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Distribution – What challenges?

Distribution – What challenges?

DISTRIBUTION – IT IS IMPORTANT

 Distribution  (the 2nd P in the 4Ps of marketing) aims to make the product available to the nearest point of purchase to a consumer. Therefore, distribution is a very critical element within the marketing value chain for an organisation.  This function is closely grouped with sales operations. . The distribution model adopted by FMCG companies in India is time- tested for its efficacy and durability.

The model of distribution evolved by FMCG corporations over several decades have become exemplary for many  industries that are relatively new entrants in the market, telecom being a notable example. There is an endless pursuit by larger corporations to enhance the distribution reach as a key strategy for organic growth and the width of distribution is redefined every year.  For new entrants and smaller organisations distribution has always  been a daunting task.

DYNAMICS IN DISTRIBUTION

 The distribution mechanism has become more complex in the last 10 years due to a host of factors, some of which are:

1,  Expansion of urban markets:  Since late 90s, the urban markets  have been growing rapidly thanks to the huge employment created in IT, ITES and Automobile sectors. New residential colonies have been created, enlarging the cities’ boundaries. This dispersion of residential colonies encouraged local decentralised market clusters far away from the erstwhile main markets.

2.   Growth of Rural Market : Reach of electronic media, coupled with higher earnings in the rural markets have created new aspirational demand for various products in the rural markets, thus demanding specific distribution model for semi-urban and rural areas.

3.  Modern Trade: Emergence of modern trade as a retailing format has necessitated specialised service requirements  from distribution point of view.

4.  Commodity to branding:  In order to offer quality and hygiene, commodities like edible oil, wheat, dhall, pulses, salt etc.., were packed and branded.  Once these were sold in mandis or wholesale outlets in loose form and the change over to branding needed a different distribution approach.

5.   Packaging revolution: India has been witnessing a revolution in packaging especially in food products and toiletries.  Today packaging is effectively being leveraged to get better storage, longer shelf life  and visibility for a brand.  Introduction of sachet, pouch pack, pet container, trial version pack etc., have enormously increased the scope to stock and sell a brand in more outlets. This has redefined the scope of distribution in a market.  Small price point packs, which are designed to generate trials  for  a brand, are to be necessarily sold through small bunk shops. Besides, the corner bunk shops are now helping the housewife to get some last minute “top up” purchases without going to her regular outlet. And servicing these smaller outlets that offer convenience, require an “inclusive” distribution model.

6.  Multi distribution points  : There are several products that are to be sold across all categories of outlets including medical outlets. Health drinks, sanitary napkins, home insecticides etc., are products that are to be distributed through multiple distribution points within a market to cater to all categories of outlets.

THE CHALLENGES

The sales manager who is mandated to optimise the distribution reach of the brand in his territory is facing enormous challenge in three fronts:

1.  Distributor as a declining tribe: Distribution was once a family business, with clear succession in place. It was rated as a good investment giving  a handsome ROI.  However, stagnant gross margins,  steep increase in real estate cost, logistic cost and shortage of  man- power, have in combination taking off  its sheen .  Resultantly, today , even the MNCs are finding it difficult to get  distributors.

2. Rapidly  changing retail map :  The retail landscape is fast evolving with new outlets getting added or existing outlets getting modified . With a vast geographical area to be covered and reaching out to different categories of outlets require a thorough mapping of the market.  This market mapping should clearly indicate the profile and potential of each outlet to enable the sales manager to plan his quantity sales, coverage plan and promotional inputs.  Importantly, such a plan needs a constant updation.  While he may be able to garner such details for those outlets that are under direct coverage in a market, he may miss out those outlets that are indirectly getting covered or yet to be covered.

3.. Frontline sales force:  While MNCs and larger corporations have either  delegated the front line market servicing to the distributor or taking  the sales force on a  lease from  manpower vendors, the sales manager in the medium and small enterprises find it challenging to hire the right manpower for the front line sales force.  Generally, there has been a sharp decline in the youngsters preferring to work in the  market- place as a frontline sales person. Hence the sales manager has to make adjustments with the man- power  available and this does impact the distribution activities adversely.

THE SOLUTIONS

In the best interest of distribution as a strategy in marketing, the marketing fraternity should address these challenges and bring out  certain broader recommendations.  With this objective, we have talked to a few professionals in the distribution management in order to share their experience and guidelines.  These will be presented in a  sequel to this post.

 

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