Re-Engineering sales & distribution systems is the need of the hour for FMCG brands

From travel to shopping and banking, everything around us has changed significantly over the past few years. The rapid growth of digitization has introduced several innovative technologies and strategic approaches which have changed the way Indian businesses function. Consumer demand acceleration has fuelled the growth of many new categories mostly driven by competitive brands in the FMCG space. Brands like McVities, Wai Wai and Wingreens have shown strong abilities to challenge established category giants like Britannia, Nestle and HUL on the basis of reliable sales and distribution support to make their products consistently available in target markets.
FMCG sales and distribution in India has not seen much progress for over five decades. The existing sales and distribution system in India is multi-layered and fragmented. Even big FMCG brands have multiple distributors in any city. Due to the high number of touchpoints in the entire sales and distribution value chain, the prime challenge for FMCG brands is to reach consumer via brick-and-mortar stores or online players.
However, big FMCG players have leveraged technology solutions like – Sales Force Automation, Distribution Management System, Warehouse Management System, Delivery Management System and other intelligent tools to improve sales, delivery and in-outlet executions. This sales and distribution structure works for these brands as they have scale at every level of the sales and distribution chain.
Challenges
A multi-layered, fragmented distribution channel with low scale forces competitive brands to take the responsibility of sales and reduce primary dispatch quantity which increases their overall sales and distribution cost significantly. High fixed costs, complexity of managing and retaining sales teams and distributors limits the bandwidth of the management team and limits the ability to spend on brand activation.
Other critical challenges are issues related to last mile data transparency and visibility as there are several blind spots related to sales. These brands cannot deploy technology at each distribution point to capture data, thereby, creating further gaps vis-à-vis big brands.
Further, conventional distributors have always ignored collection of products which are damaged, unsold or expired. If this activity is handled with care it has the potential to make a significant positive difference in customer perception about competitive brands.
At times, the plethora of issues does make competitive brands defensive about their ‘Go to Market’ strategy. Lower marketing budgets and manpower constraints often prevent continuous consumer engagement programs, leading to a further struggle to establish and scale up their product presence and increase brand awareness. The outbreak of COVID-19 pandemic has highlighted the fact that the traditional supply and distribution networks in FMCG and allied businesses have a fragile structure.
The current sales and distribution system and structure have become a moat for the big brands and as long as the competitive brands continue to operate with this sales and distribution structure and system, they will find it extremely difficult to leverage on the growing consumer franchise for their brands. It’s high time they start re-engineering their sales and distribution systems to maximise on the market opportunity.
Re-Engineering Sales & Distribution System
An ideal model for such competitive brands is the one that takes away the pain points in sales and distribution and allows them to concentrate on their core strengths and needs like new product development, brand building and consumer engagement to leverage emerging market opportunities. Such a model would also help reduce the sales and distribution cost, improve efficiencies and build relevant distribution, scale and consistency with absolute transparency on sales data.
Therefore, the new operating model needs to be benchmarked against overall sales and distribution costs instead of conventional distribution margins. It will provide these brands greater scalability, consistency, direct distribution in relevant outlets and real time data on a reduced sales and distribution cost.
It’s time for competitive brands to usher in more innovative and efficient plug and play sales and distribution systems and break the shackles that bound them till date, to leverage the potential of their brand.