal is to multiply your sales. Sales is a simple formula: average sales per store multiplied by the number of stores. The more stores you reach, the higher your revenue. And if you enter the right channel, the growth can be exponential.

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