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
2

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
3

• 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

4

00.Coverage Status in Rural Markets • Rural – any location with a population of less than 50. • 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 5 .

large villages. towns Sub-stockist/ Star seller/ and large villages Shakti dealer Layer 4 Wholesaler Layer 5 Retailer Prof. haats 6 .haats Villages. Raghavendran Venugopal Feeder towns.Channels of Distribution Five layers of distribution channels for movement of products from company depot to interior village markets: Layer Channel Partner Layer 1 Company depot/ C&FA Location National/State level Layer 2 Distributor/ van operator/ District level super stockist/ rural distributor Layer 3 Sub-distributor/ Retail stockist/ Tehsil HQ.

Rural Distribution System • • • • • Wholesalers Retailers Mobile traders Vans Weekly haats 7 .

insufficient product availability .urban areas – most concentration on retailers .wholesale distribution less -companies neglected rural markets 8 .Wholesaling • 70% of rural market – beyond reach of direct marketing • 50% rural consumption through wholesalers • Speculative rather than distributive .

Availability of shops in villages is poor 9 .Rural India .Rural retail system • Rural retail spread .Average monthly sale per shop < Rs.35 lakh retail outlets spread over 6 lakh villages .65% retail outlets in country .restricts variety and range of products stocked . 5000 .High distribution cost * geographical spread * low volumes per outlet .58% of villagers prefer to buy from haats rather than shops coz of better price. quality and variety .

travel and transport costs 10 .financial constraints * inadequate funds * unwillingness of banks to extend loans .ft area .infrastructural constraints * lack of sufficient space * inadequate power supply * lack of proper storage system .low retail space per capita – <100 sq.Rural premises: .

stand • Strategies: provide display & storage systems 11 . display box.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.

Diary • Effective but expensive 12 . J.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.K.: Everyday .

Mobile Traders • Direct to home. personal care. handcarts • Deep reach • Good rapport with clients • Mostly sell fakes and local brands 13 . garments. cosmetics. unorganised distribution • Daily need products – mostly local brands – detergent. footwear • Carry products on bicycles. mopeds.

Haats/ Shandies • Oldest marketing channel in India • Profile of haat visitors and purchase behaviour 14 .

BEHAVIOUR OF CHANNEL • • • • • • • • 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 15 .

PREVALENT DISTRIBUTION MODELS RETAIL WHOLESALE VAN/SUBSTOCKI ST FEEDER TOWNS WHOLESALE AND RETAIL RURAL MARKET 16 .

MARKETING DISTRIBUTION MODEL 1 COMPANY C&FA DISTRIBUTOR (RURAL) DISTRIBUTOR (URBAN) SUBDISTRIBUTOR WHOLESALER WHOLESALER RETAILER (RURAL) RETAILER (LOCAL) RETAILER (SATELLITE MKT) RETAILER (URBAN) RETAILER (URBAN) 17 .

of points appointed in the rural areas as locations are scattered. RD covers a large area • DM1 model focuses more on RD’s & SD’s rather than the wholesale channel and has large no. of areas • Advantages include better monitoring.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. of outlets covered in a day is 30 – 40 of which 15 – 20 are productive Eg. Outlets are covered only fortnightly • No. This ensures that companies products reach maximum no. price discipline and control over the sale and distribution of products • Companies prepare PJP’s (Permanent Journey Plan) – six working days. HLL 18 .

DISTRIBUTION DISTRIBUTION MODEL MODEL 2 2 COMPANY C&FA / DEPOT DISTRIBUTOR WHOLESALER RETAILER (LOCAL) RETAILER 19 .

allowing companies to offer better margins to distributors and other channel partners (fewer) • Companies with limited no. Nirma (Shakti detergent. 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 soaps. Camay & other toiletries) Issues: • Coverage.CHARATERISTICS • There is no separate channel for rural distribution • Minimises distribution costs. No SD to cover interior parts 20 .

NIRMA DISTRIBUTION SYSTEM NIRMA DISTRIBUTION SYSTEM NIRMA DEPOT DIRECT DISTRIBUTOR At district level Ahmedabad Hyderabad. Kolkata. Kanpur SUB DISTRIBUTOR/BIG WHOLESALER At Tehsil level Covers 300-400 outlets directly WHOLESALER RETAILER WHOLESALER RETAILER 21 .

1 LG DEPOT NEW RURAL DISTRICT OFFICE C&F AGENTS WAREHOUSE EXCLUSIVE DEALERS MULTIPLE DEALERS CONSUMER 22 .DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM .

MARKETING DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM .2 PHILIPS DEPOT DISTRIBUTOR (URBAN) STOCKIST (RURAL) RETAILER (URBAN) RETAILER (RURAL) CONSUMER 23 .

which results in price differences and put the rural retailer at disadvantage 24 . 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. companies give huge discounts to the big city dealers.Retail outlets are not able to sell more durables because: • They lack variety • Transport costs increase the prices (The net landed cost of a 21inch Color TV is Rs. visit several shops and check different prices Problem: • To generate volumes.

NIRMA DISTRIBUTION SYSTEM DISTRIBUTION OF FAKE PRODUCTS MANUFACTURER WHOLESALER IN BIG CITY WHOLESALER IN SMALL TOWN/KASBA HAAT RETAILER VILLAGE RETAILER MOBILE TRADER CUSTOMER 25 .

or directly to customer Channel 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 26 .Channels of distribution: Channel 1: Manufacturers to wholesaler/retailer in big city or small town.

Objectives: Maximize existing infrastructure. Ensuring participation and economic sustainability of all stakeholders . Marketers are innovating new cost effective approaches to reach markets.EMERGING DISTRIBUTION MODELS.

28 . • Rapid Growth provided an opportunity to establish a path breaking distribution model through the linkage of the groups for marketers. • Loan assistance from rural banks for setting up of income generating enterprises.CORPORATE.SHG LINKAGE(self help group) • 10-15 women organized by govt bodies. • To boost the self worth among women.

• Meetings were organized with the group . • Company saw SHG women as an opportunity to enter to the rural market. 29 . • Women dealers also visited other potential buyers and booked orders.TTK PRESTIGE PRESSURE COOKER CASE • Stagnating Sales and declining returns. • Interested women were chosen as dealers and demo cookers were given to present at the SHG meetings.

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

Pioneers in Satellite Distribution model COKE & PEPSI 31 .

Small company should not deal in the same products that the big company deals 32 . Two or more companies come together to form a syndicated trading organization to jointly distribute a collective group of household products by sharing costs.SYNDICATED DISTRIBUTION Distribution is posing a major problem for a new company to penetrate to Rural market.

• Since JK diary has only a single product they shared the travelling expense with three other companies targeting at rural customers.50 Rs targeting at Rural customers. • To cover the interiors a van was hired(125 Km *25 Days) @6Rs Per Km.JK Diary Case • JK diary launched a WHITENER DIARY TOP in 50 gm. sachets priced at 6. 33 .

• Markets for the coverage of two companies are different. • Terms of Payment are different.Problems with syndicated Distribution. • Salesman of only one company accompanies the van: ( Pushes his companies products & does not make serious efforts to collect the payments of other companies). 34 .(Cash by one company & credit by other company).

ITC’s DISTRIBUTION MODEL. • Reached Rural Consumers through its eChoupal model for backward and forward linkages for its agri related business • Services provided like • • • • Information Knowledge Purchase Sale 35 .

• NSV is assigned with 15-20 villages :organize events and create good rapport and credibility with villagers. • Hires young people as National Service Volunteers (NSV) for 2 years with 2000Rs stipend.NYKS Haat DISTRIBUTION MODEL • Nehru Yuva Kendra Sangathan. 36 . • After 2 years Existing NSV retire to give way to fresh NSV’s.

CASE. T-shirts. • Volunteers buy stock from nearby sub stockists and sells at near by Haats and village Shops on the way. 37 . • MART selected500 ex volunteers to promote company Brands(COLGATE). • Result is that Company got benefited from this .PROJECT DISHA. • Average sales of 1000Rs Per day. storage boxes. umbrellas.etc). • Volunteers will be provided with all facilities( bicycles.

• 2.62.000 fertilizer dealers in country. 38 . • Marketers found the possibility of selling their products through these outlets.AGRICULTURE INPUT DEALERS. • Fertilizer companies have retail outlets within a range of 5 Km.

PETROL PUMPS & EXTENSION COUNTERS. 39 . • 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.

 Display them outside dealer’s Premises and will close the sale. 40 . • HERO HONDA Company reported emergence of Unofficial channel of distribution.OTHER CHANNELS. Real Estate Agents & Shopkeepers).  (Village Mechanics.  Paper work left to the Dealer to complete.  Take the Bikes in 2’s or 3’s from company Dealers.

• 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 41 .(Corporate –SHG) Low PCS.IDEAL DISTRIBUTION FOR RURAL. Cooperatives& Fertilizer Dealers. Low Population Density Segment consumers. Low PCS High Population Density Segment. NSV Model PDS. Name of the Model Best situation Project Shakti.

THANK YOU 42 .