Analysis of the mainstream sales model in the lighting industry

by:EME LIGHTING     2019-01-16

   

 It is understood that the current lighting industry mainly uses four major channel models: brand agency mode, direct mode, engineering mode and network marketing mode. Different types of products are operated, and the channel patterns adopted by enterprises are different at different stages of development.

 Brand agency model: still the mainstream

 Undoubtedly, even after the channel wins and the terminal is king, the brand agency model is still the most common and most popular channel model in the lighting industry. The so-called brand agent means that the goods of the manufacturer pass through the multi-level agents and are sold to the final consumers after several hands-on. The ownership of the goods still belongs to the manufacturer. In the agency business, the agents represent the manufacturers to attract customers, solicit orders, sign contracts, and earn profit margins from low buy and high sell.

 Before the emergence of the brand agency model, the lighting industry was in a state of bulk cargo operation. There is only a simple buying and selling relationship between the manufacturer and the merchant, and basically there is no after-sales service. Since the cost of purchasing goods from the local manufacturers is too high, the wholesaler will fix as many manufacturers as possible. At the same time, with the development of the industry and the intensification of competition, manufacturers began to screen high-quality businesses, try to stabilize high-quality businesses, and promote the frequency and quantity of merchants' purchases. As a result, the production of multiple items, conditional owing, and after-sales return rate have begun. As a result, the relationship between wholesalers and manufacturers at this time is relatively stable. Although it is still only a trading relationship, cooperation has a certain continuity and mutual cooperation.

 Then, with the further development of the lighting industry, on the one hand, the manufacturers' product types and styles are gradually enriched, almost exclusively to meet the needs of wholesalers; on the other hand, agents also require regional protection. As a result, the brand agency model of the wall sconce industry came into being. The brand agency model has a unified image and a certain brand appeal, and the merchants do not bother to find the source of supply. The manufacturer provides certain training and opening management support for the merchants, but the manufacturers also have a set of strict system requirements for the business, such as image display, distribution, settlement and so on.

 After entering the year 2000, the brand store model has gradually emerged. The store has a good brand image display, product categories and styles are relatively large, and the price is relatively stable, which is conducive to the manufacturer's brand building and timely access to terminal sales information. These unique advantages have enabled wall sconce manufacturers to strengthen the construction of specialty stores. However, at present, due to many manufacturers' lack of understanding of the true brand monopoly model, thin product lines, lack of professional marketing and service teams, etc., the lighting store's specialty store model still has weak profitability and sells dog meat. And so on, the store model appears to be tepid in the lighting industry.

 Direct mode: the beginning of the show

 In 2008,EMEestablished its first direct store in Shanghai Xinliuying Plaza. When the enterprise develops to a certain stage, the brand transformation becomes the inevitable demand of the enterprise. However, in the process of cooperation with dealers, more or less will have some friction in cooperation. Sometimes, because of different ideas and different interests, there are some obstacles to mutual development. Manufacturers can set up direct sales stores to get rid of the dealer's control and reduce the loss of intermediate profits.

 First, the intensification of competition has increased the terminal operating costs, and the direct channel can reduce the cost of circulation to ensure the cost advantage of the terminal. Secondly, the direct channel can refine the successful profit model to the national replication; once again, the direct channel is freed from the intermediary channel. The barriers allow brand owners to control the terminal themselves, and they are more flexible and flexible, which makes the terminal operations more refined, and the market operation is more planned, planned and systematic. Finally, the direct channel is more conducive to brand management and maintenance. It is conducive to the long-term development of the brand.

 However, the capital requirements and management requirements of the direct-operated stores have been greatly increased. It requires the company's entire back-office support, team building, safety stock, sales monitoring and management of downstream distributors to establish a complete system. . Among them, remote management is the biggest problem facing direct stores. In the case of the Tiangao Emperor, it is difficult for enterprises to integrate the problems of people, property and materials in direct sales stores, and management is difficult. At the same time, the initial investment in opening a direct-operated store is too large, and the cost is large. Although the profit of the agent can be obtained, the relative rate of return is reduced under the premise of large-cost investment. In contrast, the proxy model is more worry-free.

 At present, the management level of lighting companies is relatively backward. There are huge challenges in opening direct stores across the country. The direct mode has advantages and disadvantages. Therefore, the direct mode is not yet popular in the lighting industry.
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EME LIGHTING CO., LTD.’s model also predicts (i) a positive effect of management on firm performance; (ii) a positive relationship between product market competition and average management quality (part of which stems from the larger covariance between management with firm size as competition strengthens); and (iii) a rise (fall) in the level (dispersion) of management with firm age.                                

 


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