distribution priti

DISTRIBUTION STRATEGY

INTRODUCTION

• Availability determines volume and market share

• Challenge : Reaching 6 lakh villages and feeding a retail network of over 35 lakh village shops

• 68% of rural markets still lies untapped due to inaccessibility.

• Some successful regional brands : Ghari detergent, Anchor toothpaste, Gemini Oil

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Problems faced in rural distribution:• Large number of small markets• Dispersed population and trade• Poor road connectivity• Multiple tiers – higher costs• Poor availability of suitable dealers• Low density of shops per village, high variation in

their concentration• Inadequate bank and credit facilities for rural

retailers – poor viability of retail outlets

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• Poor storage systems• Highly credit-driven market, low investment

capacity of retailers• Poor visibility and display of product• Poor communication of offers and schemes –

poor reach of media

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Coverage Status in Rural Markets• Rural – any location with a population of less

than 50,00.• 50% of rural population resides in 1 lakh off

large villages ( 2000+ population)• Account for 60% of rural wealth• 2.3 lakh tiny villages (<500 population) –

hardly any shops• Distribution becomes uneconomical towards

smaller towns

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Channels of DistributionFive layers of distribution channels for movement of products from company depot to interior village markets:

Layer Channel Partner LocationLayer 1 Company depot/ C&FA National/State levelLayer 2 Distributor/ van operator/

super stockist/ rural distributorDistrict level

Layer 3 Sub-distributor/ Retail stockist/ Sub-stockist/ Star seller/ Shakti dealer

Tehsil HQ, towns and large villages

Layer 4 Wholesaler Feeder towns, large villages,haats

Layer 5 Retailer Villages, haatsProf. Raghavendran Venugopal 6

Rural Distribution System

• Wholesalers• Retailers• Mobile traders• Vans• Weekly haats

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Wholesaling• 70% of rural market – beyond reach of direct

marketing• 50% rural consumption through wholesalers• Speculative rather than distributive - insufficient product availability

- urban areas – most concentration on retailers - wholesale distribution less-companies neglected rural markets

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Rural retail system• Rural retail spread

- Rural India - 65% retail outlets in country- 35 lakh retail outlets spread over 6 lakh villages- High distribution cost

* geographical spread* low volumes per outlet

- Average monthly sale per shop < Rs. 5000- restricts variety and range of products stocked- 58% of villagers prefer to buy from haats rather than shops coz of better price, quality and variety- Availability of shops in villages is poor

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Rural premises: - infrastructural constraints

* lack of sufficient space* inadequate power supply* lack of proper storage system

- financial constraints* inadequate funds* unwillingness of banks to extend loans

- low retail space per capita – <100 sq.ft area- travel and transport costs

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Rural retail shelves• Filled with local and regional brands – higher margins and

longer credit periods• Less variety of brands available• Number of brands per product category decreases

towards smaller villages• Ensure visibility on shelves• Product stocking – cluttered &disorganised• Slow moving products – dust covered• Absence of proper racks, display box, stand• Strategies: provide display & storage systems

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Vans

• Salesman loads van with stocks from nearest stockist or company stock point

• Works around surrounding markets• Then moves to next stock point – journey

cycle• Used for both sales & promotions• Eg.: Everyday , J.K. Diary• Effective but expensive

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Mobile Traders

• Direct to home, unorganised distribution• Daily need products – mostly local brands –

detergent, cosmetics, personal care, garments, footwear

• Carry products on bicycles, mopeds, handcarts• Deep reach• Good rapport with clients• Mostly sell fakes and local brands

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Haats/ Shandies

• Oldest marketing channel in India• Profile of haat visitors and purchase behaviour

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• Credit facilities to customers• Pricing by channel• Reason for stocking a product / brand• Seasonal pattern of stocking• Information source and influence on retailer• Purchase source for the retailer• Purchasing cycle• Channel promotion

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BEHAVIOUR OF CHANNEL

PREVALENT DISTRIBUTION MODELS

VAN/SUBSTOCKIST

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RURAL MARKET

FEEDER TOWNS WHOLESALE AND RETAIL

RETAIL WHOLESALE

MARKETING

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DISTRIBUTOR (URBAN)

WHOLESALER

WHOLESALER

RETAILER (LOCAL)

RETAILER (SATELLITE

MKT)

RETAILER (URBAN)

RETAILER (URBAN)

RETAILER (RURAL)

COMPANY

C&FA

DISTRIBUTOR (RURAL)

SUB-DISTRIBUTOR

DISTRIBUTION MODEL 1

CHARATERISTICS• Rural distribution separated from urban distribution• Company appoint a sub distributor(SD)under rural

distributor(RD)• Owing to poor road networks & low volume per outlet, RD

covers a large area• DM1 model focuses more on RD’s & SD’s rather than the

wholesale channel and has large no. of points appointed in the rural areas as locations are scattered. This ensures that companies products reach maximum no. of areas

• Advantages include better monitoring, price discipline and control over the sale and distribution of products

• Companies prepare PJP’s (Permanent Journey Plan) – six working days. Outlets are covered only fortnightly

• No. of outlets covered in a day is 30 – 40 of which 15 – 20 are productive Eg. HLL

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WHOLESALER

RETAILER (LOCAL)

COMPANY

C&FA / DEPOT

DISTRIBUTOR

RETAILER


CHARATERISTICS• There is no separate channel for rural distribution• Minimises distribution costs, allowing companies to

offer better margins to distributors and other channel partners (fewer)

• Companies with limited no. of SKUs and high sales volume adopt this model

• It is also preferred by new entrants who lack infrastructure required to have wide distribution network

• Example: Priyagold biscuit, Nirma (Shakti detergent, Nirma soaps, Camay & other toiletries)

Issues:• Coverage, No SD to cover interior parts

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NIRMA DISTRIBUTION SYSTEM

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SUB DISTRIBUTOR/BIG WHOLESALER

WHOLESALER

NIRMA

DEPOT

DIRECT DISTRIBUTOR

RETAILER WHOLESALER RETAILER


Ahmedabad

Hyderabad, Kolkata, Kanpur

At district level

At Tehsil level Covers 300-400 outlets directly

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NEW RURAL DISTRICT OFFICE

LG

DEPOT

MULTIPLE DEALERSEXCLUSIVE DEALERS

CONSUMER

DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 1

C&F AGENTS WAREHOUSE

MARKETING

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CONSUMER

RETAILER (RURAL)

RETAILER (URBAN)

PHILIPS

DEPOT

DISTRIBUTOR (URBAN)

DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 2

STOCKIST (RURAL)

Retail outlets are not able to sell more durables because:

• They lack variety• Transport costs increase the prices (The net landed cost

of a 21-inch Color TV is Rs. 1000 more compared to the price offered by a dealer in the city)

Rural buyers prefer to buy from city stores because:• More choices are available• It is possible to get competitive prices through

bargaining• Rural buyer can see many options, visit several shops

and check different pricesProblem:• To generate volumes, companies give huge discounts to

the big city dealers, which results in price differences and put the rural retailer at disadvantage

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HAAT RETAILER

MANUFACTURER

WHOLESALER IN BIG CITY

WHOLESALER IN SMALL TOWN/KASBA

VILLAGE RETAILER

MOBILE TRADER

DISTRIBUTION OF FAKE PRODUCTS

CUSTOMER

Channels of distribution:Channel 1: Manufacturers to wholesaler/retailer in big city

or small town, or directly to customerChannel 2: Wholesaler in big city to wholesaler in small

town/kasba

Channel 3: Wholesaler in small town /kasba to village retailer/mobile trader/haat

Fakes reach consumers through the following channels:

• Small kirana shops located within the village• Big shops generally located on the main road• Door-to-door visits by salesmen who pose as company

representatives• Salesmen in local trains and buses• Mobile traders• Haats

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EMERGING DISTRIBUTION MODELS.

Marketers are innovating new cost effective approaches to reach markets.

Objectives:Maximize existing infrastructure.

Ensuring participation and economic sustainability of all stakeholders

CORPORATE- SHG LINKAGE(self help group)

• 10-15 women organized by govt bodies.• To boost the self worth among women.• Loan assistance from rural banks for setting up

of income generating enterprises.

• Rapid Growth provided an opportunity to establish a path breaking distribution model through the linkage of the groups for marketers.

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TTK PRESTIGE PRESSURE COOKER CASE

• Stagnating Sales and declining returns.• Company saw SHG women as an opportunity

to enter to the rural market.• Meetings were organized with the group .• Interested women were chosen as dealers and

demo cookers were given to present at the SHG meetings.

• Women dealers also visited other potential buyers and booked orders.

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Satellite Distribution Model.(HUB & SPOKE SYSTEM).

Stockists are appointed in major towns and feeder towns.Retailers in feeder towns get attached to these stockists.Manufacturer supplies goods to stockists.Functions performed by stockists include Financing, Ware housing, Sub distribution.Volume done by retailers varies due to location, capacity etc.Over a period of time some retailers will be elevated to stockists points. 30

Pioneers in Satellite Distribution model

COKE & PEPSI

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SYNDICATED DISTRIBUTION

Distribution is posing a major problem for a new company to penetrate to Rural market.

Two or more companies come together to form a syndicated trading organization to jointly distribute a collective group of household products by sharing costs.Small company should not deal in the same products that the big company deals

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JK Diary Case

• JK diary launched a WHITENER DIARY TOP in 50 gm. sachets priced at 6.50 Rs targeting at Rural customers.

• To cover the interiors a van was hired(125 Km *25 Days) @6Rs Per Km.

• Since JK diary has only a single product they shared the travelling expense with three other companies targeting at rural customers.

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Problems with syndicated Distribution.

• Markets for the coverage of two companies are different.

• Terms of Payment are different.(Cash by one company & credit by other company).

• Salesman of only one company accompanies the van: ( Pushes his companies products & does not make serious efforts to collect the payments of other companies).

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ITC’s DISTRIBUTION MODEL.

• Reached Rural Consumers through its e- Choupal model for backward and forward linkages for its agri related business

• Services provided like• Information• Knowledge• Purchase• Sale

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NYKS Haat DISTRIBUTION MODEL• Nehru Yuva Kendra Sangathan.• Hires young people as National Service

Volunteers (NSV) for 2 years with 2000Rs stipend.• NSV is assigned with 15-20 villages :organize

events and create good rapport and credibility with villagers.

• After 2 years Existing NSV retire to give way to fresh NSV’s.

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PROJECT DISHA- CASE.

• MART selected500 ex volunteers to promote company Brands(COLGATE).

• Volunteers will be provided with all facilities( bicycles, umbrellas, storage boxes, T-shirts,etc).

• Volunteers buy stock from nearby sub stockists and sells at near by Haats and village Shops on the way.

• Average sales of 1000Rs Per day.• Result is that Company got benefited from this .

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AGRICULTURE INPUT DEALERS.

• 2,62,000 fertilizer dealers in country.• Fertilizer companies have retail outlets within

a range of 5 Km.• Marketers found the possibility of selling their

products through these outlets.

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PETROL PUMPS & EXTENSION COUNTERS.

• 60% of 12000 Petrol pumps in INDIA is located on Highways close to villages.

• Selling of food Products & toiletries through these outlets.

• Exploring possibility of selling agri inputs & LPG cylinders from these outlets.

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OTHER CHANNELS.

• HERO HONDA Company reported emergence of Unofficial channel of distribution.

(Village Mechanics, Real Estate Agents & Shopkeepers).

Take the Bikes in 2’s or 3’s from company Dealers.

Display them outside dealer’s Premises and will close the sale.

Paper work left to the Dealer to complete.40

IDEAL DISTRIBUTION FOR RURAL.• Per Capita Sales=Annual Sales/Market

Population..

Rural Markets are GOLD Mines which forced marketers to come up with innovative ideas to ensure the reach of their Products in these areas

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THANK YOU

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distribution priti

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