Establishing a brand in the market is an arduous task, requiring many factors to be taken care of. A customer always desires quality products and expects adequate after-sales services, something that can only be accomplished if the manufacturer has the right distribution model. The model determines the strength of the company’s presence in the market. According to Mohammed Ghouse, manager (analyst and media), Scintech Associates, “The distribution model plays a vital role in the expansion of a company. It is the platform through which our products reach the customers.”
By Saurabh Sharma
Monday, April 20, 2009: There are different modes of distribution—one can either sell directly to the end-consumer through the Internet, via telephone, or by shipping, without any involvement from distributors. In the current scenario, the ratio of both marketing strategies (direct marketing and channel marketing) is 50:50. Some companies are employing a strategic alloy of both routes. They supply some products directly to the end-consumers where they have presence and use distributors to supply products to end-consumers where they have limited geographical reach—a convenient and advantageous technique.
Sairush Electronics Systems markets
In India, only a handful of companies choose enterprise resource planning systems to constantly stay in touch with their distributors. The most common means of communication between the two parties are still the telephone and the Internet. A company having distributors spanning several regions can face problems in communication without an ERP 80 per cent of its products through direct marketing and the residual 20 per cent via channel partners. Jyoti Telecom applies 50 per cent direct marketing and 50 per cent channel distribution in its business marketing.
Traits and numbers
It has been established that distributors are pivotal to business generation, but what are the attributes one should seek out in a distributor? Furthermore, how does one evaluate the number of distributors required in a particular region? “The electronics test and measurement (T&M) distribution market is very different from a popular food chain or retail segment distribution model. The distribution channel should be two-way,” Ghouse explains. Designing the distribution model is a critical procedure because it is the foundation that the business thrives on.
“Different companies have different methods of constructing their distribution models. Cambridge Instruments & Engineering Co. selects its distributors on a zone-wise, city-wise and depart-ment-wise basis,” informs its partner, Manoj Sharma.
Most manufacturers are scouting for specific qualities in distributors, desiring them to add value to their distribution chain. Arun N Avhad, proprietor, Jyoti Telecom, states, “The distributor should be from the electronics background. Knowledge about the field will help him to connect with customers and exhaustively comprehend market needs and trends, which, we want him to convey to us for the betterment of our enterprise.”
Manufacturers use their discretion to choose which regions they will engage distributors for and to which regions they will cater directly. Companies like Sairush Electronics prefer to appoint distributors through reference, conserving their resources.
Mitesh Mody, CEO, Bhavna Electronics, throws light on the company’s distributional status. “Our distribution strategy varies as per the geographical conditions of respective areas. Since India is a large country, one cannot subsist without succour from competent distributors to strike remote and underdeveloped areas, where at present, demand may be less but the future is incredibly bright. On the other hand, due to sharp global competition and in order to provide services of international standard to customers such as on-time delivery, R&D support and technical support, we prefer to supply directly to many industries. It is the faraway corners of India that require distributors the most,” he reveals.
Sometimes, it is the distributor who helps his principal to gain an edge in the market. Since distributors are in direct contact with consumers, often, even bulk buyers get in touch with the former. Reaching those bulk-buying consumers requires coordination with the appropriate distributor. “We liaison with those dealers who do not possess retail outlets and are directly supplying to end-users like state electricity boards, railways or big companies. They look after the procurement of orders, delivery, inspection clearance, acceptance of material, payment, etc,” discloses Sharma. A good distributor, hence, becomes the face of the company and begets his principal business.
The other major issue is that of deciding on the number of distributors to be deployed in a particular region. This is a weighty issue because in India, only a handful of companies choose enterprise resource planning (ERP) systems to constantly stay in touch with their distributors. The most common means of communication between the two parties are still the telephone and the Internet. A company having distributors spanning several regions can face problems in communication without an ERP. In order to evade confusion, many companies opt for a multi-tier distribution model. They hire a big distributor for a particular region and then that distributor further engages smaller distributors. The company only maintains contact with the main distributor and the distributor manages the channel below him by himself. This method spares the principal time, money, confusion, mismanagement and delay.
The question of ethics
Distributors are at an advantage, being directly in contact with consumers. They can use their influence to get more business for manufacturers or maliciously ignore earnest business queries if they so desire. That brings us to the matter of ethics in the supply chain. “We want the distribution model to consider the benefits of everyone involved by safeguarding our interests and stressing on the ethical conduct of distributors,” Ghouse remarks.
An ethical distributor should handle the queries of clients as per company standards. He must provide punctual delivery of goods, replace malfunctioning products and repair them with absolute adherence to the principal’s guidelines. These steps help companies in retaining their customers. The secret weapons of distributors are geographical coverage and direct acquaintanceship with customers, giving them the power to transport their principals to revenue-inspired nirvana or push the latter into the abyss of losses through malignancy. The key is to choose discerningly and to monitor business dealings carefully, right from the beginning. It is evident that the importance of channel partners will only get accentuated in the future. As they gain ground, more and more manufacturers will decide to opt for distributors in order to beat the competition.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine