Distribution & channel

Management
Indian perspective

Marketing channels
Gatekeeper between the
manufacturer and the end consumer.
Channel selection must be
supportive to the product/service
Ex: Screening of films
Differentiator for your product?

Challenges
Commercial
1.25 billion, 3732 towns
and 6.27 lacks villages
Non-commercial- poor
infra, interior village
location
Odd climate, caste and
sub caste, preference of
packaging, SKU size Purchase of chocolates
by retailers in hills large
SKUs

In Ahmadabad
purchase of milk in
labor colonies in a pack
of 200 ml. whereas in
other localities in 11
different packs.
Tax structure- first
point/ last point/multi
point state taxes other
than CST.

Overview
Tata
teaTata
Gaon
2005,
tea Chalo
problem of stagnant
market share
How did the company
solve the problem?
Focus territory- UP
Coverage of villages
was inadequate,
channel used- NGOs
with the help of Tata
trust.

Channel development
NGO (RD-1)
Mobile dealers (RD-2)
Rural retailers ( RD-3)
Results Market share has gone
up from 16.3% to
19.2% (2002-2007)

Tea selling in Taiwan: The key roles

of tea middlemen
In mid 1800s the tea plants
were imported from china
to Taiwan.
By late 1920s there were
20000 tea farmers & 280
middlemen , 60 tea
refineries located in Ta-taocheng.
The Governor general of
Taiwan opened a tea
auction house to benefit
the tea growers. But the
auction house was closed
after some time. Why?

The answer lies in the key role

played by the tea middlemen.
Visit many farms to find tea to
sell.
Take these sample of tea to
different refineries to ask for
the order.
Visiting multiple refineries is
necessary because the same
variety and quality of tea could
fetch very different prices from
different refineries. This is
seasonal pattern and to be
repeated every year.

Tea selling
Sorting of tea same
variety of tea cultivated
in different farms gives
different produce.
Accumulating the tea of
various farms.
Minimize the number of
contact.
20000 tea farmers, 60
refineries and 25
varieties

Value addition at
reduced cost.

Distribution channel?
Levels

Function

Store
Bulk breaking
Serving retailer

Manufacturer
Wholesaler
Retailer
Customer
FlowOfferings
Information
Funds

Display
Point of purchase
Publicity
Customer interaction

Role
Core offering

Range and availability

Bulk breaking
Credit
Pre sales support
Delivery-logistics
Order consolidation
Product information
guarantee

Optional services
Sourcing of products
Back-to-back ordering
Simplified supply
logistics
Repackaging
Post sales support
Coordinationg the
supplies from different
suppliers to multiple
locations

Business model definition

High volume low margin

Low volume and high margin
Medium
Marketing flows in channels
Physical
possession/ownership/promotion/neg
otiations/financing/risk/ordering/pay
ment

Types of distribution
Intensive
Market share gain
Exclusive
distribution
Selective

Push and pull strategy

Question?
How cash and carry
format of Wal-mart and
Metro will affect
traditional wholesalers
and retailers?
Analyze the vanishing
Indian TV brands. How LG,
Sony and Samsung did
different as distribution
strategy?

Key of success
Sonal Anand, Country
Product Manager
(Display), Samsung India

The key reason for

our success is the
distribution
network

Distribution network

four distributors in India Tech

Pacific India Limited, Redington
India, Ingram Micro and Savex
Computers. Between these
four distributors we cover the
entire breadth of the country
with more than 84 sales offices
in over 25 cities. We have more
than 4000 channel partners
who feature in our database
and whom our distributors bill
to.

Sony India
distribution network
comprising of over
10,400 dealers and
distributors, 270
exclusive Sony outlets
and 23 direct branch
locations. Sony India
also has a strong
service presence
across the country
with 255 service
outlets.

Distribution in digital age

Traditional film
distribution
channel

Producers
Distributors
Theaters
Movie goers

Technology and channels

Technology has changed the
rule of game.
Digital prints and digital
distribution
Reduced print and delivery
cost with a server and a digital
projector
1900 theaters adopting this
technology from UFO movies
India pvt. Ltd., reliance media
network( largest cinema chain
with 525 screens spread
across India, US, Malaysia,
Nepal and Netherlands.

Formats
Service channels Contact warehousing
Public warehousing
service for a fee. Cold
storage
Integration of truck
and rail For heavy weight and
high volume productscement, fertilizers and
coal

VARs( value added

resellers) software
sellers.
Home partyTupperware
MLM- Amway
Pay per service
point of dispensing

Channel formats

Manufacturer based
Company store/outlet
EX: Athletic goods, Bakery
Consignment /locker stockManufacturer ships products to
point of consumption, but title
does not pass until consumed.
Risk of obsolescence and
ownership is with
manufacturer until used.
Concerned with high price-high
margins and emergency items.
Ex: diamond, Fragrances and
machine repair parts

Retailer based formats

FranchiseMcDonalds
Dealer directHeavy equipment and auto
dealers

Mass merchandise- Wal-Mart,

Kmart, Target
Specialty store- offer
merchandise in one line.
Sports goods, office supplies,
children merchandise

Channels - Distribution of luxury

brands vs. FMCG
Parallel distribution
structures
M

Infomercials Home shop

18
Star CJ Live
Channel suitability for
products
Industrial products/small
producers
Consumer durables/high
value items
Consumer goods
Outsource the DC.

Distribution of services
Direct channel
Delivery of services
through
intermediaries
Franchisers
Agents &
brokers( AMC)

Distribution of perishable
goods
Goods consider
perishable only by
customer( late delivery of
vehicle by vehicle
transmission co.)
Goods deemed perishable
by manufacturer- expiry
date Goods deemed perishable
by both producer and
customer- Newspaper

Hub & spoke model

Used in transport, telecommunications and
freight.
Pioneered by Delta lines in 1955 as its hub in
Atlanta
FedEx adopted it for Package delivery I 1975.
Airlines have extended this model by creating
regional hubs.
Nicholas Piramal uses this model to reduce
finished goods inventory from 30 days to 7 days.
Benefit- reduced cost, improved service,
shortened time to market.

Cash & carry model

Wall-mart, Tesco, Metro and
Carrefour are using this model.
Created by Lawrence

Online channels
4 basic function
Information
provider
Engage customer
Sell and deliver
goods and services

Type of transaction and

industry
Distribution
Industries
Online only

Software, e-books,
music, video

Online with physical

delivery

Books, CDs, electronic

goods

Online personalized
goods

Clothing and apparels

Online delivery of
services

Bank, insurance, MF and

trading

Online sales by brick

and mortar stores

Physical stores using

online to increase their
reach

Physical only

Companies that decide

not to sell online.

Mail order business

Receiving and
fulfilling orders for
merchandise using
mails.
before Credit card
payment option
Send payment and
goods used to deliver
through VPP( value
post parcel)
Ex: Readers Digest

B2C sites
www.indiaplaza.in
www.rediff.com
www.flipcart.com
www.ebay.com

B2B sites
Alibaba.com
Indiatimes.com
Tradeindia.com

Advantages and disadvantages of

online distribution
Multiplies reach
Eliminates
middlemen
Time saver
Ease of use

Low internet
penetration
Individual
distribution not
possible for low
value items
High cost of new
customer
acquisition

Conflict with existing

channels
2005- a big brand of
camera from Japan entered
in to Indian market. High
price and light weight item
did well in Indian market.
E-Commerce given a flip to
its ambitions and firm
decided to launch its
website with a secured
payment gateway. It also
tied up with a internet
partner to sell the products
online.

Revolt by the
existing channel
members.
What should be
done?

New age channels

New age Real
estate channels
99acrs.com
Investor clinic
Financial service
Bajaj capital
Moneycontrol.com
Hospitality Makemytrip.com

Service, jobs, real

estate, vehicles
etc.