21 st Century Fmcg Distributor — General Trade — Way forward.
By: Sreedharan Rajagopala
Tags: Strategy, Implementation, Fmcg, Skills, Learning And Development

Today to reach the consumer you have the following Chanel’s 1, General Trade 2, Modern Trade 3, E-Commerce. 4, Direct to Consumer. It is important for growing and startup companies to be available in General Trade & Modern Trade and then scale up in E-Commerce & Direct to the consumer. In the below-said article let us look at General Trade Distributor.

Infrastructure &. Service.

The distributor will have the required manpower to bill goods with a computer and deliver goods to the retailer in time. He will be able to share the information to the Company regarding outlets product is available and the frequency of the outlet’s purchases as well as quantity of purchases .He takes his own risk in giving credit to the retailers to grow his business. The manpower available with him will visit the Outlets who are buying regularly and paying the money to the distributor in time and ensure they are serviced well. No opportunity sales loss. Contribution to total secondary sales from the distributor will be higher than 60% if the company is a market leader in the category if the company is not a market leader or at the lowest in terms of market share the distributor contribution to secondary sales will be less than 5% of secondary sales. You can expect the distributor to take care of potential outlets ( weightage distribution ) in the absence of the company sales force, but will not show much interest in numerical distribution ( Outlet Coverage) where the company is a category leader or not . Distributor is interested in fast buck .

Investment in the Business.

Distributor will be very clear, he will invest 30 days to 35 days of sales ( Market credit +. Paid-up stock in hand +. Any secondary claims + Market returns if any. ). The investment will be based on the last 3 months sales trend actual. He will not be interested in having dead inventory. ( Slow-moving or non-moving Skuas ). At the same time, he will keep faster-moving skuas in ample quantities. The distributor always wants to avoid secondary claims and wants the company to clear the damaged stocks to return from the market in time. ( Every 2 months claims to be cleared ). Regarding market credit, the distributor will be very clear in the creditworthiness of the existing supplied retailers and will act accordingly. In case of any new outlets, he wants to start small with the outlets and then scale up. Distributors will not be interested in the primary target achievement incentive because it is nothing but a transfer of stocks from the Cfa to the distributor godown. In case the incentive is very lucrative for him he will buy and take the incentive and will not buy in future till his paid-up investment comes down to 30 to 35 days of the last 3 months average. Companies should better focus the efforts on secondary and grow the business instead of dumping the stocks at the distributor point. If the investment is 30 to 35 days of sales, the distributor will follow the company pricing Structure, but if the investment goes overboard the distributor will overcharge the retailer. It is critical the Company has to sell as per distributor norm by keeping its total investment ( 30 to 35 days inclusive of all ) under control. If the above is done and the sales guy is achieving his target, then the sales function & marketing function is doing their job properly. Company should not gloat over primary achievement rather than celebrate secondary achievement and ensuring the inventory is not more than 10 days of sales at any given time .

Distributor ROI.

The distributor will be reviewing himself whether the money he has invested in each company he deals with is giving him the required returns or it can give shortly, if the answer is no then he will stop partnering with the company.

Salesforce relationship with the Distributors.

Companies should understand that the sales force relationship with the distributors is mutual. Distributors take up companies based on, Company as well as the confidence he has in the sales force thinking he can deliver business for him. A growing or a startup company should appoint only a growing or a startup distributor. The higher turnover distributors will not come forward to take up growing or startup companies and in case they come forward they will not able to do justice for the company. In short, what type of distributors you will get for growing or startup’s is that they will invest money ( financiers ) but revenue delivery will be the company sales force responsibility. It is extremely critical for the growing & startup companies to start small with the distributors and scale up gradually by building confidence with the distributors. When you start a small company you will lose money but it is nothing but an investment for the future. Distributors have to be profitable for a smooth flow of business and you cannot sack a distributor for your whims and fancies. The over communicative business environment will not allow you to do it. Those days are gone with the wind.

Distributor issues today .

The success rate of new product launches is 6 % and 94% is failure . Companies grow the business in the existing categories and launch new categories , any new category launch the distributor has to invest money ,ex :One Distributor territory value planned is 3 lacs and his investment will be during the launch 4.50 Lacs inclusive of credit in the market . If the launch is successful he will receive the money from the retailers if the launch is a failure it will take lot of time to receive the money from the retailers .Distributors face existing categories slow moving inventories and as well as new launches investment which affects his ROI . Companies has to be careful in new launches so that the Distributors ROI is not affected . Because of Covid issues many outlets have closed down and the Distributors outstanding money has gone for a toss . Companies are not going to compensate for the loss of money . Distributor because of the above are worried about giving more credit to new retailers . Distributors will be more prudent in giving credit to retailers because of the covid experience .In the current environment retailers buys stocks from the distributors on credit and sell it and rotate the money for priority categories .Distributors have to be careful if not they will be investing more with limited returns for them . Distributors have issues in getting regular manpower because of the opportunities available elsewhere . Companies will have to take care of the distributor to ensure consistent supplies to the retailers who in turn sell to the end consumer .Frequent changes in distributor will affect the sales in the short run as well as wrong run .Companies should know that they can progress in business by increasing the availability in outlets through the distributors and so should take care of the Distributors so that there is no frequent stoppages in the market in case of availability to the retailers .In general trade channel companies cannot go direct supply to the retailers .