An overview about marketing, sales & distribution for fmcg sector

A Brief Overview About Marketing, Sales & Distribution in
FMCG Industry
Presented By:
DL Vishnu Kumar
B. Tech || MBA || PGDMM
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S.No Topics Pg. No
1 What is ATL, BTL & TTL Marketing 3
2 Conventional Marketing Channel vs Vertical Marketing Channel vs Horizontal Marketing Channel 4
3 7P's of Marketing Mix 5
4 4C's of Marketing Mix 6
5 Types Of Marketing Channels 7
6 Go-To-Market Strategy(GTM Strategy) 8
7 Brand/Product Penetration into Rural Markets 9
8 How MTO(Modern Trade Outlets) Operations Works? 10
9 Difference Between Logistics & Distribution 11
10 Placing products in Modern Trade Retail Malls/Outlets 11
11 Maximum Retail Price(MRP) & Market Operating Price(MOP) 12
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Maximum Retail Price(MRP) & Market Operating Price(MOP)
12 Top-Line Growth vs. Bottom-Line Growth 13
13 Sales Related Glossary 14
14 Undercut in Sales 19
15 Classification of Indian Retail Sector: Categories | Retailing 20
16 Seven steps to a successful retail launch 20
17 Choosing a better retail format for a FASHION Retail: EBOs Vs MBOs 22
18 Building brand awareness activity is a must to Increase Off-take sales from retail shelves 24
19 Various Distribution Strategies 27
20 Removal Strategy For Expiration/Picking for Distribution 28
21 What do Supermarkets/Distributors do with food items that have passed their expiry date? 29
22 The Top Sources of Retail Shrinkage 30
23 FMCG Distribution Network 31
24 Bibliography 36

What is ATL, BTL & TTL Marketing?
The terms ATL & BTL were first used in 1954 after Proctor & Gamble began paying advertising firms separately (& at a
different rate) from other suppliers who dealt with more direct promotional efforts. In effect, marketing that was more
broad in nature was separated from marketing that was more direct in nature.
Above the line (ATL): Refers to promotional activities done at macro level. It is done at national, regional or at bigger
territory. Media such as television, cinema, radio, newspapers, magazines are used. ATL communication is more of
conventional in nature. ATL promotions are difficult to measure, tailored for mass audience, used for increase branding
effect/image /awareness/visibility is created about the company & its product, to generate mind share awareness. ATL
marketing aim is to provide basic information about the product to the customer so as to compel a customer to actively
seek a product. ATL marketing is costly & one way communication.
Below the line(BTL): BTL communication is unconventional in nature, done at micro level & forms part of non-media
communication. These include direct mailing, distribution of flyers, brochures, sponsorships, public relations, telemarketing
& point of purchase/sale, trade shows, exhibitions, catalogues, gift vouchers, SMS marketing.
BTL is used to generate loyalty & repeat sales. BTL promotions are targeted at individual levelBTL is used to generate loyalty & repeat sales. BTL promotions are targeted at individual level
according to their needs & preferences. BTL are measurable in terms of sales & feedback & it gives marketers valuable
insights on their return on investment (ROI). Since BTL focus is targeted & customer centric, it is efficient & cost effective,
apt for start-ups. BTL marketing aims to develop direct relationships between the company & customer. BTL marketing is
two way communication.
Through the line(TTL): TTL marketing (often referred to as TTL promotion/ TTL advertising) involves the use of both ATL &
BTL marketing strategies. The recent consumer trend in the market requires the integration of both ATL & BTL strategies for
better results. Sometimes ATL strategies are used to execute their direct marketing strategies which also comes under TTL
marketing. These include 360 ° Marketing, Digital Marketing. Most of the marketing campaigns today are TTL campaigns.
TTL strategy has a better ROI & is considered better by the consumer.
The key points used in differentiating marketing between ATL & BTL such as: Target Audience, Objective, Mediums used,
Aim, Cost, Measuring outcomes, Communications.
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Conventional Marketing Channel vs Vertical Marketing Channel vs
Horizontal Marketing Channel
Conventional Marketing Channel Vertical Marketing Channel Horizontal Marketing Channel
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7Ps of Marketing Mix
All the elements of the marketing mix influence each other. They make up the business plan for a company & handled right,
can give it great success. But handled wrong & the business could take years to recover. The marketing mix needs a lot of
understanding, market research & consultation with several people, from users to trade to manufacturing & several others.
Price: Refers to the value that is put for a product. It depends on costs of production, segment targeted, ability of the
market to pay, supply - demand & a host of other direct & indirect factors. There can be several types of pricing strategies,
each tied in with an overall business plan. Pricing can also be used a demarcation, to differentiate & enhance the image of a
product.
Product: Refers to the item actually being sold. The product must deliver a minimum level of performance. otherwise even
the best work on the other elements of the marketing mix won't do any good.
Place: Refers to the point of sale. In every industry, catching the eye of the consumer & making it easy for him/her to buy it,
is the main aim of a good distribution or 'place' strategy. Retailers pay a premium for the right location. In fact, the mantra
of a successful retail business is 'location, location, location'.of a successful retail business is 'location, location, location'.
Promotion: Refers to all the activities undertaken to make the product or service known to the user & trade. This can
include advertising, word of mouth, press reports, incentives, commissions & awards to the trade. It can also include
consumer schemes, direct marketing, contests & prizes.
Packaging: Refers to the way product or service appears from the outside. Looking at every visual element in the
product/service packaging through the eyes of a critical prospect.
Process: Refers to anything within the organization that has an impact on how a product or service is handled by employees
& delivered to consumers. Like how many queries salespeople receive & where they direct customers for help, or how
performance is tracked & measured.
People: Selecting, recruiting, hiring & retaining the people who will do the job that needs to be done is among the most
important parts of business. Refers to the people in an organisation who goes to market your business & brand.
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4Cs of Marketing Mix
The 4Cs marketing model was developed by Robert F. Lauterborn in 1990. It is a modification of the 4Ps model. It is an
extension. Here are the components of this marketing model:
Cost: Cost of conscience or opportunity cost is also part of the cost of product ownership. Also time spent acquiring the
product/service, cost of change or implementation is part of the cost of product ownership.
Consumer Wants and Needs – A company should only sell a product that addresses consumer demand. So, marketers and
business researchers should carefully study the consumer wants and needs.
Communication – Promotion is manipulative while communication is cooperative. Marketers should aim to create an open
dialogue with potential clients based on their needs and wants.
Convenience – The product should be readily available to the consumers. Marketers should strategically place the products
in several visible distribution points. This relates to positioning.
Whether using the 4Ps, the 7Ps, or the 4Cs, the marketing mix plan plays a vital role.
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Types of Marketing Channels
Strategic selection of marketing channels can impact an organization’s brand, profitability, & overall scale of operations for a
given line of products or services. There are basically 4 types of marketing channels:
1. Direct Selling; 2. Selling through intermediaries; 3. Dual distribution; 4. Reverse channels. 5. Channel Sales
1. Direct Selling: Direct selling is the marketing & selling of products directly to consumers away from a fixed retail location.
Peddling is the oldest form of Direct Selling. Direct Selling is about individual sales agents reaching & dealing directly with
clients. Direct Selling uses multi-level marketing (a salesperson is paid for selling & for sales made by people they recruit or
sponsor) rather than single-level marketing (salesperson is paid only for the sales they make themselves).
2. Selling Through Intermediaries: A marketing channel where intermediaries such as wholesalers & retailers are utilized to
make a product available to the customer is called an indirect channel. The most indirect channel is used when there are
many small manufacturers & many small retailers & an agent is used to help coordinate a large supply of the product.
(Producer/manufacturer –> agent –> wholesaler –> retailer –> consumer).
3. Dual Distribution: Dual distribution describes a wide variety of marketing arrangements by which the manufacturer or
wholesalers uses more than one channel simultaneously to reach the end user. They may sell directly to the end users as
well as sell to other companies for resale. Using two /more channels to attract same target market can sometimes lead to
channel conflict. An example of dual distribution is business format franchising, where the franchisors, license the operation
of some of its units to franchisees while simultaneously owning & operating some units themselves.
4. Reverse Channels: This one goes in the reverse direction .i.e. from consumer to intermediary to beneficiary. Recycling is
an example of a reverse marketing channel.
5. Channel: It is a chain of organizations that a product must pass through before a customer can buy it. Also called by many
other names such as 'distribution network', 'supply chain' or simply as 'trade‘. Example, A product is usually made by a
brand at a factory. The brand then sells this product to a national distributor which sells it to a state level distributor which
sells it to a retailer which sells it to a customer. This is an example of a Retail Channel. In the Organized Retail business,
brands may directly sell to the retailer. In other combinations - brands may sell to regional distributors. Regional distributors
may sell to city distributors, & so on. Other examples are: E-Commerce Channel, Door-to-Door Channel, B2B Channel etc.
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Go-To-Market Strategy (GTM Strategy)
A go-to-market strategy (GTM strategy) is an action plan that specifies how a company will reach target customers &
achieve competitive advantage.
The purpose of a GTM strategy is to provide a blueprint for delivering a product or service to the end customer, taking into
account such factors as pricing, funding & distribution.
The GTM strategy for a range of events, including new products/services launches, introducing a current product to a new
market & even re-launching the company or brand.
The GTM strategy will align all stakeholders & establish a timeline to ensure each stakeholder meets the defined milestones
& outcomes, creating an attainable path to market success.
The GTM includes following core components.
1. Identifying & screening target markets.
2. Identifying & screening target customers.2. Identifying & screening target customers.
3. Gathering Market & Competitor Positioning Intelligence.
4. Identifying distribution model to deliver product/service to the customer.
5. Knowing how to meet the buyer to get the relationship off to a good start.
6. Presentation & demonstration of product story, benefits, uniqueness, brand & value positioning includes cost budget,
penetration pricing, quality, use & application.
7. Beta/Market Test & Feedbacks.
8. Post Sales & Support Model includes necessary trainings.
The GTM strategy has following benefits:
Reduce time to market, Reduce costs associated with failed product launches, Increase ability to adapt to change, Manage
innovation challenges, Ensure effective customer experience, Ensure regulatory compliance, Ensure a successful product
launch, Avoid the wrong path, Establish path for growth, Clarifies plan & direction for all stakeholders.
Buyer Personas(behaviour of product users) & Buyer Journey(behaviour of customer pre & post purchase)are vital in
framing GTM strategy .
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Brand/Product Penetration into Rural Markets
When brands think of making inroads into the rural markets, one infallible strategy would be to take recourse to the 4As of
marketing - Acceptability, Affordability, Accessibility, Awareness.
Usually based on a hub & spoke model with a network of distributors, sub-distributors & retailers, a robust distribution
channel needs to be laid before a brand can make its presence felt in a rural market in a big way.
Next comes the pricing as the rural market is known to be price sensitive with consumers always looking for products that
can give them value for money.
The success or failure of an FMCG product in the rural market is more often dependent on the magic price point that a
brand decides to sell a product to rural consumers.
It is always advisable for brands to cut down on extra features that their products offer to keep the cost of production low
without compromising with the quality of the product.
This will enable them to market their products to the maximum number of consumers & eventually earn profits.
Mostly Rural customers look for three qualities in a brand.
1. Simple- Not Complicated
2. Reliable- Durability, Service support
3.Sensitive- Price, Culture, Environment.
It is obvious that most of the sales in Rural Markets in India happen through whole sellers.
In Indian Rural Market, you will have strong whole sellers for every group of villages or in the nearby town, where retailers
go & replenish their stocks. The top FMCG companies are driving their direct distribution in Rural Markets as they mine
the Gold at the Bottom of the Pyramid.
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1. Terms of trade agreement between manufacturing company and retailer will include product name, minimum stock
quantity, margins, customer schemes, schemes and discounts, off-take activities.
2. Place the purchase order sent from retail HQ to manufacturer HQ mentioning the outlet location or centralized retail
warehouse.
3. Supplier MTO manager receives the PO will forward the PO to company owned warehouse or to the distributor.
4. Distributor will supply the products and will create an invoice.
5. Now retailer will acknowledge the goods received with GRN (Goods received note).
6. Company merchandiser showcase the product to increase the off-take.
7. If the available stock goes below the threshold MBQ, the purchase manager release the PO.
How MTO(Modern Trade Outlets) Operations Works?
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FMCG: It stands for Fast Moving Consumer Goods. Deals with consumer goods that have a smaller shelf life & are perishable
in nature. Ex: Food items like Milk, bread, etc. FMCG products are consumed almost immediately by the consumer & need
to be replenished from time to time.
FMCD: It stands for Fast Moving Consumer Durable. They are more durable of course & do not wear out too soon. They
have a utility value over a period of time. Ex: Consumer electronics like microwave, washing machine, etc. They do not
exhaust in one use & can be used for a considerably longer period of time, with repeated usage.
Difference Between Logistics & Distribution
Logistics deals with the overall strategy of optimizing the inward & outward flow of goods from various manufacturing
warehouses to the final destination. Logistics is the management of the flow of things between the point of origin & the
point of consumption in order to meet requirements of customers. It has 3 stages: Upstream(raw mat from supplier),
Internal(goods are transformed), Downstream(goods flow out of organisation to customer).
Distribution, on the other hand, is a subset of logistics, & its main goal is to ensure that goods are delivered as efficiently &
cheaply as possible. Distribution management refers to overseeing the movement of goods from supplier or manufacturercheaply as possible. Distribution management refers to overseeing the movement of goods from supplier or manufacturer
to point of sale. It has only 1 stage: Downstream logistics(flow out of organisation to customer thru multi stages).
Placing products in Modern Trade Retail Malls/Outlets
1. The buying decision in modern retail formats are taken by the “Buying & Merchandising” team. So establishing contact
with them is important. Visit the retail store & ask store personnel the contact details of Category Buyer /
Merchandiser.
2. Merchandiser & Buyers are the decision makers. There is a need to make sure for a good presentation ready to
showcase the relevance of our products viz a viz existing potential competitors already available in that modern retail
chain.
3. Proposing competitive margin / inventory model (stock or consignment) returns process & marketing budget to
promote your product. Also discussing the “End-caps” rate where in our product gets more visibility by paying the
promotions charges. Quality check assurance is a must.
4. Finally beta test the product placement by starting to place the products for 1 or 2 stores & see the sales through &
entire experience of 2 payment cycles before expanding full scale.
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Maximum Retail Price(MRP) & Market Operating Price(MOP)
MOP: Market Operating Price. It is the price at which a product was made available to a retailer by the manufacturer.
Therefore, it is the lowest price at which the retailer can sell the product. The MOP is set by the manufacturer or the brand
& is either lower than or equal to the selling price set by the retailer, who seeks to sell the product at above the MOP to
make a profit. MOP is not publicly displayed on the product. Offers such as the ‘0% EMI’ are usually based on the MOP. MOP
audits are also conducted.
MRP: Maximum Retail Price. It is the maximum price at which the product can be sold to the customer & it is inclusive of all
taxes. maximum price’ in relation to any commodity in packaged form shall include all taxes local or otherwise, freight,
transport charges, commission payable to dealers, & all charges towards advertisement, delivery, packing forwarding.
Selling at above the MRP is always prohibited. MRP is publicly displayed on the product.
MRP = MOP + Profit.
While MOP is set by the manufacturer, the MRP is set by the government/regulatory body.
The retailer is free to fluctuate his selling price as long as it is below/equal to the MRP & above/equal to the MOP.
Predatory Pricing: Selling product at extremely low prices. Often at a loss, so as to put other competitive forces out of
business & then increase our selling price again. Example: E-commerce & Big Retailers outlets have a habit of selling their
products at large discounts, often at MOP (or even below: it is difficult to know the case for all products). This ensures more
business for them. However this puts offline & smaller retailers margin at risk of elimination from the market. These small
retailers cannot afford similar discounts and soon lose their customers to the larger retailers.
If we can ask for prices across various stores, both offline & online. This will give you a fair idea of what the MOP of the
product is. For instance, let us compare the prices of an LG 32 inch high definition television (MRP of 28,900) across online
and offline retailers. On Snapdeal.com, it costs 22,490; on Flipkart it is 22,990 (prices as on Monday); at a brick-and-mortar
store such as Croma in Nehru Place (Delhi) it is 27,900; & at an LG Shoppe in the same locality, it is 28,900. With this you can
get a fair idea of what the MOP could be, & then use it as a bargaining tool. But do remember that it is completely up to the
retailer to want to sell at a price that’s lower than the MRP.
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Top-Line Growth vs. Bottom-Line Growth
The top line & bottom line are two of the most important lines on income statement for a company. The utmost need for
attention for signs of any changes from quarter to quarter & year to year. Both the top-line & bottom-line figures are useful
in determining the financial strength of a company. The most profitable companies typically grow both their top & bottom
lines.
However, more established companies might have flat sales or revenue(top line) for a particular reporting period but are
still able to boost their bottom line through expenses reduction. Cost-cutting measures are common during periods of
economic slowdown or recessions.
The top line refers to a company's revenues or gross sales. Therefore, when a company has "top-line growth, company is
experiencing an increase in gross sales or revenues.
Top line only indicates how effective a company is at generating sales and revenue.
The bottom line is a company's net income, or the "bottom" figure on a company's income statement.The bottom line is a company's net income, or the "bottom" figure on a company's income statement.
The bottom line describes how efficient a company is with its spending & managing its operating costs.
The bottom line is a company's income after all expenses have been deducted from revenues. These expenses include
interest charges paid on loans, general & administrative costs, income taxes. A company's bottom line can also be referred
to as net earnings or net profits. A company can increase its bottom line through the reduction of expenses.
A company's products could be produced using different input goods or with more efficient methods. Decreasing wages &
benefits, operating out of less expensive facilities, utilizing tax benefits & limiting the cost of capital are ways to increase
the bottom line.
The bottom line figure can be spent in a number of different ways by a company's executives. The bottom line can be used
to issue payments to stockholders in the form of dividends as an incentive to maintain ownership. Alternatively, bottom line
can be used to repurchase stock & retire equity. Perhaps a company may keep all earnings reported on the bottom line to
utilize in product development, location expansion, other means of improving the company.
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There are 3 stakeholders before a product reaches to end consumer:
a) Manufacturing company/National supplier, b) Distributor c) Retailer
Primary Sales: Primary sales is the sales from a manufacturing company or national supplier to a city/state/region
distributor. For example when a brand is invoicing the product to a distributor in one city, who will further sell it to retailers,
is called as ‘Primary Sales’ transaction. Company invoices the product at distributor price, & revenue generated from this
transaction is the net revenue of the company.
Secondary Sales: When a distributor invoices the product to a retailer, this transaction is called as ‘Secondary Sales’. In this
transaction, distributor keeps its margin & invoices the product at dealer price (also called as retailer price). Usually, targets
are always based on secondary sales
Tertiary Sales: When a retailer sells the product to a customer (end consumer), this transaction is called as ‘Tertiary Sales’.
The product at this level is sold at either of MRP (maximum retail price) or MOP (Market operating price). Also called as Off
takes.takes.
Range Selling: Range Selling is used to provide variety of products to customers, reduce the dependency of sales revenues
from single or limited products & have better visibility at stores. Range selling is one of key techniques to do better sales.
WOD: Stands for Width of Distribution, number of retail stores that a product is distributed to - which then is also the
number of stores that customers can buy the product from. Example, if an product is available at 100,000 stores across the
country - it's National WOD is 100,000 & if it's available at 10,000 stores in a city, it's city WOD is 10,000.
Single Product Line: Some manufacture & focus on single product line i.e range of different models in a single product line.
Example: Hero Cycles, which focus in making & marketing only bicycles. Under this single “bicycle” product line e.g baby
cycles, trendy cycles for young people, mountain bikes aka cycles for adventure loving people or bicycles for females.
Multiple Product Lines: Multiple product lines means businesses, manufacturers making & marketing different product
categories like FMCG companies which dabble in different product categories like toothpaste, shampoo, home care
products like Unilever/P&G. These multiple product lines are different from other products & serve different needs of
consumers.
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Up-Selling: Up selling is the practice of encouraging customers to purchase a comparable higher-end product than the one
customer desiring for a basic model of a project. a salesperson may influence a customer into purchasing the newest
version of an item, rather than the less-expensive current model, by pointing out its additional features. Example suggesting
a brand of watch that the customer hasn't previously heard of as an alternative to the one being considered.
Cross-Selling: Cross-selling is the suggestion of any other product to be purchased in conjunction with the primary product.
Example a scanner suggestion when a printer is purchased or a conditioner suggestion when shampoo is selected. Cross-
selling is prevalent in every type of commerce, including banks & insurance agencies. Credit cards are cross-sold to people
registering a savings account, while life insurance is commonly suggested to customers buying car coverage, while
in ecommerce, cross-selling is often utilized on product pages, during the checkout process, while camera might come with
an offer of batteries, & a printer purchase might prompt the suggestion for ink. .
Up-selling & Cross-selling are mutually beneficial when done properly, providing additional value to customers & increasing
revenue without the recurring cost of many marketing channels.
Co-branding: It is a marketing strategy that involves strategic alliance of multiple brand names jointly used on a singleCo-branding: It is a marketing strategy that involves strategic alliance of multiple brand names jointly used on a single
product or service. Also known as a brand partnership, co-branding encompasses several different types of branding
collaborations, typically involving the brands of at least two companies. Ex: In India, Ola customers were given an
opportunity to buy the latest Smartphone One Plus X, on-demand, through the Ola app.
Co-marketing: It is a marketing strategy that involves brand partners look for ways to effectively share their customers &
build awareness for both brands. it’s similar to cross-selling. It lets companies work together closely to develop deeper
insights into their existing customers & adjacent market segments. Ex: Uber & Spotify worked together to differentiate both
brands from a sea of competitors: Spotify members using Uber can queue up a special playlist timed to launch just as their
Uber begins, giving them a unique ride experience no one else can match.
Brand Positioning: Brand positioning describes how a brand is different from its competitors & where, or how, it sits in
customers’ minds. It is the process of company’s brand positioning in customers mind. Brand positioning is also referred to
as positioning strategy, brand strategy, or brand positioning statement. An attempt to “own” a marketing niche for a brand,
using various strategies including pricing, promotions, distribution, packaging & competition. The goal is to create a unique
impression in the customer’s mind so that the customer associates something specific & desirable with your brand that is
distinct from rest of the marketplace.
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Trade Schemes: These are schemes that are given out in the market to boost sales from time to time. Trade Schemes
are designed for the trade i.e. Retailers/Whole-Salers & the distributor is supposed to comply with them & extend it to
the trade & the company’s sales force are expected to utilize it in the right spirit & ensure market hygiene.
These can be in terms of discounts on the bill (hence translating to higher margins) or in terms of goods that may be
enticing for the retailer/distributor.
An example of this would be a free air conditioner on purchase of a particular value of goods, or a free holiday package
on achieving the target that is given. Trade schemes are of two types:
Quantity Purchase Schemes (QPS): These typically look like this:
144 pieces – 8% discount
Basically these are discounts offered on purchasing a particular quantity of productsBasically these are discounts offered on purchasing a particular quantity of products
Value Purchase Schemes (VPS): These would look like this:
Purchase of 10,000 – 8% discount
Purchase of 6,000– 4% discount
These are discounts offered on purchasing products of a predefined value
Trade schemes are further divided into two types depending on who they are offered to:
Primary Schemes: These are those that are deducted while the invoicing is done to the distributor from the company’s
end. This may be done to give the distributor an additional margin.
Secondary Schemes: These are those which the distributor is supposed to first extend to the market and then claims it
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ROI (Return of Investment): This is calculated on monthly/quarterly/yearly basis to understand distributor's profitability.
ROI calculation is very important as it is a tool to negotiate with your distributor to manage/deploy required investments.
The equation is simple: ROI= Return/Investment, Return = (Earnings – Expenses).
The company gives a margin of 5% on its products to a distributor. After all his distribution expenses, the net profit % is 2.1,
and his investment is 20L with an annual turnover of 200L, ROI is easily calculated as under.
No of rotations = annual turnover/investment = 200/20 = 10 rotations/year. Investment = 20 Lakhs.
This means he rotates his investment of 20lakhs, 10 times a year, each time making say 2.1%. So his ROI is 10*2.1 = 21%.
Numeric Distribution: The number (or percentage) of outlets where company's product is present (outlets that have at
least one SKU of a product) e.g. at how many outlets a company's product are available is measured by numeric
distribution.
Weighted Distribution: The percentage of the total sales volume that comes from the served outlet.Weighted Distribution: The percentage of the total sales volume that comes from the served outlet.
Example: you have 10 outlets in a beat, now out of these 10 outlets if your product is present in 4 outlets then numeric
distribution is 40%. If that 4 outlets contributes 75% of your total sales, in that case weighted distribution would be
75%. Numeric distribution gives you an idea of the reach of distribution whilst weighted gives you an idea of the quality of
distribution.
Wholesalers: An outlet of a beat is considered as wholesaler if that outlet contributes more than 50% sales of that
particular beat (this assumption may differ for different companies).
Strike Rate or Productivity: It is the % of all successful sales calls out of total calls made by a DSR. This is generally measured
on daily basis.
ECO: It stands for Effectively Covered Outlet or Effective Coverage which means how many outlets out of total outlet of a
route or market or territory are making at least one memo in a month. With ECO a company measures active outlet number.
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Sales Representatives (SR) or Sales Officers (SO): SR/SO can be employed either by company or by distributors depending
on company policy who are responsible for collecting sales order from their assigned routes. After collecting sales orders
from the outlets of his assigned route, a SR/SO makes a summary of this total order and submits it to the distributor for
delivery. Based on this collected order (summary sheet) product delivery happens on the next day by DSR or Deliveryman of
distributor.
DSR: Distributor's Sales Representatives are employed by distributors but managed by TM/TSM; DSRs are the salesmen who
are responsible to make sales of company's products (SKUs) to retailers. Typically where SR or SO concept is available, DSRs
are the deliverymen who are employed to deliver company's products to outlets according to previously collected orders by
SR/SO. Where SR/SO concept is not practiced (e.g. not employed by company itself) DSR plays the role of SR/SO and in that
case distributor employs a separate delivery unit for distributing products to retail.
Average basket size: Average basket size refers to the number of items getting sold in a single purchase. Depending on the
kind of business, average basket size can be a very important metric. Formula: total units sold ÷ number of invoices.
Example, a pet store selling small-ticket items as opposed to a jewellery store selling distinguished merchandise.
Average ticket size: Average ticket size is just the amount of money that each buyer spends on average per visit. This figure
can be influenced by offering volume discounts, point of sale promotions, and personal recommendations by the sales
person (up-selling/cross selling). Keeping a variety of products and having all the sizes available also contributes in
increasing the average ticket size. Formula: total sale/total bill.
Consumer Packaged Goods (CPG): CPG are items used daily by average consumers that require routine replacement or
replenishment, such as food, beverages, clothes, tobacco, makeup, and household products. Demand for CPGs largely
remains constant, It is a highly competitive sector, due to high market saturation & low consumer switching costs where
consumers can easily & cheaply switch their brand loyalties. CPG have generally enjoy healthy margins & fight for shelf
space in stores & invest in advertising for brand recognition & stimulate sales & have limited shelf lives. Example:
Beverages, Cosmetics.
Consumer Staples: Consumer staples are broken down into 6 industries: Beverages, Food & Staples Retailing, Food
products, Household products, Personal products, Tobacco products.
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UNDERCUT IN SALES
In sales, company’s competitor is not the product of another company in same category & price band, that is real threat but
the real threat is the same product from other distributor or other channel (TT/MT /SS).
Price cutting or Undercutting, is a sales technique that reduces retail prices to a level low enough to eliminate competition.
In most cases (more than 95%) the competition is not with a competitor’s product, but it is competition between a company
salesman and a wholesaler selling the same branded product at different prices.
The sales team generally uses visibility budget to get out of the price undercut problem. Undercutting can be solved by
re-allocating the markets. The distributor serves below parties are different.
1. The wholesale market,
2. The retail stores that are buying under-priced stock from wholesale.
If bringing these two entities under one distributor, then under-cutting can be controlled.
Sales people work based on beats, a certain geographical area. If there are too many complaints about undercutting in a
particular beat & if company too realizes the problem, then they can remove that particular beat under that salesperson.
Reallocation of those stores & the wholesale market together into another market will solve the problem.
Sometimes distributors can warn, wholesaler that if they practice undercutting in their area, then wholesaler won’t be
provided with stock. If warning repeats for 1-2 months, then distributors become more cautious.
The philosophy of under-cutting can be done by anybody in the supply chain.
So, salesman himself, in order to reach his target, can make this happen. He makes an invoice against one such large
wholesaler & he passes the benefits to his retailer. In a way, the brand or the particular product starts to become more driven
By wholesalers.
Various channel partners do under-cutting to boost volumes at his/her own level. TSO who will be in-charge of
certain stockists too sometimes bill it against a certain stockist ABC, but he actually sells it to a big wholesaler. The distributor
too can have his own share of price undercutting to attract the retailer. Undercutting is a very common phenomena in field.
Though FMCG companies have various strict mechanisms to curb them. After all, price matters to everybody.
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Classification of Indian Retail Sector: Categories | Retailing
1. Food Retailers: Example: Reliance Fresh, Reliance Smart, Aditya Birla More, Dmart, etc.
2. Health & Beauty Products: Examples: Health & Glow etc.
3. Clothing & Footwear: Examples: Reliance Trends, FBB etc.
4. Home Furniture & Household Goods: Example: IKEA, Homecenter, Studio Pepperfry.
5. Durable Goods: Example: Godrej Appliances, Bajaj Electronics, E-Zone.
6. Leisure & Personal Goods: Example: Landmark.
General Merchandise Retailer:
(a) Discount Stores: Examples: Wal-Mart, Big Bazaar, Vishal Mega Mart etc.
(b) Specialty Stores: Examples: Toys Kemp, Planet Fashion, Music World etc.
(c) Category Specialist: Examples: Food World, Welspun, Electronics Bazaar etc.
(d) Off Price Retailers: Examples: Factory Outlets like Brand Factory, Nike, Reebok, Lewis etc.
(e) Value Retailers: Examples: MegaMart, Sampoorna Supermarket etc.
Non-Store Retail Format:
(a) Electronic Retailing: Examples: E-Bay, FlipKart, Amazon etc.
(b) Catalog Retailing: Examples: McMaster, Home Depot, Grainger etc.
(c) Direct Selling: Examples: Door – Door Sales, Cold Calling, CnF Agents etc.
(d) Television Shopping: Examples: TV18 Sky Shop, India Asian Sky Shop, Naaptol etc.
(e) Vending Machine: Examples: Self service soft drink & condom vending machines etc.
(f) Services Retailing: Examples: Childcare creche, Financial planning center, Dry cleaning center, Weight loss center,
Internet parlour, Telephone booths, Entertainment parks, Hotels etc.
The marketing aspects are usually taken care of & product quality is good, the trade partner feedback should also
be incorporated prior to launch.
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Seven steps to a successful retail launch

1. Margin: The margin is always important, but secondary off-take & stock availability is equally critical. Trade partners
know their store space is limited & take a long time to decide on whether to invest in a new product. They concerns
beyond the margin are the brand in question, potential ease of conducting business & whether it will appeal to the end
consumer.
2. Trade Relationship: While reviewing a new brand, trade partners want to get familiar with the company behind the
offering. Trade partners shifts their understanding promoters’ background, production facilities, supply chain
investment, products safety, efficiency, benefits & how new offering is differentiated from competition & relevancy to
their customer base.
3. Positioning in competitive context: Prior to launch, most brand owners review the competition and establish a
positioning from a branding perspective. Trade partners are already selling these existing brands & it evaluates all new
offerings with a deep look. Trade looks for real benefits to consumers, rather than simple marketing claims.
4. Appropriate marketing support: With global brands & established national & local brands, new brands need to ensure
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4. Appropriate marketing support: With global brands & established national & local brands, new brands need to ensure
they have base level marketing support to begin conversations with trade partner. This means new brands have to
meet hygiene requirements with respect to packaging aesthetics, POP material & other marketing material in-store.
Unless these basics are met, trade partners are hesitant to engage with brands. Firms also need to prepare themselves
for the longer haul & spend money for secondary offtake once distribution is in place.
5. Sales support systems: New brands need to demonstrate their capabilities in terms of quality, supply chain investment,
product launch commitments &marketing support. Trade partners hesitate to stock products with fluctuating quality,
or brands that do not invest in marketing support for off take or where availability is an issue. The trade partners views
these functions as essential aspects of sales support & need concrete answers to their queries prior to launch.
6. Sales team & old-fashioned face-time: Brick-and-mortar retail sale is a high-intensity activity with a significant amount
of footwork & trade partner face time. Tech support helps but cannot replace the warmth of a face-to-face interaction.
So the sales team needs to visit trade partner outlets, share information, request space & accept feedback. They may
need to provide local store activation support & work on secondary offtake. The role of a well trained , properly
managed sales team that works in a disciplined manner to achieve sale targets is a critical trigger for retail success.

7. Commitment to a well-thought business plan: Retail success is, at times, a long-drawn process. It involves a detailed
distribution plan, retail growth markers, product investments & marketing support. Trade partners are quick to identify
firms who do not exhibit long-term commitment to mutual growth. By staying the course & demonstrating through
action, a new firm can establish the foundations of a long-term relationship. There are costs to retail entry. It’s not just
the product & marketing expenses, costs include fixed expenses (warehouses, transport, technical support, software,
& so on) & variable expenses (salaries, marketing support, trade campaigns). Working on a realistic business plan with
accurate break-even horizons & an appreciation of the magnitude of investment is critical for success.
Choosing a better retail format for a FASHION Retail: EBOs Vs MBOs
Starting up a fashion retail business as an EBO for visibility, & gradually leveraging the business through MBOs would
prove to be successful for retailers. Both retail concepts have their own pros, and cons. One point of time, the retailer
benefits from exclusive outlets, and another time, he may benefit from multi brand outlets.
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EBO: EBOs are important for branded apparel makers to establish a market presence. Exclusive Brand Outlets
need efficient & skill fully trained staff, as they are the face of the brand. In exclusive formats, retailers lose their
freedom as they will have to abide the vendor guidelines such as fixed set of promotions for a year. Exclusive brand
retailers get territory protection from their vendors.
Exclusive brand outlets are vendor centric models. They provide complete
fashion solution keeping clothes both fashionable & functional. The retailer makes deep commitments through his
investments & marketing strategies. The retailer enjoys territory protection, rebates & marketing support from
the vendor, better margins & other subsidies.
Example: 'Koutons', 'Fab India', and 'W' are a few EBOs that are carving a niche market for itself.
A EBO includes a brand & creates a store image to convey its brand image. It enables the brand to choose the location,
size & configuration of the store. Unique promotional strategies are followed. They also get more discounts &
incentives comparatively over multi brand retailers.

An exclusive retail store maintains uniformity in store design, interiors, products, store size, promotions undertaken,
& its product pricing. This prevents harsh competition among EBO retailers, giving them a fair chance of profits.
An EBO requires high investment & is challenging for a retailer to find the right location to set his store. If he is a new
player in the market, he would face issues running the store without prior retail experience, as it deals with one
specific brand. EBO’s create an impression in the customer's mind.
EBO retailers get very little footfall, and are lost out on customers who seek options of similar brands.
MBO: Multi Brand Outlets make a pragmatic approach for the success of a retailer as they offer a wide variety of
choice to the shoppers under a single roof. Most of the customers today are well informed about the product they
prefer to buy, & are aware of the comparative benefits, and pricing of similar other brands. They prefer to go to a
store, where they can see many brands, compare their performance benefits, & pricing before they make their
buying decisions.
A multi brand retailer would be able to satisfy this kind of customer. Multi brand
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A multi brand retailer would be able to satisfy this kind of customer. Multi brand
formats put the brand & its product right in the middle of its competitors. New offerings are showcased in a way,
facilitating the consumers to compare & decide. The sheer volume of shoppers stepping in MBOs makes it essential.
Example: Lifestyle, and Shoppers Stop etc are gaining more popularity with the consumers.
MBO’s providing multiple choices might confuse the shopper. The retailer would also not be in a position to
recommend any brand to his customer, as that would indirectly imply under selling the remaining brands.
Multi brand retailers also get fewer benefits from the vendors.
Apparels are more product driven, and less brand driven, hence MBOs will prove more profitable because customers
get a variety of apparels to choose from. MBOs are free from not needing efficient and skilfully trained staff.

Building brand awareness activity is a must to Increase Off-take sales
from retail shelves
1. Check sales persons attendance as per sales beat plan/journey plan: Check the attendance of DSR/SA/SO team & verify
if it is as per journey plan.
2. Delivery check option as per last Purchase Order(PO)/Purchase Indent(PI): Check if the delivery to the MTO’s has been
made in accordance with Purchase Order has been generated.
3. Check Primary Axis Point: Includes:
A. Measuring the number of SKUs.
B. The share of facing.
C. The share of shelf.
D. Level of facing for both self and competitors' products.
E. The freshness of relevant products.
F. Parameters against Minimum Basic Quantity(MBQ).F. Parameters against Minimum Basic Quantity(MBQ).
4. Check Secondary Axis Point: Includes:
A. Checking for FSU, Gondolas, Bins, End Caps. Which might have any impact on the tertiary sales/offtakes.
5. Check Tertiary Axis Point: Includes:
A. Check of backroom stock. When there is a stock requirement, DSR/SA/SO should be able to immediately meet the
Requirement.
6. Using Sales Force Automation: The use of sales force can help to increase the off takes in MTO by:
A. Creating Brand Visibility: When merchandiser replaces salesman, & thereby he will be able to visualize the sales
Conditions of his products and competitors’ products. Automation helps a merchandiser stay in line with the
Competition & avail real-time updates & so can stay in par with the competition & increase his brand visibility.
B. Increases Tertiary Sales: In MTO’s the brand/company appoints their salesman in the super/hypermarket who can get
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an overview of the products. The appointed salesman will be able to provide concrete data & update in the automation
app. This helps the sales team to be proactive in case of all the outlets & increase the tertiary sales.
C. Helps in Stock Checking: Real-time updates on stock helps company is not missing out on any stocks & have control
over the inventory across the Modern Trade Outlets(MTO’s). Minimum inventory of 9-15 days for super markets so
that there does not arise the stock out situation.
D. Stay in line with Planogram: Automation helps the sales team achieve the target, more accurately & efficiently by
reducing the unproductive hours on reporting & by giving reminders to submit letters one month in advance.
E . Capture Product Expiry Date on Shelf: Sales Diary lets you do the ageing analysis of your products on the shelves in
different modern retail outlets from one single place.
F. Define Promotion Calendar for the year: With Sales Diary, you can have a track of schemes & offers to be given to
various outlets. It is easier to define the promotional calendar, product-wise or outlet-wise along with estimated
off-take.off-take.
G. Monitor Sales: Sales Diary lets you monitor sales achieved & compare it against company’s investment amount for
shelf rentals helping in make better decisions on selecting the shelves for company’s products.
H. Capture Competitor: Sales Diary provides you an option to benchmark our & competitors'activities in each
outlet & thereby helps us to stay ahead in the competition.
I. Use of Sales Diary: Helps keep track of the supplies to Modern Trade Outlets through its advanced features. Sales Diary
is an automation sales force software with features such as:
1. Route Management: Can Optimize routes based on priority outlets & business goals.
2. Check-in and Check-out: SalesDiary provides with Geo-tagged & time-stamped records to analyse BTL activities &
their impact.
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3. Automated Order Generation: With Sales Diary, reduce time on taking orders with system suggested orders & share
with the Purchase teams.
4. Dispatch and Delivery Confirmation: You can track and verify past orders with real-time updates from the depot
generated by the system.
5. Tertiary Sales: You can even enable your Modern Retail Merchandisers to record sales & consumer feedback.
6. Consumer Surveys & Competition Analysis: Sales Diary lets to stay abreast about market trends & new products in
their category.
7. Customer Issues: Can easily record issues regarding claims, returns, damages or product feedback through the app.
8. Team Performance: With Sales Diary, can analyse team activities & derive the best practices for Modern Retail outlets.
Metrics General Trade Modern Trade
Ownership Store is owned by an individual, with limited space capacity.
Store is owned/franchised by a multinational/privately
held company with standard set of processes controlled
centrally & comes with a large space availability for
brand visibility.
Terms of Trade
(TOT)
Margin structure of each product is decided by the company policy or by
the distributor of the product. There could be trade promotions offered
by sales representative to increase purchase.
The production company and the retail chain purchase
division enters into an annual trade agreement includes
minimum purchase quantity, volume purchase discounts,
% of shelf space in the category, and activities to be
carried out by the production company as a part of
merchandising activity.
Supply Chain
The salesman goes to the shop on a regular basis, takes the order and the
distributor supplies the same on the same day or the same week.
Order generated at the HQ purchase manager and
directly sends to the sale/ division head, the company
mostly decides to supply from its own central/regional
warehouses.
Brand Visibility
The salesman goes to the shop on a regular basis, takes the order and the
distributor supplies the same on the same day or the same week.
Order generated at the HQ purchase manager and
directly sends to the sale/ division head, the company
mostly decides to supply from its own central/regional
warehouses.
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Various Distribution Strategies
Distribution strategies depend a lot on the various products which the companies might have. A single company might
have multiple product line & lengths, each with its own distribution strategy. Some products, which are premium,
might need selective distribution whereas others which are mass products, may need intensive distribution. The
strategies for both types will be different. So, in the end, the distribution of a company is dynamic in nature & it
contributes a lot to the competitive advantage of the company.
1) Indirect distribution: Indirect distribution is when the product reaches the end customer through numerous
channels in between. For example – The product goes from manufacturer to C&F, then to the distributor, then to the
retailer & finally to the customer. Thus the chain is long.
2) Direct distribution: Direct distribution is when the company either directly sends the product to end customer or when
the channel length is very less. A company selling on an e commerce portal or selling through modern retail is the form
of Direct distribution.
3) Intensive Distribution: When a company is having a mass marketing product, then it uses intensive
distribution. Intensive distribution tries to cover as much of the market as it can. Typical FMCG & FMCD products are
best example of intensive distribution strategy.
4) Selective Distribution: A company like Armani, Zara or any other such branded company will have selective
distribution. These companies are likely to have only limited outlets. For example – In an urban city, Armani might have
2-3 outlets at the maximum whereas Zara might have 4-5.
5) Exclusive Distribution: If Zara has 4-5 outlets in a city, how many outlets would a company like Lamborghini have?
Probably one in a region of 5-7 cities. That’s exclusive distribution for you. If a company wants to give a big region to
one single distributor then it is known as exclusive distribution strategy. In some cases, a distributor might be
appointed for a complete country. There would be no one other then that distributor operating in that company.
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Removal Strategy For Expiration/Picking for Distribution
Removal strategies are usually in picking operations to select the best products due to reason of product expiration.
Types of removal strategy:
1. FIFO (First In First Out). 2. LIFO (Last In First Out). 3. FEFO (First Expiry First Out).
1. FIFO (First In First Out): This strategy implies that products that were stocked first will move out first. Companies
should use FIFO method if they are selling perishable goods, products with relatively short demand cycles(clothes,
mobiles), also may have to pick FIFO to ensure they are not stuck with outdated styles in inventory.
2. LIFO (Last In First Out): The products which are brought in the last, moves out the first. LIFO is used in case of
products which do not have a shelf life (Utensils, Home Furnishing).
3. FEFO (First Expiry First Out): The products are dispatched from warehouse according to their expiration date. This has
further four expiration fields for each lot. They are such as:
A. Best Before Date: This is the date on which the goods with this serial/lot number start deteriorating, without being
dangerous yet.
B. End of Life Date: This is the date on which the goods with this serial/lot number may become dangerous & must
not be consumed.
C. Removal Date: This is the date on which the goods with this serial/lot number should be removed from the stock.
Using the FEFO removal strategy goods are picked for delivery orders using this date.
D. Alert Date: This is the date on which an alert should be sent about the goods with this serial/lot number.
Expiration Date Tracking helps companies with few advantages such as:
1. Decreasing food waste.
2. Improves customer experience.
3. Improves the employee experience(if used automation than manual labour).
4. Improves margins(Discounts on nearing expiry).
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What do Supermarkets/Distributors do with food items that have
passed their expiry date?
There is a distinction to note that there are generally several dates associated with food. There is:
•A sell by date,
•A best by date,
•An expiration date.
A lot of food gets thrown out. Most supermarkets/distributors do a very good job of minimizing this food waste. Almost all
departments, especially ones with perishable items, in order to sell out and should come very close to running out before
their next order arrives. The blanket rule for food past its expiration date is this, it gets thrown out. They find a way to use
almost everything else.
Produce - Fruits and vegetables don't come with clear expiration dates. We probably never see a banana that's turning
brown on the racks in the produce department. If some produce isn't sell-able it usually gets shopped around the store. A
department that handles any type of prepared foods will use these items to make items for hot bars, salad bars, soups, etc.
The same goes for meat and seafood that is past its sell by date but still within its best by date.
Composting seems like the natural answer for all the other produce that can't be used. This issue has been explored and
explored at every supermarket and there are two major roadblocks to seeing it in action.
Storage - Most farms are generally farther away from urbanized (or suburbanized) stores. Because produce deteriorates
rather quickly farms would have to pick up compostable produce on a daily basis. Storage at the market is not an option
because a large, rotting pile of fruit would attract all sorts of unwanted pests to the store. Daily pickup is difficult and would
the extra monetary and green cost of the freight & labor make up for the produce that would be picked up is impossible.
Recalls - Unfortunately, recalls due to contaminated fruits and vegetables do happen. Many of them happen after the
produce has been in the store for some time. If the store composts melons, and those same melons are recalled two days
later due to a possible salmonella contamination, then you have potentially deadly compost making its way around local
farms.
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Bakery - Almost all old baked goods get donated to the local food bank which disperses it to not for profit agencies in the
area. Every morning a big shopping cart of old muffins, donuts and bread makes it way to the back dock and every morning at
10AM a van rolls around and picks it up.
Meat and Seafood - Lately, within the past couple of months, It has been testing out freezing meats that have just passed sell
by date and donating these to the local soup kitchens. Again, this is still in its infancy and some issues have arisen that have
taken the logistics of this back to the drawing board. The main issue becomes, and always comes back too, safety.
Just because a product makes it to its final consumer in a frozen state doesn't mean its 100% safe. Traceability is of
paramount importance until it gets to the store, but the cost involved with continuing that traceability until it reaches
donations is economically unfeasible.
Grocery and Dairy - Unfortunately, for the same reasons Meat and Seafood can't be donated, many refrigerated, expired
dairy products don't make the list. Very few items get thrown out. Longer shelf lives, higher demand and tight orders ensures
that they only dairy products that really get thrown out are the damaged ones that aren't safe for consumption anyways.
Grocery items are given to food banks. I'm sure some smaller markets donate directly. At most store, everything expired isGrocery items are given to food banks. I'm sure some smaller markets donate directly. At most store, everything expired is
packed and freighted to headquarters and they distribute the goods evenly among the communities that supermarket are
located in. The extra freight may seem wasteful but assumption is they record their donations for tax deduction purposes.
It is best to spend some time volunteering at food banks. They have different expiration dates for products which I assume
are regulated by some sort of government agency. For example, canned beans may be ok for two years past the date on the
can whereas boxed pasta is good for six months past the date on the box. The majority of time volunteered at the food banks
was spent sorting through the mountains of canned goods and checking expiration dates to see what was still deemed safe
and what wasn't. So basically, if it's safe it gets donated. If it's not, it gets thrown out. Definitely some food for thought.
The Top Sources of Retail Shrinkage
1. Shoplifting(Customer theft like hiding, altering, swapping price tags, transfer from one container to another)
2. Employee Theft(Company workers steal or misappropriate funds or goods. Types of employee theft include fraudulent
use of discounts, refunds, credit cards)
3. Administrative Error(Simple pricing mistakes due to mark-ups or markdowns)
4. Vendor Fraud(Supplier failing to provide as many units as invoiced)
5. Unknown Causes(Few losses are not able to be accounted for under any of the other categories)
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FMCG Distribution Network
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The typical chain for a FMCG product will be:
Manufacturing plant -> Company Ware House -> Regional Ware House -> Regional Stockist or Depot -> Super Stockist or
Depot -> Stockist/Depot -> Distributor -> Retailer
Main Warehouse -> C&F Agents/Super Stockists -> Distributors as per territories-> Wholesalers/Retailers.
So, the retailers either buy from the distributor or the local wholesaler. Each has its own advantages & disadvantages.
Distributor provides with better servicing, replacement of spoilt products, credit facility of 2 weeks etc.
Wholesaler will give more margins, but no credit facilities & no compulsion of storing a set of SKUs etc.
Distribution & Credit: Distribution has a huge relation with credit period. Distributors get stock from the company on credit
terms, some provide a credit period for 21/30 days etc. Similarly, distributors offer credit period to retailers. This is very
tricky because if the distributor gives the stock on credit for some fraudsters, then he will run out of business by next week.tricky because if the distributor gives the stock on credit for some fraudsters, then he will run out of business by next week.
For example it is almost like lending. One has to be very careful to whom lending is done. The same thing happens from the
company to the distributor level too. If an association with a bad distributor, then distributor may take company stock but
not paid money on time. Both the company (to the distributor) & the distributor (to the retailer) are very careful about
whom they are dealing with and their credit history. This is why distribution is linked with credit and is very risky if not done
carefully.
Distribution push & Consumer pull (demand): Some brands which are very powerful do operate on cash basis. Then think
why would distributors encourage cash. Because they don’t have an option. If there is a lot of consumer pull for a brand,
then even if the brand gives thin margins (they gain on volumes) the retailers want to stock the brand & thereby distributors
are forced to stock the brand. In such cases, profit is gained from the volumes. This is why consumer pull is very important
for a brand. If consumers ask for a brand, then retailers get worried & they immediately start stocking the brand. This is
where advertising & other brand building activities help in creating the consumer pull for the brand & make it less
dependent on distributor & retailer push. Though each company has its own distribution strategy & flow, most of the
companies follow the above distribution framework. 32DL Vishnu Kumar

The inventory is under the ownership of the company only until it reaches the distributors by the C&F agents.
The stockists are responsible to distribute to the retailers. Each stockist may serve around 500-1000 retailers in a
proximity.
Also, all stockists are not the same in their storage. Every stockist may have his own set of categories which he
can store the best, like a stockist can store rice, sugar, tea powder, biscuits, and snacks. Some may be specialists in handling
premium products & some in frozen foods.
The company generally categorizes the stockists based on their specialty and allocates different super-stockists. Company
categorizes based on stockists storage capacities where company has some standards that every stockist & distributor
should have 2 months & 3 weeks of stock.
Example: HUL categorizes them as U1 and U2 stockists, where U1 is general products and U2 stockists handle only premium
products.
products.
The distribution network for premium products is different from that of discount & popular as they require
much deeper distribution penetration unlike the premium products.
The stockists appoint salesman who take the orders from retailers & the delivery is made on a van.
Each stockist may have 6-10 vans & 10-12 people for the delivery process. The
link between manufacturer & stockist is maintained by the manufacturer’s employees ASM, TSM, Activation Manager, & Re-
Stockist Salesman (RSSM) manages all the distribution, purchases, labor management & supervises the delivery process.
Every month the sales targets are set by the company to all its sales force – TSM, ASM, Sales In Charge, etc. & they handle
all the relations with the distributor & sometimes push the stock onto the distributor to meet their sales targets.
Companies try to motivate the channel partners with workshops about business & marketing,
good warehouse practices, & a lot of other incentives.
They follow a strict rating mechanism with all its channel partners & evaluate them continuously on a set of parameters.
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Internally, all the sales is reported at the ASM level and then it is aggregated in a bottom-up approach. Typically,
a FMCG manufacturer has a gross margin of about 40-50%.
a Distributor receives a margin of about 6-8%.
a Retailer receives a margin in the range of 9-15%.
There are also many trade schemes that run throughout the year. But these trade schemes change from channel to channel
as per the terms of negotiation.
A kirana (General/Grocer) store might sell about ₹ 5K to ₹ 60K or more per day depending on various parameters such as:
1. Store location, 5. In-store visibility,
2. Size of the store, 6. Pushing & Increasing their assortment within stores,
3. SKUs stocked,
4. No. of appointed salesman,4. No. of appointed salesman,
Sales Representatives <– Territory Sales Exec <– Area Sales Exec <– Territory Sales Manager <– Area Sales Manager
Among distributors, we have two kinds of distributors.
Some of the distributors deal in products of company exclusively, whereas some
distributors specialize in categories e.g. cooking oil.
These distributors don’t have dedicated time & resources to focus on one’s own brand among many brands (especially if it is
a new brand). So the company appoints its own sales representatives who visit various routes & beats every day.
Sales Reps do 1 beat in one day & 6 beats on 6 days.
Each route should have at least 40 small retail stores. These sales reps visit the stores & take the orders from them & then
they report those orders to the corresponding distributor. This way we create & aggregate all the demand for a brand &
help the distributor cater to that area effectively.
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Both the Sales Reps & TSE do the same job. TSEs are more experienced (~2 years) in doing this job.
Sales Reps visit one beat once a week. For example, they will visit Alpha area in XXX city on Wednesday of every week &
take the demand. This way each area is serviced regularly.
ASEs, who is responsible for certain districts say YYY & some other district.
TSM is responsible for ASE sales at a higher level & they also manage the counter sales & the trader sales to big bazaars
such as local merchants bazaars.
ASM co-ordinates everything at a state level and the ASM along with TSM co-ordinates directly with all the traders &
manages sales to the traders too. Modern Wholesale stores such as Metro, Wal-Mart, Best Price etc.
Once the distributor receives the stock, it is up to him on how he manages the business.
Example: A distributor bought some stock of oil at ₹ 50 & now it is up to him about what he will do with that stock. He may
sell it at any price that he deems right for his business. Let’s say the brand is not moving much, then he may sell it at a lower
price to get rid of the stock. Similarly, he may sell it to one retailer at ₹ 55 & to another retailer at ₹ 53. It all depends what
he deems profitable or appropriate for his business situation.
Very often for distributors to make their own schemes & sell to the retailers. They generally pass on the schemes from the
company to the retailer.
Example: A retailer scheme would be: if you buy two cartons of cooking oil, then you will get a one gm silver coin.
Retail Verticals: These includes: FASHION & APPAREL, JEWELRY, SPECIALTY GIFTS, WINE & LIQUOR, CONSUMER
ELECTRONICS, SPORTS, PHARMACY, HARDWARE, PET & PET FOODS, HOME UTILITY GOODS, KITCHEN UTILITY GOODS,
GROCERY, PURE E-COMMERCE GOODS, CPG etc.
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Bibliography
Essentials of Modern Marketing Management by Philip Kotler
Sales Glossary by Peter J. Kraljic
https://www.academia.edu/7108307/DISTRIBUTION_MANAGEMENT_Introd
uction_to_FMCG_Industry
http://www.inc.com/encyclopedia/logistics-management.html
http://www.capterra.com/salesforce-management-software/
https://www.tradegecko.com/product-tour/retail.html
https://www.asapsystems.com/stock-management-system.php
http://searchmanufacturingerp.techtarget.com/definition/Inventory-management
DL Vishnu Kumar 36
https://www.asapsystems.com/stock-management-system.php
http://searchmanufacturingerp.techtarget.com/definition/Inventory-management
http://www.cmu.edu/visualmerchandising-systems/
https://www.microsoft.com/en-us/dynamics/what-is-sales.aspx
http://www.netsuite.com/portal/products/netsuite/CRM.shtml

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