1.15.Channel Behaviour in Rural Areas

8/13/2019 1.15.Channel Behaviour in Rural Areas

1/27

Channel Behaviour in Rural Areas


2/27

Dimensions of Channel Behaviour

Sourcing of stocks & purchase cycle

Stocking behaviour & seasonality

Credit pattern

Transfer of capital

Pricing by the channel

Channel promotion

Retailerconsumer

dynamics


3/27

Sourcing of Stocks & purchase cycle

Sourcing

For retailer, wholesaler is the most important influencer, source of information, &stocks

In interior areas, retailers are not serviced by distributors agentsgo to nearbyfeed towns or large villages once or twice a month

In feeder villages, retailers purchase from distributors agents who visit their shops

at regular intervals & supply materialPurchasing Cycle

High t/o feeder villagesvisit nearby wholesale urban market 3 to 4 times a week

In other areas where only counter sales take placebuy once a week or fortnight

If purchasing brands directly from company salesmen, buy once a month or whenthe sales man comes

If one brand not available, will substitute brands Rural retailers will look for better marginswill visit several wholesalers to get

best margin

For grainsfrom mandis

Company has to give wholesaler the best terms & make sure that it is passed on tothe retailer


4/27

Stocking Behaviour & Seasonality

Seasonality pattern in stockholding

Retailer investment goes up 3 to 4 times during harvest(toiletries, cosmetics, clothes, footwear)

After harvest, seeds & fertilizer stocks go up, in

preparation for sowing Thereafter tapers off, and shop inventories also come

down

Usually, demand dictates stock position

Marketer must promote brand to consumer &wholesaler

Restrict the number of dealers, promote brans, preventundercutting, improve dealer margins


5/27

Credit Patterns

Retailers offer consumers between 15 to 70% credit

Running credit, settled partially every month, clearedafter harvest

Settlement may be in cash or kind Promotions to be made at harvest time, as funds

available

Credit usually on essentials like rice, wheat, cooking oil,

not on branded products National brands on pull, as cash & carry, local brands

on push, as available on credit


6/27

Transfer of Capital

Retailer may transfer capital from shop to

cultivation

At harvest when produce is sold, will invest in

building up inventory in shop

Will then move capital to purchase seeds &

fertilizers

Marketers launch promotions during this

period in between


7/27

Pricing by Channel

In interior villages, sometimes sell higher than MRP

Justifies greater effort and expenses

Want larger margins, but unwilling to pass on to the

consumer Festival discounts used to stock up, but benefit not

passed on

Need for better communication to final consumer

Wholesalers resort to undercutting to increase sales onfast moving items, then loose interest when marginsdrop drastically


8/27

Channel Promotion

Retailers in interior villages buy small

quantities, and do not qualify for discounts

Retailers in feeder towns purchase in bulk

(retail as well as supply to retailers in interior

villages), so discounts to be targetted at them


9/27

Retailer-Consumer Dynamics

Customer loyalty to retailer is highdepends on him

Retailer is a key influencertrustworthyfamilyrelationships - recommendations are valued

Retailers stock brands customers are used to buyingreluctant to change

Coca Cola University on Wheelstraining of retailers2 hour audio-visual aidbased on customer, shop,stock & financebest practices

Shop layout & location, display, basics of finance,knowledge of credit card transactions, peoplemanagement skills


10/27

Distribution Models in Rural Markets

Distribution Models for FMCGsDM1

Advanced Model

Company

CFA

Distributors (Rural)

Sub-Distributors

Retailers (Rural)

Wholesalers

Retailers

(Satellite Markets)

Retailers (Local)

Distributors (Urban)

Retailers (Urban)

Wholesalers

Retailers (Urban)


11/27

Channel Structure

Rural separated to give focus

Rural Distributor area clearly defined

Sub-distributors up to 5000 pop villages

Rural Distributor services wholesalers

Wholesaler reached satellite markets where companydistribution has not reached

This model ensures company's products reach maxlocations

Wholesalers role reduced, better discipline

HULDistributors at District level, star sellers for acluster of 20 - 25villages; star seller invests money inthe business.

To reach below 2000 pop villages, SHGs under Project

Shakthiown village as well as 4 to 5 other villages


12/27

Transportation

From production unit to CFA to Distributor done

at company expense Done on heavy trucks with fixed annual contract

Rural Distributors use light commercial vehicles

Urban Distributors use 3-wheelers Sub-Distributors use vans or pick-up trucksget

higher margims or 1 to 1.5% of sales T/O to cover

salaries of sales men & vehicle maintenance costs


13/27

Coverage

Permanent journey plan in consultation with

Distributor & Sales Team Haat days, distance, number of outlets to be

covered, type of vehicle to be used

PJP for 6 working days Outlets covered fortnightly

Outlets per day : 30 -40, of which 1220

productive

Distributor area50 km radius


14/27

Traditional Distribution ModelDM 2

Company

Distributor

Retailers Wholesalers

Retailers

CFA (Depot)


15/27

Channel Structure

No separate rural channel

Minimises distribution cost, better margins

Wholesalers act as feeder markets, cover

villages not reached by company

Distributor large territory

Regional cos with high volumes (Gari, Priyagold)

New entrants without infrastructure


16/27

Transportation

Stock to co depot on transfer basis

To disributor on freight paid basis, heavy

vehicle

Distributors use Matadors or tempos, owned

by them

Distributor employs sales people


17/27

Coverage

Area covered by Distributor is large

No sub-distributor to cover interiors

Wholesaler responsible for interior coverage

Not good for launching new products,

wholesalers prefer products with demand

Works for high volume, low SKUs


18/27

Rural-centric Distribution Models

Learning from old rural distribution systems

Haats / Shandies, mobile traders, PDS

Optimizing existing physical & socialinfrastructure

SHG, Cooperatives, NGOs, Youth groups, petrol

pumps

Collaboration principle


19/27

Haats / Shandies

Total no. of haats 43,000

Average annual

sales Rs 5,000 billion

Large

haat

Small

haat

Total no of stalls 545 327

Avg no of visitors 12,000 5,600

Catchment villages 57 21


20/27

Products sold at haats

Category % of outlets

Agri products 53

Manufactured goods 19

Processed foods 6Handicrafts 5

Forest products 5

Services 4Meat / poultry 3

Others 5


21/27

Corporate presence at haats

Mahindra

Hero Honda

Bajaj

TVS

Tata Ace

Ceat tyres

Emami

Nippo Batteries

Parle Products

HUL Coca Cola

Nestle

Dabur

Samsung

Airtel

Reliance Vodafone

Tata Docomo


22/27

Modern Distribution Models

SHG Model

Groups of 10 -15 women organized by NGO

Members contribute amount, matched by rural banks

Income generating enterprises

Project Shakthi

Youth Entrepreneurship Model

Educated, unemployed youth in villages

Entrepreneursorientation & training

HULs Shakthimaansdistributors on bicycles

1,50,000 villages with popn less than 2000 Company provided cycle

Distributes company's products to consumers


23/27

VansEveready

44 warehouses, 4,000 distributors, 1000 vans

Vans reach 3.3 million retail outlets 9rural +urban)

Each van 50 -60 calls per

day

Extends to < 5000 popln

villages

Van visits retailer every

fortnight Exclusive territories are marked for van operators,

wholesalers and retail stockists


24/27

Public Distribution System

476,000 FPS (wheat, sugar, rice, edible oil,

kerosene)

80% in rural areas (380,000)

FPS to Micro Malls in Gujarat

Deregulateall kinds of goods & services

Can also get gas cylinders, cosmetics, recharge

vouchers, fertilizers, seeds, packaged goods

ITC, HUL, Videocon, Hutch, LIC


25/27

Cooperative Societies

Agri inputs & credit

500,000 cooperatives

Play key role in economic value chain

production, marketing, procurement,

distribution

Warana BazarKholapur (MS). Two big shops

with 50 branches in Sangli & Kholapur Dist.

FMCGs, durables, auto components, agriproducts


26/27

Petrol Pumps

12,000 petrol pumps

60% on highways close to villages

Food products, toiletries

Agri-inputs, cooking gas

Kisan Seva Kendra


27/27

NGOs

3.3 million

Rural Development & SHG

NGOsreach; companiesemployment

opportunity

Tata TeaGaon Chalo12 NGOs in UPcovered 10,000 villagesadded 2000 retailers & 500 distributors

1.15.Channel Behaviour in Rural Areas

Documents

Transcript of 1.15.Channel Behaviour in Rural Areas