The agency system, the mainstream marketing model of China's construction machinery, is facing a collapse. More and more agents are actively or passively withdrawing from the agency system, because they cannot make sustainable profits. The foundation for the development of the agency system is slowly collapsing.
Whether an enterprise can make sustainable profits is the only external standard to judge whether its business model can succeed. Therefore, when designing the business model, profit and how to make profit will inevitably become the important principles to attract enterprises to join its marketing system. Now, many OEMs have violated this principle. With the rapid growth of the market from 2020 to 2021, the performance of OEMs has increased significantly, but many agents are in a loss state. At the same time, agents also bear a large number of accounts receivable and debt risks. After all, fooling and beating chicken blood cannot be eaten as food.
In 2021, the revenue of the construction machinery industry will be 906.5 billion yuan, up 17% year on year, and the total profit will be 55.6 billion yuan, down 6%. According to the data of China Construction Machinery Market Research Center, from January to August 2022, about 72.7% of the construction machinery agents were in a loss state, 16.7 percentage points worse than that in 2021, of which 34.6% were in a loss range of more than 10%, 7.9 percentage points worse than that in 2021... The health of the agents was worrying, and sustainable development faced great challenges.
In order to pursue sales volume and market share, OEMs have designed various rebate policies, forcing agents to sell more equipment. As a result, the price is getting lower and lower, and the risk is getting higher and higher. The strange phenomenon of "selling one equipment, losing one" has spread from small equipment to medium and large equipment. People seem to forget the painful lessons of the last round of market decline. Some enterprises are repeating the same mistakes, and the performance growth goal makes OEMs lose their sense. In the past, if the agent did not offset the sales volume, he would be replaced by a new agent; Now, if the agent is conservative, he will be replaced by a direct company, which makes many old agents in a dilemma.
The temptation of growth has made people forget the principles of the business model and that win-win is the root of business. In today's construction machinery market, agents bear a lot of responsibilities and obligations, but it is the main engine factory that counts the money, and the partnership has long gone.
In the relationship between manufacturers, OEMs have always been a strong side, and weak agents are like angry daughter-in-law. Especially after the last round of market downturn, some OEMs and agents have confronted each other in court, making the fragile relationship between manufacturers even more vulnerable. Agents change over and over, and users are the most affected.
The combination of epidemic impact, economic downturn and industry cycle makes this round of adjustment have a huge impact. If the relationship between manufacturers cannot be improved, nearly half of the agents may withdraw. Who will provide services to customers then? Does the direct selling company really have the ability to replace the agent? I doubt this. Although the direct operation has strong execution, its operation ability depends on the quality and experience of the first leader, and requires more capital from the OEMs. If the responsibilities, rights and interests are not clear enough, the mode of thinking is changed, and the operation level of the direct sales team, the management team dispatched by the OEMs can take over the agency? I'm afraid it's too simple.
The author believes that OEMs urgently need to reflect on the relationship between manufacturers. Many OEMs' managers are high above the crowd and think that the money earned by agents is their gift. The OEMs are getting bigger and bigger. Isn't that also the contribution of agents? The communication between the OEMs and the agents is often condescending, never treating each other as equals as the partners, and there are also some corruption phenomena behind them.
The cooperation between many foreign agents and OEMs has lasted for several generations. They have mutual trust, equality and mutual benefit. Why do such manufacturer relationships rarely occur in China? Some domestic brands have started to turn to direct marketing, which has hit the confidence of old agents. The agency system has experienced nearly a hundred years of practice abroad, and has been proved to be an efficient business model. The direct marketing model is not only costly, but also allows manufacturers to face risks directly, including financial risks and compliance risks. Once problems occur, not only the manufacturers are doomed, but it is almost impossible to return to the agency system.
The author has worked in both the OEM and the agent, and knows the importance of manufacturer cooperation, and is deeply worried about the current manufacturer relationship. Some leaders in the top positions of the OEMs are blind and confident, thinking that the growth of performance is due to their high level of operation, and they can easily make decisions without argument. "Lifetime free service" is the "marketing innovation" under such circumstances, which has made it difficult for the post market to turn around.
The author believes that the agency system is facing the risk of collapse, which is a challenge that OEMs need to face urgently, while direct marketing is by no means the key to solving the agency system problem.
