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Sales channels to reach your customers

Selling through retailers, wholesalers and other distributors
Selling through an intermediary may be a more cost-effective way of reaching your end-customers than selling to them directly.

If you are targeting business customers who prefer to deal with large suppliers, selling directly to them may not be a realistic option. Instead, you might aim to supply wholesalers who have existing relationships with those businesses.

If individual consumers buy low value quantities of your products, the best option might be to target retailers that sell similar products. Or you might choose to focus your efforts on a relatively small number of wholesalers who can in turn supply your products to many retailers.

Other distribution channels may also reach your end-customers. For example, technology suppliers often sell to resellers who can configure and install the technology to suit end-users’ particular needs.

Managing your distributors
You need distributors who will value your product. If they sell competing products, what will make them push yours?

coconut water powder Store marketing consultant

Think about how you set your prices. Distributors will be more enthusiastic if they can make a large profit – but setting too low a price will eat into your own margins.

Effective advertising and promotions can be vital. As well as marketing to the distributor, you can promote your products directly to end-customers. Distributors will be keener to stock and sell products that their customers are asking for.

The key terms of the supply relationship should be covered in a written contract. Key issues might include:

coconut water powder Store marketing consultant

how much stock the distributor will hold
what the distributor will do to promote your products
how quickly you can resupply and minimum order levels
whether the distributor has exclusive rights to your product (for example, in a particular territory)
what happens if either you or the distributor want to end the relationship

 

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Indian FMCG Journey So Far !!

FMCG sector in India has seen some ups and downs in the last half decade. The intension of this post is to give you a flavor of the journey after independence till date. I have split it into five stages:A) “LACKLUSTER” STAGE – 1950’s to 1970’sPost independence (During 1950’s to 1970’s), there was not much happening in the FMCG sector in India. The business was limited to the upper segment of the society, as the purchasing power was low. Companies like HLL were purely focused on the urban areas and never bothered to enter the rural hinterland of India. The investment in the sector was low, with few FMCG companies selling their products. Also, the government’s emphasis was more on the small-scale sector.There was never a doubt in the potential of the sector, with such a big base of consumers residing in India.B) “RURAL SENSITIZATION” STAGE – 1970’s to 1990’sLet me two examples, which changed the rules of the game, and brought focus to the rural markets.NIRMA In the early 1970s, when Nirma washing powder was introduced in the low-income market, Hindustan Lever Limited reacted in a way typical of many multinational companies. Senior executives were dismissive of the new product and never considered the potential and opportunity. But very soon, Nirma’s success in the detergents market convinced HLL that it really needed to take a closer look at the low-income market.At the time, the focus of the organised players like HLL was largely urbane. There too, the consumers had limited choices. However, Nirma’s entry changed the whole Indian FMCG scene. The company focused on the ‘value for money’ plank and made FMCG products like detergents very affordable even to the lower strata of the society. Nirma became a great success story and laid the roadmap for others to follow. MNC’s like HLL, which were sitting pretty till then, woke up to new market realities and noticed the latent rural potential of India.CAVINKARE1983, C K Ranganathan started selling shampoos in a sachet with an investment of Rs 15,000 and dared to take on the multinationals, Lever and P&G, the unquestioned leaders in that segment.Ranganathan took the then shampoo market by storm, selling his Chik brand of shampoo at a much lower price than other shampoo sachets which were selling at Rs 2. He targeted rural and small-town consumers who used soaps to wash their hair. He introduced the sachet at 90 paise and then reduced it to 50-paise. And that’s when the multinationals sat up and noticed him.But what really worked was the ‘bring empty sachets and take shampoo sachets in return’ offer. Sales zoomed from 35,000 sachets to 12 lakhs. Initally they took any sachet, but after three months they restricted to Chik sachets.C) “LIBERLIZATION BOOM and STABLIZATION” STAGE – Post Liberalisation (1991 – 2000)Post liberalisation not only saw higher number of domestic choices, but also imported products. The lowering of the trade barriers encouraged MNC’s to come and invest in India to cater to 1bn Indians’ needs. Rising standards of living urban areas coupled with the purchasing power of rural India saw companies introduce products targeting both rural and urban markets with value for money and value added offers. Companies started investing in increasing the distribution depth, upgrade existing consumers to value added premium products and increase usage of existing product ranges.As an outcome of increased choices to the consumers and positive euphoria post liberalization, many of the affluent consumers who always had the money but limited choices, started splurging.So you could see all companies be it HLL, Godrej Consumer, Marico, Henkel, Reckitt Benckiser and Colgate, trying to outdo each other in getting to the rural consumer first. Each of them has seen a significant expansion in the retail reach in mid-sized towns and villages. Some who could not do it on their own, have piggy backed on other FMCG major’s distribution network (P&G-Marico).The Sales boom was observed for first 4 to 5 years and then it stabilized.D) “DROP” STAGE – (2000 – 2005)2000 was a rather uneventful year for manufacturers and marketers of fast moving consumer goods (FMCGs). The growth rate of FMCG categories was torpid to say the least and the marketing environment was such that, even veterans like Hindustan Lever Ltd (HLL) and Procter & Gamble (P&G) found it difficult to hold on to their market share. The market grew more crowded, what with the entry of new brands entering categories which were virtually the bastions of HLL, Colgate or P&G.Even in 2001 prominent, high penetration categories such as toilet soaps and detergent bars were very badly affected, actually shrinking in real value terms. Categories with a comparatively lower reach in terms of market penetration, such as shampoos and skin creams too slowed although to a lesser extent. The explanation for this could be that categories with high penetration levels, such as detergents and soaps also depend to a great extent on rural demand. The probable cause is a combination of both industrial slowdown as well as the almost-crisis in the agricultural sector which forced consumers to cut back on spending.Buyers moved from higher-end products to low-end products in an effort to reduce monthly grocery expenditure. Mid-priced and low-priced segments in soaps and detergents registered robust growth rates, while the premium segment faltered. Impulse products suffered while essentials managed higher rates of growth. Despite the slowdown, staple foods such as atta and salt managed to recorded superior growth rates, higher than those of supposed luxury products such as chocolates and ice creams. Low unit packs saw robust volume growth. Most FMCG marketers offered smaller versions of their products at affordable price points and these drew in new consumers.The crisis of declining FMCG markets was also driven by new avenues of expenditure for growing consumer income such as consumer durables, entertainment, mobiles, motorbikes etc. Now, as many consumers have already upgraded, their income is being directed towards pampering themselves. Indian population was all set to experience the new basket of products, but with cut-down on FMCG.E) “BOOM REVISTED” STAGE: 2005 onwardsEverything turned positive thereafter.2006 was a different story altogether though. The FMCGs seem to have gotten a new lease of life 2005 onwards. Be it hair care products to sunscreen, they were flying off the shop-shelves. In fact sale of white goods dipped while toiletries registered an increase. Such a sharp rebound was, however, unexpected. AC Nielsen’s retail sales audit numbers for August 2006, show that sales growth was sound, recording a 24%. Not so long ago, in July 2005 most firms were unable to pass on even basic cost increases and growth had plunged to under 3 per cent.The key reasons look like the following (please refer my previous post – Indian FMCG Growth Drivers and Category Trends):a) Increased disposable incomeb) Organized Retail Boomc) Increased Rural PenetrationAlso the new basket of products mentioned above (like mobile phones etc) were now affordable (because of cheaper products and EMI culture) to the Indian consumers and therefore revisited and upgraded to FMCG products.SOME FUTURE PREDICTIONS ??1. Increased Competition: In last few years, we have seen large number of companies expanding their portfolio into other categories, which is leading to fragmentation of market. This will lead to cut throat competition from regional/ national companies, giving the ultimate benefit to the consumers. In this environment, only the innovators will survive. Focus will be the key to profitability2. Micro Segmentation: In recent past we have seen companies developing products targeting niche segments, by addressing specific needs. Some time it looks logical and sometimes absolutely silly!! Lets look at few examples. Marketers are segmenting Horlicks into Women and Junior Horlicks. Fairness cream for men. Pepsodent Barbie Toothpaste for Kids. I think this is just the start!! I think many marketers are ready for further segmentation of many FMCG categories.3. Growth of Under-penetrated Categories: There is huge scope in lot of under-penetrated categories like Household Cleaners, Deodorants, Skin Creams, Shampoos, Coffee etc4. Consumer will move from the status of KING to GOD: Undoubtedly, all this is good for the consumers, who can now choose a variety of products, from a number of companies, at different price points.5. Organized Retail: The modern retail format will slowly occupy a bigger share. This will lead to change in shopping behavior and growth in FMCG sectorLabels: FMCG Journey

 

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