Vol 25, No 3; Article by Avinash G. Mulky; September 2013
The distribution channel structure remains an important yet little researched issue, especially in the Indian context. As the pathway along which products, information, and finance flow between manufacturers and end-consumers, designing and maintaining an efficient channel would be important elements in a company's competitiveness. This round table article provides an overview of distribution channels, identifies the key issues that impact distribution channels in India, and attempts to develop an agenda for future channel related research.
The first part of this round table article analyses the constituents, structure, functions, and contributions of distribution channels and focuses on the characteristics of the distribution channel structure in India. Some perspectives that emerge from this overview are that channel structures vary across countries and industries and that the level of economic development of a country is an important factor in determining the nature and characteristics of channels. Some other determining factors are the presence of organised retail, use of technology and data by channel members, customer awareness, Internet penetration, logistics, and implementation of laws and regulations, which are stronger in developed markets. In India, where the distribution channel structure is largely traditional and the penetration of organised retail is very low, the traditional retailer offers several advantages such as convenience, credit, home delivery, and personalised service; modernisation of retail, however, is picking up in many sectors.
In the second part, the article reports on a panel discussion featuring academic and industry experts, on the challenges in designing, constructing, and managing distribution channels in India.
S Rajendran, Chief Marketing Officer, Acer Computers, describes the evolution of Acer's information technology (IT) distribution model, particularly the challenges the company faced as they moved from a semi-direct business model to an indirect business model, and the challenges of IT distribution. Consolidation in the IT marketplace, redefinition of distributor roles, and convergence of products, are emerging trends he sees in distribution structure. Changes in technology, business models, and supply chain dynamics are the challenges ahead. V Jaigopal, Senior Vice-President, Madura Coats, presents the distribution system and market experiences of a textiles and thread business, a consumer business with an intense countrywide distribution network. He sees the principal challenge in his field as that of cost effective reach. He observes that rural affluence is an emerging trend, and that critical challenges such as channel profitability, high cost to serve, sales force attrition and effectiveness, and lack of market intelligence among others, need to be addressed.
R Nargundkar, Senior Dean -- Academics, Institute of Management Technology, Ghaziabad, focusses on the demand side of the distribution channel i.e. the consumer, while touching upon different types of industries, fast moving consumer goods (FMCG), durables, B2B, and services marketing. Making several suggestions that could help these various industries differentiate themselves, he emphasises that customer satisfaction is most important at the strategic level, and that technology could only play a secondary role.
Banupriya Sudhakar, Director, Nielsen, details the process of retail audit or retail measurement that tracks the consumer offtake for FMCG through retail trade, and surveys the Indian retail landscape. She suggests that trends like personal consumption mindset, nutrition and wellness, digitisation, partaking in global brand culture, lifestyle upgrade, and emphasis on time saving could shape demand in the near future, and that connectivity would emerge as a key factor affecting trends in the long term. Prof Ashis Mishra of IIMB focusses on the Indian retail scenario in recent years. He provides a SWOT analysis of the Indian retail sector and suggests that growth is the Indian retail sector is inevitable and given its low penetration levels, organised retail is not likely to impact unorganised retail in India. He also looks at FDI in multi-brand retail and the expected response from manufacturers.
