Intermediaries like distributors & stockists are truly the blood vessels of the supply chain. All the more so in the Indian business ecosystem. Traditionally, when the Indian market was not as fund rich (the pre-VC days), and even now for businesses that are not very favourably looked upon by financiers, these intermediaries provide the necessary capital as well as the reach into the Indian market. Good distributors are often times better managers of capital as well as capital risk than the brand owners (they would've been operating in their markets for decades, and would be able to pick out who will pay and who won't). While dis-intermediation and vertical integration are all the talk of the town these days, for traditional brand owners who do not have all that money to blow, a prudent way would be to expand via these distributors and stockists.
While the distribution path is prudent, the key question remains - why would the distributor stock a brand's products and do all the aforementioned good things for the brand? They'd obviously do so for the money, but then they don't always take the salesman's word for it (unless the brand rubs shoulders with the likes of Unilever and P&G) slowing down the expansion process. For brands that are coming up, it is essential to build up good distribution methodically from the ground up.
To scale up methodically and profitably (ensuring profitable unit economics):
a. Define clear geographical target areas
b. To expand distribution into target areas, brands can have 2 distinct strategies -
I. Approach and sell to distributors only and rely on them for selling
OR
II. Deploy sales staff into the area who develop retail sales as well as distributors in parallel.
Option II has a clear advantage over I as it gives the brand owner a lot more control.
For brand owners choosing to go forth with their own (inside) sales team, some of the ways to expand quickly would entail:
(a) Building up retail sales
Every distributor loves to take on products that are already selling in retail. To achieve quick retail sales, some of the enterprising upcoming brands are actually using consignment sales along with nice merchandising at retail outlets to close quick sales.
(b) Gathering distributor information from the market
The own sales team can be used to gather distributor information as well as feedback from the retailers to get to the right distributors. Distributor data should be collected and collated using standardized templates suited for the brand's products. Dairy product manufacturers would need to collate information regarding cold chain facilities, for example, while apparel manufacturers may need to check pest control in facilities.
(c) Evaluate distributors
Once data is collated, the distributors can be evaluated on a balanced score card model. To leave aside the jargon, the brand RSMs would need to align and compare all the distributors on the same set of parameters based on the importance of each parameter to the brand's supply chain.
(d) Sign-up contracts and onboard distributors
Contracts specific to the territory, sales numbers expected, coverage, sales margins and more should be set forth and closed at the outset. A contract in black-and-white before operations start helps both parties achieve goals and possibly exceed them better.
(e) Incentivize distribution
Newer territories typically require an additional marketing push. While these promotions are necessary, care should be taken to ensure that there is little spillover from the supplied promotions into other existing territories.
A lot of the aforementioned methods can be streamlined and undertaken pretty quickly using technology. Smartphones are ubiquitous these days, and are extremely relevant when it comes to automating roll-out in various geographies. Scaling out with technology literally takes a day where it used to take ten earlier!
ERP
