Names of the author(s): (1) Nihit Jain

(2) Saurabh Bhatt

Topic: Rediscovering Distribution: Going the e-tailing way

E-mail id: nihit_jain@rediffmail.com

saurabh_bhatt2004@yahoo.com

Telephone numbers: +91 99984 76845

+91 99987 90823
 Rediscovering Distribution: Going the e-tailing way

Distribution process is essential and core for business operation. Rediscovering of distribution
means re-designing of distribution process in a better way. As the market grows need for
efficiency and viability increases. Given an existing distribution process of a product, the need to
rediscover it in e-tailing way would lead to many unanswered questions.

• Need of e-tailing
• What would happen to current distribution process
• Benefit among existing distribution or e-tailing

The solution for the above questions would lead to rediscovering distribution.

Traditional and current distribution process is well established and to rediscover the same needs
to think upon. The need for e-tailing is to provide better access to customer along with the instant
order placement and convenience for the same.

Traditional distribution process can even exist after rediscovering. Instead both the distribution
model would exist in the product market adding to higher sale by company.

Actual benefit can be calculated only after implementation of e-tailing. One idea can be put
forward is that e-tailing would add to distribution process which would benefit the company
from both the ways.

The attempt has been made to convey rediscovery of distribution process along with the
rediscovery of e-tailing by unconventional offerings. To understand e-tailing for conventional
offerings a case study methodology has been initiated by Author on Selling of condoms and
Career counseling in the paper.

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Traditional Distribution

Traditional distribution process normally consists of manufacturer, wholesaler, and retailer

reaching towards final consumers. Such type of distribution was essential due to lack of
technology, better connectivity and wide reach. With the increasing consumer base the need for
e-tailing starts generating.

Traditional distribution system can be interpreted as follows.

Manufacturer Wholesaler Retailer Consumers

Advantages:

ü Reduction in setup cost as company can use the retailers to sell the product.
ü Understanding customer demand and behavior in a better way with the help of retailer.
ü Easy access to rural areas with the help of small retailers located there.
ü Consumers have easy availability of product with the help of retailers.

Disadvantages:

ü A Retailer has to be at particular location otherwise it loses its customers. Being a local
player has to wait for customers.
ü In retail significant amount of capital investment goes for acquiring real estate.

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E-Tailing

E-tailing means selling of goods and service through online process with the use of internet. It’s
an advanced version of distribution. E-tailing basically deals with retailing that takes place on
internet. The best example that can be quoted over here could be of Dell computers which uses e-
tailing for its business.
Model of E-Tailing

Manufacturer Internet Consumer

Advantages:

ü An e-tailing does not have to wait for customers because it virtually operates globally.
ü Companies have cost leadership with the elimination of middlemen.
ü Products can be ordered all-round the clock.
ü Chances of product shortage are minimized.

In the current scenario where the market is growing and world is shrinking due to better
connectivity, need of e-tailing is highly looked upon. There is huge potential in the world market
as the spending of consumer is increasing.

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WORLD INTERNET USAGE AND POPULATION STATISTICS

% Usage
Population Internet Usage
Population Population Growth
World Regions % of Usage, % of
(2007 Est.) (Penetra- 2000-
World Latest Data World
tion ) 2007

Africa 933,448,292 14.2 % 33,545,600 3.6 % 2.9 % 643.1 %

Asia 3,712,527,624 56.5 % 436,758,162 11.8 % 37.2 % 282.1 %

Europe 809,624,686 12.3 % 321,853,477 39.8 % 27.4% 206.2 %

Middle East 193,452,727 2.9 % 19,539,300 10.1 % 1.7 % 494.8 %

North America 334,538,018 5.1 % 232,655,287 69.5 % 19.8% 115.2 %

Latin
556,606,627 8.5 % 109,961,609 19.8 % 9.4 % 508.6 %
America/Caribbean

Oceania / Australia 34,468,443 0.5 % 18,796,490 54.5 % 1.6 % 146.7 %

100.0
WORLD TOTAL 6,574,666,417 100.0 % 1,173,109,925 17.8 % 225.0 %
%

NOTES: Internet Usage and World Population Statistics are final for June 30, 2007

Source: http://www.internetworldstats.com/stats.htm

The above data reflects that there is huge potential in the world market as the there is steep rise
in the internet usage among all the world regions. The overall growth rate of the internet user in
the world is 225% since 2000 where as it is highest in Africa with 643.1% followed by Latin
America with 508.6%.

The above data depicts the rice in internet users which leads the focus on the e-tailing of
products and services. E-tailing is not new but started in 1997 when dell came into computer
market. Many companies later entered into e-tailing of products and services to provide an
additional linkage to existing market.

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 Source: http://www.internetworldstats.com/stats.htm

The above pie-chart reflects that Asia has highest internet user when compared to other regions.
This shows that companies would like to target Asian users much more over internet so as to
increase their sale. Companies can either directly go for e-tailing or do synergy with other online
shops to sell their products.

There are 21.4 million online users in urban areas in India out of which 10% are active buyers.
The most commonly purchased merchandises online are leisure and gift articles like books and
electronic items, clothes, and fashion accessories. The Future Group is aiming at revenues of
Rs300 crore from its portal www.futurebazaar.com, which offers more than 5,000 products in
185 categories. (Source: http://www.tmcnet.com/usubmit/2007/08/28/2891652.htm)

This reflects the future potential of e-tailing in the Indian scenario where the online customer
base is increasing continuously. As the companies are moving with e-tailing distribution process
they are reaching towards customer’s doorstep.

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 Source: http://www.internetworldstats.com/stats.htm

As shown in the bar chart, there is huge penetration in North America, this means out of total
population in North America 69% uses internet. Australia has 54% of penetration followed by
Europe. This gives a better picture for firms located into these regions to enter into e-tailing
business and increase the reach for customer.

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E-Tailing of unconventional offerings:
(1) Condom distribution system:
Current Distribution Channel for condom:
Currently NACO procures and supplies condoms to the NGOs working with HRG. Primarily
NACO and the State AIDS control Society (SACS) obtain their supplies through the Department
of Health, Family Welfare (DHFW). NGOs also directly access social marketing agencies.
NACO and SACS ensure hat there is adequate supply of condoms in. SM condoms are made
available at outlets situated near state highways and in areas where TI projects are underway.
NGOs are encouraged to use a mix of free and SM approaches.
(Source:http://mohfw.nic.in/Convergence%20plan%20between%20NACP%20and%20DOHFW.htm)

Distribution system of Condom

DHFW NACO Private Firm

NGOs Distributors

Stores, Vending Machines

Social
Marketing
Agencies

Health facilities, pharmacies, village stores

As shown in the above diagram there are two ways of distribution system for condoms. One way
is done by public department as described above where as Second way is done by private firm
through distributors and retailers.

Indian Scenario
In India the distribution of condom takes place with the help of public and private firms such as
Government agencies, hospitals, NGO’s, wholesalers, retailers and Vending Machines.

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Disadvantages of traditional system for condom
ü Demographic explosion has been a major constraint and challenge to India's development
process. The realization on the fallouts of a rampant growth in population prompted the
government to initiate programs of family planning and control.
ü The study shows customers hesitate to buy condoms from the open market especially in
rural market was very high. (http://dspace.iimk.ac.in/bitstream/2259/344/1/423-426.pdf)

Market Potential for Condom e-tailing

A customer is normally shy and hesitates to buy condoms from the shop. Also it is very
uncomfortable for female’s to buy condoms. This discussion facilitates need of online shop to
sell condoms and providing a convenient store for buyers.

Internet Usage and Population Statistics:

YEAR Users Population % Pen.

1998 1400000.00 1094870677.00 0.10%
1999 2800000.00 1094870677.00 0.30%
2000 5500000.00 1094870677.00 0.50%
2001 7000000.00 1094870677.00 0.70%
2002 16500000.00 1094870677.00 1.60%
2003 22500000.00 1094870677.00 2.10%
2004 39200000.00 1094870677.00 3.60%
2005 50600000.00 1112225812.00 4.50%
2006 40000000.00 1112225812.00 3.60%
2007 42000000.00 1129667528.00 3.70%
Source: http://www.internetworldstats.com/asia/in.htm

The above data reflects the online users in India since 1998 till 2007 with respect to population
and the penetration figures. The data has been plotted into graph below which illustrates the
trend of continuous increase in number of online users.

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Graph reflecting Internet User in India over a period of years.

Users

60000000.00

50000000.00

40000000.00
No of Users

30000000.00

20000000.00

10000000.00

0.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Year

Users

The graph reflects the number of user increases over the period of 10 years. It reflects that there
are lots of opportunities in the Indian E- tailing market in coming days. As there is increase in
the number of internet users even condom can be sold by companies online which would lead to
increase in the sales and also achieving social welfare.

Women and Child Development Minister Renuka Chowdhury said that women should carry
condoms on their person and that protection should be made available to them 24/7, it wasn't
just an off-the-cuff remark. (Source: Hindustan Times New Delhi, Dated September 15, 2007)

Hence it does not mean that traditional retail ends, but e-tailing co-exist with traditional retailing.
This shows that there is huge potential for e-tailing for condom manufacturer and they shall take
a look on internet opportunities. This will enhance the market manifold.

Challenges:
ü Need for a critical mass
ü By designing good websites or web-marketing does not mean growth but it come from
the internet penetration in the market which is not in the company’s hand.

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(2) Career Counseling

The need for e-tailing way is highly essential when career counseling is taken into consideration.
Metros like Delhi, Mumbai, Chennai and Kolkatta where it takes much traveling time and hectic
journey of train so as to clarify doubts which can be generated at any point of time, e-tailing is an
easy way to get help from the career counselor.

Career Counseling has never been into e-tailing. With the increasing need of career counselors
and the efficient availability of technology Career Counseling shall be moved ahead to e-tailing.

Advantages of e-tailing for Career Counseling

• Easy and convenient

• Fast and Efficient
• Cost minimization

E-tailing can further be extended to other cities like Hyderabad, Pune, Bangalore, Ahmedabad,
Gurgaon and Noida so as to cater the need of growing consumer base. There is a high need of
rediscovering distribution process in case of Career Counseling and to provide the consumer
with quality service and value for money. By going e-tailing way Career counseling can have a
online presence all round the clock.

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Conclusion

E-tailing makes the company available and present for the consumer at his place and
convenience. Consumer can log into internet and can avail the service of the company at any
point of time when they feel the need. This helps company in generating an additional amount of
revenue by having presence all round the clock.

The example such as selling of Condom and providing Career counseling through e-tailing way
shows the need and future of e-tailing. E-tailing is the only cost effective way to be present for
customer when he needs and to provide the service at his door step.

Rediscovering distribution is very essential so as to meet the competition and to position the
company in a different way in the mind of consumers. It not only helps in catering the need of
consumers in efficient way but also gives a cost advantage to both company and to consumer by
elimination of middle man.

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Bibliography

Websites

http://www.internetworldstats.com/stats.htm
http://mohfw.nic.in/Convergence%20plan%20between%20NACP%20and%20DOHFW.htm
http://dspace.iimk.ac.in/bitstream/2259/344/1/423-426.pdf
http://www.tmcnet.com/usubmit/2007/08/28/2891652.htm

Newspaper

Hindustan Times New Delhi, Dated September 15, 2007

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