As pressure on margins increases, thanks to heightened competition and a more demanding customer, manufacturers have been forced to reinvent their go-tomarket strategies and relook at their existing distribution set-up in order to get closer to the end customer to gain an in-depth understanding of his requirements.
The relationship between manufacturers and distributors is at crossroads thanks to industry consolidation, cutthroat competition and the emergence of new channel alliances. Today, the manufacturer wants to get closer to the end customer to not only understand the impact of its products but also ensure quicker response to market demands.
Says Alok Bharadwaj, director and GM, consumer imaging & information division & volume products, Canon India, “The distribution value chain has progressed beyond simple order taking activity to providing logistical support and local stocking. But now disties need to focus on market development for its brands. Currently, local disties provide us this value-add. Hence, most manufacturers are looking at taking a more direct sales approach.” Adds S. M. Ram Prasad, business manager-consumer products, Epson India, “A manufacturer needs to be present where the consumer is. In consumer products, local disties play a crucial role in connecting the manufacturer directly with the end customer.
Currently, the flow of information from national distributors to end-users is not effective due to its multi-layered structure. If the end customer doesn’t have adequate information about the product it affects the brand positioning and image.”
The advantage of adopting the regional distribution model and bypassing the ND is that the layers between the manufacturer and the end customer are reduced to a bare minimum. This translates into quicker response from the market, which enables manufacturers to keep a tab on the pulse of the market.
Manufacturers Expectations
Manufacturers tie-up with a particular distributor to leverage the latter’s reach and the relationship it enjoys with the channel. It is also the responsibility of the disty to ensure that the channel and thus the end customer is kept upto- date with information about its offerings.
In addition to this, increasingly, manufacturers have begun to expect market development initiatives from the distributor.
For any distributor, its channel network is its biggest asset. But manufacturers have realized that the multiple layers between them and the end customer is not only putting undue pressure on margins but it is also acting as a barrier in effective communication with the end customer. Says Sanjay Yadav, sr. manager-sales, Samsung India, “A major factor that has led to this trend is the fact that companies are introducing new
This necessitates creating an ambience where the customer can experience the product. Growing brand consciousness is another factor that is driving companies to set up brand stores. Hence, disties need to improve their knowledge about these new technologies and evolve from mere price-based selling to an advisory function for consumers.”
But Prashant Mehar, corporate champion-channel (uptime solution), Emerson Networks feels that manufacturers generally prefer to go through their partners, as this helps them leverage on the reach provided by the partner. The exception, according to him, arises in case of large accounts where customers expect to deal directly with the manufacturer.
Disty Role
A manufacturer might be able to avoid the distributor, but despite these trends, distributors continue to play a vital role in the supply chain. Says Prasad, “We are bypassing certain tiers in the channel. But we can’t cut out the distributor completely. Hence, we are following a two-pronged strategy— retail and channel. Companies that have a presence in India will go through local disties. But high-end products and business products will go through the ND.”
While the manufacturer may be able to circumvent the disty in the more established markets, the same can’t be said about the developing markets. And this is where most disties are currently concentrating on. Says J. Kulkarni, CEO, Redington India, “The cost of tapping the SMB segment is high. Disties can add value by generating leads and creating awareness about the right product. Disties should do more volumes and create more pull so that the manufacturer
Also, newer brands, previously not present here, are now looking at tapping ‘Opportunity India’. The brands that do not have a presence in India are all the more dependent on distributors for demand generation and market development. Says Kaushal Khandor, GM-business, Neoteric Infomatique, “Disties should increase their reach, create demand, provide financial and technical support, get the right partners into the fold and provide customized solutions to partners.”
But Khandor feels that manufacturers need to clearly define their expectations as some may not want to deal with issues like fragmented shipments, collection problems and transactional costs. Elaborates Bharadwaj, “NDs can add value in the area of micro distribution. The manufacturer can bill the disty who in turn supplies directly to the dealer or retailer.”
Looking Ahead
It is the mutual responsibility of the manufacturer and the distributor to identify expectations and deliverables and work towards it. All segments in the channel should focus on their primary customer and ensure that they are in sync with the same. Expectations will keep changing depending on market dynamics. How the disty copes with this change will play a key role in how the relationship evolves. Pressure on margins is here to stay, disties need to identify ways of overcoming this hurdle while keeping both the market as well as the manufacturer happy. Disties that focus on consumers are not in danger of being shut out of the supply chain.
The relationship between manufacturers and distributors is at crossroads thanks to industry consolidation, cutthroat competition and the emergence of new channel alliances. Today, the manufacturer wants to get closer to the end customer to not only understand the impact of its products but also ensure quicker response to market demands.
Says Alok Bharadwaj, director and GM, consumer imaging & information division & volume products, Canon India, “The distribution value chain has progressed beyond simple order taking activity to providing logistical support and local stocking. But now disties need to focus on market development for its brands. Currently, local disties provide us this value-add. Hence, most manufacturers are looking at taking a more direct sales approach.” Adds S. M. Ram Prasad, business manager-consumer products, Epson India, “A manufacturer needs to be present where the consumer is. In consumer products, local disties play a crucial role in connecting the manufacturer directly with the end customer.
Currently, the flow of information from national distributors to end-users is not effective due to its multi-layered structure. If the end customer doesn’t have adequate information about the product it affects the brand positioning and image.”
The advantage of adopting the regional distribution model and bypassing the ND is that the layers between the manufacturer and the end customer are reduced to a bare minimum. This translates into quicker response from the market, which enables manufacturers to keep a tab on the pulse of the market.
Manufacturers Expectations
Manufacturers tie-up with a particular distributor to leverage the latter’s reach and the relationship it enjoys with the channel. It is also the responsibility of the disty to ensure that the channel and thus the end customer is kept upto- date with information about its offerings.
In addition to this, increasingly, manufacturers have begun to expect market development initiatives from the distributor.
For any distributor, its channel network is its biggest asset. But manufacturers have realized that the multiple layers between them and the end customer is not only putting undue pressure on margins but it is also acting as a barrier in effective communication with the end customer. Says Sanjay Yadav, sr. manager-sales, Samsung India, “A major factor that has led to this trend is the fact that companies are introducing new
This necessitates creating an ambience where the customer can experience the product. Growing brand consciousness is another factor that is driving companies to set up brand stores. Hence, disties need to improve their knowledge about these new technologies and evolve from mere price-based selling to an advisory function for consumers.”
But Prashant Mehar, corporate champion-channel (uptime solution), Emerson Networks feels that manufacturers generally prefer to go through their partners, as this helps them leverage on the reach provided by the partner. The exception, according to him, arises in case of large accounts where customers expect to deal directly with the manufacturer.
Disty Role
A manufacturer might be able to avoid the distributor, but despite these trends, distributors continue to play a vital role in the supply chain. Says Prasad, “We are bypassing certain tiers in the channel. But we can’t cut out the distributor completely. Hence, we are following a two-pronged strategy— retail and channel. Companies that have a presence in India will go through local disties. But high-end products and business products will go through the ND.”
While the manufacturer may be able to circumvent the disty in the more established markets, the same can’t be said about the developing markets. And this is where most disties are currently concentrating on. Says J. Kulkarni, CEO, Redington India, “The cost of tapping the SMB segment is high. Disties can add value by generating leads and creating awareness about the right product. Disties should do more volumes and create more pull so that the manufacturer
Also, newer brands, previously not present here, are now looking at tapping ‘Opportunity India’. The brands that do not have a presence in India are all the more dependent on distributors for demand generation and market development. Says Kaushal Khandor, GM-business, Neoteric Infomatique, “Disties should increase their reach, create demand, provide financial and technical support, get the right partners into the fold and provide customized solutions to partners.”
But Khandor feels that manufacturers need to clearly define their expectations as some may not want to deal with issues like fragmented shipments, collection problems and transactional costs. Elaborates Bharadwaj, “NDs can add value in the area of micro distribution. The manufacturer can bill the disty who in turn supplies directly to the dealer or retailer.”
Looking Ahead
It is the mutual responsibility of the manufacturer and the distributor to identify expectations and deliverables and work towards it. All segments in the channel should focus on their primary customer and ensure that they are in sync with the same. Expectations will keep changing depending on market dynamics. How the disty copes with this change will play a key role in how the relationship evolves. Pressure on margins is here to stay, disties need to identify ways of overcoming this hurdle while keeping both the market as well as the manufacturer happy. Disties that focus on consumers are not in danger of being shut out of the supply chain.
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