DISTRIBUTION STRATEGY

INTRODUCTION
• Availability determines volume and market
share
• Challenge : Reaching 6 lakh villages and
feeding a retail network of over 35 lakh village
shops
• 68% of rural markets still lies untapped due to
inaccessibility.
• Some successful regional brands : Ghari
detergent, Anchor toothpaste, Gemini Oil
Prof. Raghavendran Venugopal 2
 Problems faced in rural distribution:
• Large number of small markets
• Dispersed population and trade
• Poor road connectivity
• Multiple tiers – higher costs
• Poor availability of suitable dealers
• Low density of shops per village, high variation in
their concentration
• Inadequate bank and credit facilities for rural
retailers – poor viability of retail outlets

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• Poor storage systems
• Highly credit-driven market, low investment
capacity of retailers
• Poor visibility and display of product
• Poor communication of offers and schemes –
poor reach of media

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 Coverage Status in Rural Markets
• Rural – any location with a population of less
than 50,00.
• 50% of rural population resides in 1 lakh off
large villages ( 2000+ population)
• Account for 60% of rural wealth
• 2.3 lakh tiny villages (<500 population) –
hardly any shops
• Distribution becomes uneconomical towards
smaller towns

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 Channels of Distribution
Five layers of distribution channels for movement of
products from company depot to interior village markets:

Layer Channel Partner Location

Layer 1 Company depot/ C&FA National/State level
Layer 2 Distributor/ van operator/ District level
super stockist/ rural distributor
Layer 3 Sub-distributor/ Retail stockist/ Tehsil HQ, towns
Sub-stockist/ Star seller/ and large villages
Shakti dealer
Layer 4 Wholesaler Feeder towns,
large villages,haats
Layer 5 Retailer Villages, haats
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 Rural Distribution System
• Wholesalers
• Retailers
• Mobile traders
• Vans
• Weekly haats

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

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

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 Rural retail shelves
• Filled with local and regional brands – higher margins and
longer credit periods
• Less variety of brands available
• Number of brands per product category decreases
towards smaller villages
• Ensure visibility on shelves
• Product stocking – cluttered &disorganised
• Slow moving products – dust covered
• Absence of proper racks, display box, stand
• Strategies: provide display & storage systems

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 Vans
• Salesman loads van with stocks from nearest
stockist or company stock point
• Works around surrounding markets
• Then moves to next stock point – journey
cycle
• Used for both sales & promotions
• Eg.: Everyday , J.K. Diary
• Effective but expensive
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 Mobile Traders
• Direct to home, unorganised distribution
• Daily need products – mostly local brands –
detergent, cosmetics, personal
care, garments, footwear
• Carry products on bicycles, mopeds, handcarts
• Deep reach
• Good rapport with clients
• Mostly sell fakes and local brands

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 Haats/ Shandies
• Oldest marketing channel in India
• Profile of haat visitors and purchase behaviour

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 BEHAVIOUR OF CHANNEL

• Credit facilities to customers

• Pricing by channel
• Reason for stocking a product / brand
• Seasonal pattern of stocking
• Information source and influence on retailer
• Purchase source for the retailer
• Purchasing cycle
• Channel promotion

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PREVALENT DISTRIBUTION MODELS

RETAIL WHOLESALE

VAN/SUBSTOCKI FEEDER TOWNS

ST WHOLESALE
AND RETAIL

RURAL
MARKET

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 MARKETING
DISTRIBUTION MODEL 1

COMPANY

C&FA

DISTRIBUTOR DISTRIBUTOR
(RURAL) (URBAN)

SUB- WHOLESALER WHOLESALER

DISTRIBUTOR

RETAILER RETAILER RETAILER RETAILER RETAILER

(RURAL) (LOCAL) (SATELLITE (URBAN) (URBAN)
MKT)

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 CHARATERISTICS
• Rural distribution separated from urban distribution
• Company appoint a sub distributor(SD)under rural
distributor(RD)
• Owing to poor road networks & low volume per outlet, RD
covers a large area
• DM1 model focuses more on RD’s & SD’s rather than the
wholesale channel and has large no. of points appointed in
the rural areas as locations are scattered. This ensures that
companies products reach maximum no. of areas
• Advantages include better monitoring, price discipline and
control over the sale and distribution of products
• Companies prepare PJP’s (Permanent Journey Plan) – six
working days. Outlets are covered only fortnightly
• No. of outlets covered in a day is 30 – 40 of which 15 – 20 are
productive Eg. HLL
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DISTRIBUTION
DISTRIBUTION MODEL
MODEL 2 2

COMPANY

C&FA / DEPOT

DISTRIBUTOR

WHOLESALER

RETAILER RETAILER
(LOCAL)

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 CHARATERISTICS
• There is no separate channel for rural distribution
• Minimises distribution costs, allowing companies to offer
better margins to distributors and other channel partners
(fewer)
• Companies with limited no. of SKUs and high sales volume
adopt this model
• It is also preferred by new entrants who lack infrastructure
required to have wide distribution network
• Example: Priyagold biscuit, Nirma (Shakti detergent, Nirma
soaps, Camay & other toiletries)
Issues:
• Coverage, No SD to cover interior parts

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 NIRMA DISTRIBUTION
NIRMA SYSTEM
DISTRIBUTION SYSTEM

NIRMA Ahmedabad

DEPOT Hyderabad, Kolkata, Kanpur

DIRECT DISTRIBUTOR
At district level

SUB DISTRIBUTOR/BIG WHOLESALER At Tehsil level Covers 300-400

outlets directly

WHOLESALER RETAILER WHOLESALER RETAILER

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DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 1

LG

DEPOT

NEW RURAL DISTRICT OFFICE

C&F AGENTS WAREHOUSE

EXCLUSIVE DEALERS MULTIPLE DEALERS

CONSUMER

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 MARKETING
DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 2

PHILIPS

DEPOT

DISTRIBUTOR STOCKIST
(URBAN) (RURAL)

RETAILER RETAILER
(URBAN) (RURAL)

CONSUMER

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Retail outlets are not able to sell more durables because:
• They lack variety
• Transport costs increase the prices (The net landed cost of a
21-inch Color TV is Rs. 1000 more compared to the price
offered by a dealer in the city)
Rural buyers prefer to buy from city stores because:
• More choices are available
• It is possible to get competitive prices through bargaining
• Rural buyer can see many options, visit several shops and
check different prices
Problem:
• To generate volumes, companies give huge discounts to the
big city dealers, which results in price differences and put the
rural retailer at disadvantage

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 NIRMA DISTRIBUTION
DISTRIBUTION SYSTEM
OF FAKE PRODUCTS

MANUFACTURER

WHOLESALER IN BIG
CITY

WHOLESALER IN
SMALL TOWN/KASBA

HAAT VILLAGE MOBILE

RETAILER RETAILER TRADER

CUSTOMER
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Channels of distribution:
Channel 1: Manufacturers to wholesaler/retailer in big city or
small town, or directly to customer
Channel 2: Wholesaler in big city to wholesaler in small
town/kasba

Channel 3: Wholesaler in small town /kasba to village

retailer/mobile trader/haat
Fakes reach consumers through the following channels:
• Small kirana shops located within the village
• Big shops generally located on the main road
• Door-to-door visits by salesmen who pose as company
representatives
• Salesmen in local trains and buses
• Mobile traders
• Haats
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 EMERGING DISTRIBUTION
MODELS.

Marketers are innovating new cost effective

approaches to reach markets.
Objectives:
Maximize existing infrastructure.
Ensuring participation and economic
sustainability of all stakeholders
 CORPORATE- SHG LINKAGE(self help
group)
• 10-15 women organized by govt bodies.
• To boost the self worth among women.
• Loan assistance from rural banks for setting up
of income generating enterprises.

• Rapid Growth provided an opportunity to

establish a path breaking distribution model
through the linkage of the groups for
marketers.
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 TTK PRESTIGE PRESSURE COOKER CASE

• Stagnating Sales and declining returns.

• Company saw SHG women as an opportunity
to enter to the rural market.
• Meetings were organized with the group .
• Interested women were chosen as dealers and
demo cookers were given to present at the
SHG meetings.
• Women dealers also visited other potential
buyers and booked orders.
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 Satellite Distribution Model.
(HUB & SPOKE SYSTEM).
Stockists are appointed in major towns and feeder
towns.
Retailers in feeder towns get attached to these
stockists.
Manufacturer supplies goods to stockists.
Functions performed by stockists include
Financing, Ware housing, Sub distribution.
Volume done by retailers varies due to
location, capacity etc.
Over a period of time some retailers will be elevated
to stockists points.
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Pioneers in Satellite Distribution model

COKE & PEPSI

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 SYNDICATED DISTRIBUTION
Distribution is posing a major problem for a
new company to penetrate to Rural market.

Two or more companies come together to

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

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

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 ITC’s DISTRIBUTION MODEL.
• Reached Rural Consumers through its e-
Choupal model for backward and forward
linkages for its agri related business
• Services provided like
• Information
• Knowledge
• Purchase
• Sale

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

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 PROJECT DISHA- CASE.
• MART selected500 ex volunteers to promote
company Brands(COLGATE).
• Volunteers will be provided with all facilities(
bicycles, umbrellas, storage boxes, T-shirts,etc).
• Volunteers buy stock from nearby sub stockists and
sells at near by Haats and village Shops on the way.
• Average sales of 1000Rs Per day.
• Result is that Company got benefited from this .
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 AGRICULTURE INPUT DEALERS.
• 2,62,000 fertilizer dealers in country.
• Fertilizer companies have retail outlets within
a range of 5 Km.
• Marketers found the possibility of selling their
products through these outlets.

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PETROL PUMPS & EXTENSION COUNTERS.

• 60% of 12000 Petrol pumps in INDIA is located

on Highways close to villages.
• Selling of food Products & toiletries through
these outlets.
• Exploring possibility of selling agri inputs &
LPG cylinders from these outlets.

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 OTHER CHANNELS.
• HERO HONDA Company reported emergence of
Unofficial channel of distribution.
(Village Mechanics, Real Estate Agents &
Shopkeepers).
Take the Bikes in 2’s or 3’s from company Dealers.
Display them outside dealer’s Premises and will
close the sale.
Paper work left to the Dealer to complete.
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 IDEAL DISTRIBUTION FOR RURAL.
• Per Capita Sales=Annual Sales/Market Population..
Name of the Model Best situation

Project Shakti.(Corporate –SHG) Low PCS, Low Population Density

Segment consumers.

NSV Model Low PCS High Population Density

PDS, Cooperatives& Fertilizer Dealers. Segment.

Rural Markets are GOLD Mines which forced marketers to

come up with innovative ideas to ensure the reach of their
Products in these areas
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THANK YOU

Prof. Raghavendran Venugopal 42