Distribution Opportunities in India

Indian companies, specially FMCG companies today are staring at a major disruption in their distribution model. Other than some basic technology interventions to track primary (sales from the FMCG company to their Distributors), and in some cases, secondary sales (sales from the Distributor to the Retailers), very little changed over the decades. Products go from brands’ manufacturing facilities to their Distribution Center (DC), on to C&F agents in each state, on to the hundreds of Distributors (DB) in that state, and finally on to the retailers, where consumers/shoppers purchase them. The primary reason for the lack of change is the more or less static retail environment we have seen –close to 90% of retail even today is dominated by mom & pop outlets, or what we call GENERAL TRADE (GT) in India, this was as high as 98% till a decade or so ago. Looking at the evolution of FMCG Distribution in India since 1950, we can categorize it in the following categories: Distri...

In every country or market - whether developed, emerging or underdeveloped - consumer products eventually go through some form of distribution process. The distribution chain involves movement of goods from factory gate or shipping yard to consumers' doorstep. Success in international market largely depends on entering the distribution chain with suitable overseas partner who can successfully introduce your products. There are several models and resources - one can select depending on own organizational resource. 1. Wholesale Model Wholesaling involves selling in bulk to an overseas wholesale partner who has access to downstream channel for re-selling the goods. The wholesaler buys in bulk from Indian seller and takes complete responsibility of selling the goods in his/her own country. Post sell, the Indian seller is free of anxiety, but loses track of how his/her products doing, such as - at what price the consumer is buying, margin of intermediates, consumer feedback etc.  ...

Indian businesses have always aspired to sell in overseas markets. For a successful entrepreneur, there's nothing more exciting and satisfying than conquering foreign market. Higher margin, easier bank credit, tax free revenue and various export incentives are some of the attractions of overseas markets. Besides, thriving overseas presence is an insurance against any instability in domestic market. However, not much information is available on the topic, specially for small and medium Indian enterprises. In a series of articles, we shall discuss preparations and planning required before venturing out to overseas markets, various routes for overseas entry with comparative advantages/disadvantages and sources of information. In preparation and planning stage - a business must objectively assess whether its ready for overseas market. To help a business evaluate its position - here's few pointers. 1. Domestic Distribution First - Overseas Comes Later A business must establis...

The core of marketing is, and always been, understanding the target audience and customizing presentation for achieving desired goals. Depending upon target audience - the presentation undergoes major changes and has variously been coined as B2C (Business To Consumer), B2B (Business To Business), B2G (Business To Government) etc. While B2B marketing employs highly rational, detailed and analytic presentations to hammer home value propositions and return on investment, B2C marketing employs emotion-driven, catchy, impulse-based communication designed to appeal customer desire. Deficiency Of B2B And B2C Marketing A common thread that runs through both approaches is a largely one-way communication to convince the customer to buy a product or service, mostly overlooking customer's unique views, liking and tastes. Though B2C marketing is meant to be directed at individual consumers' desire - in practice it targets a particular demography such as 18-25 year-old women, or 35-50 ye...

What is the biggest challenge SMEs face in India ?  SMEs in India are fraught with challenges - from credit, cash flow, capacity utilization to trained manpower and technology. However, what's the biggest one ? A recent survey by Mumbai based A&A Business Consulting has brought out interesting facts. Contrary to popular belief - largest chunk of 47 percent surveyed SMEs cited sales growth as main problem they are facing rather than working capital or credit (1). Many SMEs start on a profitable idea, grow well during initial days but growth tapers down with time. The result is very few SME success stories - most SMEs are stuck with very low sales growth - remaining small for ever. This typical Indian phenomenon has been recognized by experts long back and termed 'Missing Middle' - meaning there are few large firms, many tiny ones and nothing in between (2). Why Sales Growth Slows Down Most of India's micros and small enterprises can be found in 5000 industry ...

Distribution is the backbone of Indian market - feeding its massive retail system spanning across length and breadth of the country. Estimated to be $ 714 billion (2019) -   Indian retail market is expected to grow at 10% CAGR to reach US$ 1.2 trillion by 2025. Unlike developed markets, over 70% of Indian b2b distribution market is in unorganized sector, having its own dynamics peculiar to Indian social and cultural ethos. Understanding this market, its players, their respective roles and overall market dynamics is vital for success of any brand.  Indian Distribution Model A specific feature of Indian distribution model is presence of many intermediaries - almost too many in certain cases. A study by McKinsey and CII (Faida Study in 1995) found presence of 7 to 11 intermediaries in agro distribution channels.   These intermediaries bring costs and benefits in varying degrees. The wholesaler model, for instance—in which large, powerful wholesalers buy produc...