DARE - Because Entrepreneurs Do

While money could determine the products an entrepreneur gets to distribute, it is his salesmanship, networking skills, and the knack for providing value-added services that ensures lasting success in this business

Ajay Misra (name changed) ran a profitable distribution business of firefighting equipment for ten years before slipping into the

red in 2005. When Misra had entered the distribution business, there were only a handful of manufacturers and importers of such equipment in the country, and the Uttar Pradesh government was his only customer. Over the years, he developed good contacts in the state bureaucracy and won some big tenders more than once.

However, as times changed and competition increased, Misra failed to take note of it. The number of manufacturers of such equipment more than doubled in a decade, while the size of the market he catered to almost remained unchanged. Misra’s margins slowly started dropping; he did not diversify into other products, failed to provide value-added services, ignored automation of processes, and relied solely on the government as the customer. He finally closed his shop last year only to take up distributorship of a fairly new product.

The face of distribution business has changed over the years. It is no more about just storing your products, and sitting pretty believing that the retailer will come knocking at your door once he is out of stock. Today’s distribution business is about value-added services, understanding the needs of your customers (both retailers and end-users), good networking skills and master salesmanship. “The function of the distributor’s warehouse has changed from being a storage center to a distribution center and now to a value-added service center, creating a unique and vital link in the manufacturer-to-end-user supply chain,” says Prashanth, Managing Director, Lectra Technologies.

“The distribution business is a great opportunity for entrepreneurs, and there is a lot of scope for this business to grow. But you got to provide efficient service and have a greater reach,” says Vinod Sambrani, management consultant and trainer.

Roles and Responsibilities
The distributor is a key link in the supply chain that starts with the manufacturer and ends at the customer. He plays that important role of “pushing” the product from the manufacturer to the retailer, and in turn makes money. He works at the business-to-business level, wherein he interacts with the retailer and not the end customer. But this can be no excuse for a distributor to plead ignorance when it comes to understanding consumer behavior. This is because, in the end, he is supplying products for the consumer, whose buying habits could make or break his business. Thus, ensuring visibility of his products at the retail outlets is also his concern. “Jo dikhta hai woh bikta hai (only that product sells that is visible),” says a key industry source, who deals closely with distributors at the rural level on behalf of his company.

Manufacturers depend heavily on their distributors for the “reach” of their products, because in today’s cut-throat competition, a customer sitting in a remote village is also on a company’s radar. Therefore, it is the distributor on which companies rely when it comes to expanding the reach of their products. In the case of urban markets, a distributor is appointed
at the district level, and he serves the retailers across the district. In case a district is too large area-wise, there could be more than one distributor dealing with the retailers in their specified territories.

When it comes to rural markets, the chain gets a little longer. Take, for instance, Bharti Airtel, India’s top telecom service provider, which follows the hub-and-spoke model. It appoints a super distributor at the district level, who in turn, reaches out to several rural distributors sitting at the taluqa (town) level. They make Airtel’s products available to retailers in the villages that fall in the ambit of that district.

A distributor is expected to have a thorough understanding of the market he operates in. He is usually a local person who has good contacts with the retailers, with whom he has to deal with on a regular basis. He ought to have good salesmanship because only then would he be able to convince the retailer that his product would definitely sell. If need be, he has to provide marketing support through below-the-line advertising techniques. These include pamphlets and posters. While manufacturers themselves invest a lot on advertising, it is the distributor through whom they roll out attractive consumer schemes and freebies.

“A distributor understands customer needs, knows the reality of business environment and is in a better position to anticipate trends and future changes,” says Prashanth. He adds, “Besides playing a critical role in helping the manufacturer expand market, a distributor helps him achieve an optimal logistics operation.”

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