DARE - Because Entrepreneurs Do

Have you wondered how the same soft drink and potato wafer is available even in the remote corner of a village?

Sitting in the comforts of a state capital, the urge to munch on a packet of Lays along with some Coke can be met by stepping out and walking across the street to the next door panwalla or a grocery store.

The story isn’t much different when you are driving down the national highway or when you decide to get a bit adventurous and take a detour through a narrow road running through lush sarson ke khet (mustard fields) basking in the afternoon sun. The only difference here is that you might have to travel an extra few kilometers to find a local dhaba or a kirana shop. This floats the question, how does a Coca-Cola, Frito Lay or even a CenterFresh (some of the most commonly found branded products) manage to identify and supply goods to these remote retailers and how the retailers in turn maintain and replenish stocks as compared to their more organized cosmopolitan compatriots.

What, when and how much to buy?
For almost all the formats of retail stores, the decision of what to buy and when, lie on the basic premise of consumer demand and availability of stocks. "We depend on the consumer the most to figure out demand. In case we do not have knowledge about the product, we rely on the company salesman or the distributor to get educated," says, Rajnish, a 24 year old who runs a kirana store in Farooqnagar, a quasi-city of sorts – not too big to be called a city yet better equipped than a village – in rural Haryana. When it comes to estimating stocks such stores consider the physical volumes of the product available and place their orders accordingly. They have fixed days like a Tuesday or a Saturday when the company salesman visits them with new stock automatically. The periodicity of the visit generally varies from product to product – while some are bought on a daily basis others may require a bi-weekly, weekly or fortnightly visit to get replenished. Apart from the regular customers, such local grocery stores which also double up as wholesalers also rely on people from nearby villages who come to buy in bulk from them.

These people buy directly from the company and often the company officials are instrumental in striking deals at a cheaper rate with them than us, the dealers. - Rajkumar of Farooqnagar, a dealer for a major soft drink brand

One such person is 30 year old Manoj Yadav, who runs a dhaba called Janta hotel, on a road in Sultanpur village of Haryana. For him the biggest disadvantage is that his hotel is in the middle of nowhere. Yet he manages to earn a living out of selling cooked food as well as sundry items like soft drinks and potato chips. He says, "Other than the odd customer, we also thrive on passers-by and school kids who generally wait near the bus stand with their elders and come here to buy candies, chips and cold drinks." Yet another person who runs a small grocery store nearby maintains that he is in luck as demand for soft drinks and chips are quite high in his shop, thanks to a couple of alcohol shops or thekas that sandwich his store.

Cut back to the metros and we have the modern retail outfit like a swank Spencers Hyper nicely nestled in between huge malls, catering to customers within the SEC A to B bracket. For such a huge outfit boasting of entire aisles full of different categories of products, the decision of what to buy and when is a tad complex. After considering the demand for a particular product the process of estimation of stocks is dependent on the frequency of delivery that the company offers.

Explains Amit Mukherjee, Vice president, Supply chain and IT, Spencers Retail – a group that is based out of Calcutta, "We consider certain criteria like past sales, seasonality, safety stock and frequency of sales among others to make estimations." This is to make simple a complex string of calculations and equations that are taken care by computers as not much manual intervention is required.

Procuring stocks
Once the retailer has decided on what to buy, the next step deals with procuring the particular amount of stocks. Again if we take into consideration certain commonly available goods like soft drinks, potato wafers or chewing gums, amongst the different types of retailers, the process of procuring these goods are quite different across the levels.

We consider certain criteria like past sales, seasonality, safety stock and frequency of sales among others to make estimations. - Amit Mukherjee, Vice-president Supply chain and IT, Spencers Retail

For a dhabawalla like Yadav, it’s quite a job to go about replenishing stocks. Given the remote location of his store, he isn’t paid visits by the company salesman. So much so, when we enquired whether he is aware of any company visits, he was of the view that he has never seen one and has no idea how the goods reach the market wholesaler or other big general stores. These sellers, also known as Parchoonwallas are the main source of supply for people like Yadav. When it comes to buying and negotiating, there isn’t one particular parchoonwalla that they rely on but rather they choose the one that gives them the lowest rate as they buy in bulk. A top official from the sales department of a FMCG brand candidly admits that it doesn’t pay much to reach out to every pocket of rural India as quite frankly demand isn’t that high. He isn’t that surprised to know that some of these people are not even aware of company salesmen visiting stores and says that the claims of penetration that most companies make often end up as myths.

Yet another option of replenishing stocks available with this format of retailers is that of a ‘mystery salesman’. Why we call him a mystery is because nobody quite knows much about where he comes from and what is his way of business. Says, Sachin Kaushik, owner of a ramshackle grocery store in Dhankot village – yet another village close to the Sultanpur Bird Sanctuary in Haryana – "We don’t have any company people coming to us. We have these jugaroo people coming in a tempo or Tata 407 trucks. They come from nearby cities. They might be visiting a Lays or a Coke go-down and they keep picking up stocks from these places. Then they keep distributing goods store by store along the road." These local on-the-go suppliers do not belong to any particular company neither do they have branded vehicles. They generally have a radius that they serve and operate in multiple numbers. The store owners maintain that they opt for the supplier who reaches them first when they are in need and offer the cheapest rate. In a manner, the store owners end up saving time and effort required to visit the city or the nearby town wholesalers for buying stock.

However, Rajkumar of Farooqnagar, a dealer for a major soft drink brand laments that such local sellers are quite harmful for the system. He says, "These people buy directly from the company and often the company officials are instrumental in striking deals at a cheaper rate with them than us, the dealers. As a result, the company distributor ends up pocketing some cash, while the on-the-go seller ends up selling goods at a cheaper rate than us, especially since he doesn’t have to pay taxes or incur other official expenses."

The claims of penetration that most companies make often end up as myths. - A top sales official from a FMCG company

Again for a modern retail chain, the process of replenishing stocks is quite mechanized and orderly. Mostly such chains have long term national level terms of trade contracts with the Hindustan Unilevers or Pepsicos of the world. FMCG companies typically make their products available to the last point of the company or a distribution center. Taking the Spencer example Mukherjee maintains that if the format in question is a small store then the stocks are collected from the distribution center and if it is a Hyper mart with huge volumes of sales, the company vehicles directly deliver the goods.

Purchase orders for various products get generated every night or for some products every week after computing the end of day sales. Based on this further purchases are ordered and deals negotiated by the merchandising officers. Again different products have different periodicities of ordering. Apart from selling products these retail chains also run promotions and sell visibility, wherein a brand is allotted a specific space for better visibility on a rent basis.

On the company’s part, there are different layers of teams that look after the supply and distribution of their products. Says, Chironmoy Chatterjee, Head, Sales, Perfetti Van Melle India, "For modern trade outlets we have separate teams who maintain relations, supplies and engage into promotions. For the grocery store level Perfetti has distributors who in turn have distributor salesmen. These people visit the shops 3 times a week to enquire about stocks and build relations. These stores may include chemist shops (in the city) to panwallas to kiranas (at the small town level).

As for the dhabawallas, there are a set of people called super stockists who mostly help in penetrating the rural interiors where they might be located."

Putting aside the modern retail outfits which have an orderly system of supply and distribution, the rural counterparts also end up following the textbook company to distributor to retailer model, the only exceptions being of the plug ins or middlemen involved in the chain for them and the manual estimation of stocks and inventories done at the eye-level. But what is fascinating is that even after the barriers of inaccessibility and lack of distribution and supply comforts enjoyed by their metropolitan counterparts, products still manage to reach them and in turn we keep on enjoying our favourite brands (if not all) on our trips to the hinterland.

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