Channel selection criteria

Answer 1

• Distributors are bulk buyers and sellers of company products/services. Perform all functions of primary customers viz. bulk storage, retailer servicing and participation in sales promotion

• Wholesalers sometime synonymous with distributors but at others one step down the logistic chain handling sub territory of larger distributor area

• Agents/brokers are channel partners who do not take title to company's goods but act as intermediaries between seller and customers (primary or secondary) -resorted to in initial stages of establishing post manufacturing supply chain

• Retailers are the last link in the supply chain, interface with the consumer/customer and are responsible for creating and maintaining the firm's image with them.

Channel selection criteria

• Most firms initially go for established channel members already partnering big players like H.L.L or Nestle

• Timex Watches decided to go in for enlightened, aggressive newcomers and this paid off handsomely

• Stage in product life cycle important. In initial stages risk with newcomers preferred. Later choice with company either veterans or more new comers

• High tech products like info. Hardware requires substantial company support through trained personnel. Low tech products in personal care, personal ware can do with fewer company support personnel

• Low value products can be sold through wholesalers and general retailers. However high value products including appliances, white goods require focused retailing and excellent after sales service infrastructure

• In all cases close contact with ultimate customers is a must. Companies ignore this basic wisdom at their peril.

Responsibilities of channel members

• Carrying &forwarding agents maintain company stock and move it to distributors/wholesalers. Invoicing to primary customers from C.F.As

• Wholesalers/distributors carry their own stocks and service retailers. Adequate territory coverage is their responsibility

• Retailers stock, display and sell to their customers. Key requirement is accurate and timely reporting of stocks based on which alone reliable records of demand can be built

• Retailers should also do the best in selling, and building rapport and goodwill with customers and in advising them and guiding with their best interests and the companies as well in mind

Companies responsibilities to channel members

• Channel members should not be loaded with excess inventory which will cause resentment and lower their commitment

• Every channel member should be given appropriate mix of product-fast moving, medium and slow moving.

• Non moving product should be removed by company at periodic intervals. Discount schemes do not solve the problem

• Company should provide adequate primary and secondary display to channel members and point of purchase material

• Good appraisal and reward system should be put in place to reward the right partner performance. Non performers should be gradually weeded out. Long term orientation should be the key to assessing all channel partners

• Frequent and caring interaction with channel partners and prompt addressal of grievances will help to build and sustain enduring partnerships as opposed to opportunistic alliances

Indian distribution scenario

• Traditional role of intermediaries viz. set up minimal infrastructure and expect guaranteed returns

• Extremely high cost of logistics

• Lowest margins in the world

• Expectation of extremely low prices from Indian mass market customers further pressurizes already low returns

• Challenge of working with low product portfolios and low inventories not acceptable to firms as well as channel partners

• Poorly organized and managed distribution and retail operations. Company owned and managed facilities not much better

• Continuous pressure on sales force to achieve unrealistic targets results in equally unrealistic pressure on channel partners

• Prevailing mindsets have to change for both firms and channel partners