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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
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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
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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

Coverage Status in Rural Markets


Rural any location with a population of less than 50,00. 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
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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, towns Sub-stockist/ Star seller/ and large villages Shakti dealer Layer 4 Wholesaler Layer 5 Retailer
Prof. Raghavendran Venugopal

Feeder towns, large villages,haats Villages, haats


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Rural Distribution System


Wholesalers Retailers Mobile traders Vans Weekly haats

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

Rural retail system


Rural retail spread
- Rural India - 65% retail outlets in country - 35 lakh retail outlets spread over 6 lakh villages - High distribution cost * geographical spread * low volumes per outlet - Average monthly sale per shop < Rs. 5000 - restricts variety and range of products stocked - 58% of villagers prefer to buy from haats rather than shops coz of better price, quality and variety - Availability of shops in villages is poor
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Rural premises: - infrastructural constraints * lack of sufficient space * inadequate power supply * lack of proper storage system - financial constraints * inadequate funds * unwillingness of banks to extend loans - low retail space per capita <100 sq.ft area - travel and transport costs

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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, display box, stand Strategies: provide display & storage systems
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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.: Everyday , J.K. Diary Effective but expensive
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Mobile Traders
Direct to home, unorganised distribution Daily need products mostly local brands detergent, cosmetics, personal care, garments, footwear Carry products on bicycles, mopeds, handcarts Deep reach Good rapport with clients Mostly sell fakes and local brands
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Haats/ Shandies
Oldest marketing channel in India Profile of haat visitors and purchase behaviour

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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
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PREVALENT DISTRIBUTION MODELS


RETAIL WHOLESALE

VAN/SUBSTOCKI ST

FEEDER TOWNS WHOLESALE AND RETAIL

RURAL MARKET

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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)

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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, RD covers a large area DM1 model focuses more on RDs & SDs rather than the wholesale channel and has large no. of points appointed in the rural areas as locations are scattered. This ensures that companies products reach maximum no. of areas Advantages include better monitoring, price discipline and control over the sale and distribution of products Companies prepare PJPs (Permanent Journey Plan) six working days. Outlets are covered only fortnightly No. of outlets covered in a day is 30 40 of which 15 20 are productive Eg. HLL
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DISTRIBUTION DISTRIBUTION MODEL MODEL 2 2


COMPANY

C&FA / DEPOT DISTRIBUTOR

WHOLESALER

RETAILER (LOCAL)

RETAILER

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

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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
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DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 1

LG DEPOT NEW RURAL DISTRICT OFFICE C&F AGENTS WAREHOUSE

EXCLUSIVE DEALERS

MULTIPLE DEALERS

CONSUMER
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MARKETING DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 2


PHILIPS

DEPOT

DISTRIBUTOR (URBAN)

STOCKIST (RURAL)

RETAILER (URBAN)

RETAILER (RURAL)

CONSUMER

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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. 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, visit several shops and check different prices Problem: To generate volumes, companies give huge discounts to the big city dealers, which results in price differences and put the rural retailer at disadvantage
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NIRMA DISTRIBUTION SYSTEM DISTRIBUTION OF FAKE PRODUCTS


MANUFACTURER WHOLESALER IN BIG CITY WHOLESALER IN SMALL TOWN/KASBA

HAAT RETAILER

VILLAGE RETAILER

MOBILE TRADER

CUSTOMER
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Channels of distribution: Channel 1: Manufacturers to wholesaler/retailer in big city or small town, 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
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EMERGING DISTRIBUTION MODELS.


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

CORPORATE- SHG LINKAGE(self help group)


10-15 women organized by govt bodies. To boost the self worth among women. Loan assistance from rural banks for setting up of income generating enterprises. Rapid Growth provided an opportunity to establish a path breaking distribution model through the linkage of the groups for marketers.
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TTK PRESTIGE PRESSURE COOKER CASE


Stagnating Sales and declining returns. Company saw SHG women as an opportunity to enter to the rural market. Meetings were organized with the group . Interested women were chosen as dealers and demo cookers were given to present at the SHG meetings. Women dealers also visited other potential buyers and booked orders.
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Satellite Distribution Model. (HUB & SPOKE SYSTEM).


Stockists are appointed in major towns and feeder towns. Retailers in feeder towns get attached to these stockists. Manufacturer supplies goods to stockists. Functions performed by stockists include Financing, Ware housing, Sub distribution. Volume done by retailers varies due to location, capacity etc. Over a period of time some retailers will be elevated to stockists points.
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Pioneers in Satellite Distribution model

COKE & PEPSI

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SYNDICATED DISTRIBUTION
Distribution is posing a major problem for a new company to penetrate to Rural market. Two or more companies come together to form a syndicated trading organization to jointly distribute a collective group of household products by sharing costs. Small company should not deal in the same products that the big company deals
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JK Diary Case
JK diary launched a WHITENER DIARY TOP in 50 gm. sachets priced at 6.50 Rs targeting at Rural customers. To cover the interiors a van was hired(125 Km *25 Days) @6Rs Per Km. Since JK diary has only a single product they shared the travelling expense with three other companies targeting at rural customers.
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Problems with syndicated Distribution.


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

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NYKS Haat DISTRIBUTION MODEL


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

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PROJECT DISHA- CASE.


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


2,62,000 fertilizer dealers in country. Fertilizer companies have retail outlets within a range of 5 Km. Marketers found the possibility of selling their products through these outlets.

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PETROL PUMPS & EXTENSION COUNTERS.


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.

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


Per Capita Sales=Annual Sales/Market Population..
Name of the Model Best situation

Project Shakti.(Corporate SHG)

Low PCS, Low Population Density Segment consumers.


Low PCS High Population Density Segment.

NSV Model PDS, Cooperatives& Fertilizer Dealers.

Rural Markets are GOLD Mines which forced marketers to come up with innovative ideas to ensure the reach of their Products in these areas
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THANK YOU

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