Rebirth: Fan Debiao rises from the Liaobei land

At 10:30 a.m., Director Li's assistant invited Fan Debiao to the small conference room on the third floor. A bronze plaque reading "VIP Reception Room" hung on the door, which was half-open, and voices could be heard coming from inside.

Pushing open the door, I saw that Director Li had already arrived, accompanied by a young man in his early thirties, dressed in a sharp suit with his hair neatly combed.

"General Manager Fan!" Director Li stood up to greet him. "Come, come, let me introduce you. This is Manager Zhou from the Headquarters Channel Department, who is in charge of the Northeast region."

Manager Zhou extended his hand with moderate pressure, his smile neither warm nor cold: "President Fan, it's an honor to meet you. Kaiyuan Dexing Communications has sold 2,100 units in six months; that's the highest number among county-level distributors."

Fan Debiao shook hands with him: "Manager Zhou, you're too kind."

They sat down. Tea was served, and the door closed.

Manager Zhou opened the folder, pushed it in front of Fan Debiao, and pointed to the first page.

"President Fan, this is the nationwide policy for this year. Director Li should have given you a heads-up—the purchase price will be increased by 5% to 8%, there will be price limits for retailers, the minimum order amount will be raised by 30%, and there will be a quarterly performance-based rebate system."

He paused, then raised his eyelids: "The red line. The whole country is one, no exceptions."

Fan Debiao looked down at the documents and didn't say anything.

Fan Debiao closed the document.

"Manager Zhou," he said, "I know the policy is a red line. But whether that red line can be crossed depends on who's in charge, right?"

Manager Zhou's brow twitched slightly.

"Last year, TCL's total sales in northern Liaoning were 3,700 units," Fan Debiao pushed the document aside, "and my company accounted for 2,100. Where would that rank among prefecture-level cities in Liaoning Province? And among county-level cities in the three northeastern provinces, are there any that outsold us?"

Manager Zhou did not respond.

"I'm not here to challenge you," Fan Debiao said, leaning back in his chair. "I just want to ask one question—I accept the policies, but outside of the policies, is there any space for those who 'accept the policies' to make exceptions?"

Manager Zhou remained silent for a few seconds.

"Mr. Fan," he put the folder back beside him, "what kind of space do you want?"

"Manager Zhou, Director Li, let me state my position first," Fan Debiao said. "I recognize the TCL brand. Last year, we sold 3188 units, and not a single one went to waste. Consumers recognize it, and so do the distributors. This year, as you promote color screen and foldable phones, I will definitely give them my top priority when I get back. I'm making this clear."

Director Li's expression relaxed, and he was about to reply.

Fan Debiao didn't give him a chance.

"But policy is policy, and the market is the market," he said. "If procurement prices rise by 5% to 8%, but end-user prices can't rise, and orders have to double—Manager Zhou, how am I supposed to meet that demand?"

"I've done the math. This policy is equivalent to cutting gross profit by 40% while doubling order volume."

Director Li coughed lightly: "President Fan, well... the manufacturer knows that distributors are under pressure, so they've adjusted the rebate policy. The rebate for completing the task is higher than last year..."

"How much taller?" Fan Debiao asked, looking at him.

Director Li paused for a moment: "Until completion, a 3% quarterly rebate will be given..."

"2.5% last year," Fan Debiao nodded. "That's an increase of 0.5%."

He didn't say anything more.

"President Fan," Manager Zhou lowered his voice, "the policy is set by headquarters, and I understand your difficulties. But you also have to understand us—last year, we were out of stock for three months, distributors were arbitrarily lowering prices, and cross-regional sales were spreading from Northeast to South China, and from South China to Northwest China. Headquarters pressured us, and we could only pressure them further."

He paused for a moment: "The red line is indeed off-limits. But... but for a client of Mr. Fan's stature," Manager Zhou emphasized the word "stature," "we can have a more flexible approach to negotiations."

Fan Debiao didn't respond, waiting for him to continue.

Manager Zhou stopped and turned to look at Director Li.

Director Li understood, got up to close the door tightly, and when he came back to sit down, he moved the chair forward half a foot.

"General Manager Fan," Director Li lowered his voice, "I'll be frank with you—the other distributors in Liaoning Province are getting a bit restless after hearing about this year's policy. They sent a letter from Tieling saying they want to wait and see and aren't in a hurry to sign."

He glanced at Fan Debiao's face: "That old He from Anshan, he might as well say he's going to reduce production this year..."

Fan Debiao remained silent.

"So," Director Li leaned forward, "headquarters has an idea and would like to ask General Manager Fan for help."

"explain."

Manager Zhou cleared his throat.

"Mr. Fan, we hope you can take the lead in signing the main contract—the one with the nationally unified policy. Once you sign it, we'll have more leverage to pressure other agents."

He looked at Fan Debiao: "Of course, for someone of Mr. Fan's size, signing only the main contract is definitely not appropriate. You can make any requests you may have. We can draft a supplementary agreement; the main contract will be for external parties, and the supplementary agreement will be for internal parties."

Fan Debiao took a drag of his cigarette, exhaled, and the smoke slowly dissipated in the conference room.

"Manager Zhou," he said, "I'll sign the main contract, no problem."

Manager Zhou's eyes lit up.

"However," Fan Debiao stubbed out his cigarette in the ashtray, "I have a few conditions for the supplementary agreement."

Manager Zhou opened his notebook and picked up a pen.

"Mr. Fan, please speak, I'll take notes."

"Article 1: Price lock-in. The purchase price will be based on the base price as of January 31, 2003, and will not be affected by price adjustment policies. The price lock-in period is 6 months."

Manager Zhou was taken aback: "Six months? The industry standard is three months..."

"I ordered a larger quantity, so a longer price lock-in period is reasonable." Fan Debiao didn't look up and continued writing, "Second, rebate upgrade. The quarterly rebate has been increased from 3% to 8%, of which 5% offsets the increase in purchase price, and 3% is the incremental rebate. If the quarterly target is exceeded by more than 120%, an additional 2% rebate will be added, settled monthly, and credited to your account before the 5th of the following month."

Manager Zhou opened his mouth, but no words came out.

"The third point is flexible delivery. Orders will be delivered in six batches, with one-sixth delivered each month. The model ratio can be adjusted seven days before delivery, with popular models given priority and less popular models delayed or replaced at an equivalent price. The deposit ratio is reduced to 10%, with 80% paid upon delivery and the remaining 10% deducted during quarterly rebate settlement."

"Article 4, Unsold Goods Guarantee. Unsold models with a sales rate of less than 30% within a quarter can be exchanged for goods at 85% of the original purchase price. No rebate will be deducted for exchanges, and there are no restrictions on the models that can be exchanged. Popular models can also be exchanged for goods of equal value. The exchange rate in a single quarter shall not exceed 15% of the order volume for that quarter."

He looked up at Manager Zhou.

"Fifth, it's linked to order volume."

"In the first quarter and the second quarter," Fan Debiao put down his pen, "my actual delivery volume was 60% of last year's average monthly sales."

Manager Zhou was stunned for a full three seconds.

"60%?" His voice trembled slightly. "Mr. Fan, your average monthly sales last year were 300 units, so 60% would be 180 units. The main contract you signed represents a 120% increase, which is 360 units—this doesn't add up..."

"That matches up," Fan Debiao said. "I signed the main contract with a 120% increase, totaling 3,600 units for the whole year. I signed the supplementary agreement with a 60% execution rate, with 180 units to be delivered in the first two quarters."

He paused for a moment, then said, "The difference will be made up in the second half of the year."

Manager Zhou looked at him as if he were a species he had never seen before.

"Mr. Fan," he said in a low voice, "you're... sacrificing the first half's sales volume to boost the second half?"

Fan Debiao remained silent.

"Why?" Manager Zhou pressed. "What were the statements made in the first half of the year?"

Fan Debiao picked up his teacup and took a sip.

"Manager Zhou," he put down his teacup, "you just said that we were out of stock for three months last year."

Manager Zhou nodded.

"The stockouts are because production capacity can't keep up," Fan Debiao said. "You expanded production this year, so there haven't been any stockouts, right?"

"right."

"Then the biggest problem this year isn't stockouts," Fan Debiao said, looking at him. "It's unsold inventory."

Manager Zhou was taken aback.

"The period after the Spring Festival is the traditional off-season," Fan Debiao said. "After the Lantern Festival, how many customers can a mobile phone store get in a day? People have just finished celebrating the New Year, how much money do they have left in their pockets? Your headquarters is pressuring distributors to boost sales, distributors are pressuring stores to boost sales, and stores are pressuring salespeople to boost sales—the goods are stuck in the warehouse, not a single one has been sold, the books show sales, but in reality it's all inventory."

He paused for a moment, then said, "Manager Zhou, I benefited from your supply shortage last year. This year, if you continue to supply, that benefit will be gone. I'm not afraid of competition; what I'm afraid of is—the market suddenly declining, leaving me with a pile of unsold inventory."

Manager Zhou remained silent.

Director Li whispered from the side, "President Fan, aren't you being overly cautious? Sales were so good last year, how can you possibly maintain that this year..."

"Last year is last year," Fan Debiao said without looking at him. "This year is this year."

"Manager Zhou, I'll sign the main contract for 3600 units. You can use that to pressure other distributors; that'll be enough. I'll focus on volume in the first half of the year and go all out to boost sales in the second half. The total volume for the year will only be more than that—3600 units? You think I can't handle that? I'm confident I can sell them."

He paused for a moment: "But I can't afford to stock up on inventory for the first two quarters."

Manager Zhou didn't speak, looking down at the few pages of handwritten terms.

The meeting room was so quiet that you could hear the occasional footsteps passing by in the corridor.

After a long while, Manager Zhou looked up.

"Mr. Fan," his voice was a little hoarse, "I don't have the authority to make this request."

Fan Debiao nodded without saying anything.

"But I can report it." Manager Zhou carefully put away the few pages of paper. "President Qin is still in Guangzhou. I'll see him tonight."

Fan Debiao stood up and draped his jacket over his arm.

"Manager Zhou," he said, "I'm flying to Ningbo tomorrow afternoon. If it can be finalized today, I'll sign. If not..."

He didn't continue.

Manager Zhou's expression tightened.

"Mr. Fan, is there a meeting at your Bird company too?"

Fan Debiao did not answer.

He walked to the door and paused.

"Director Li," he said without turning around, "that Chen Yongfa from Chaozhou, and that Ms. He from Foshan—for their main contract, is the purchase price going up by 5% or 8%?"

Director Li did not respond.