New channel distributions unlock retail india

New Channel Distributions Unlock Retail India

New retail channels are neutralizing the traditional advantage that distribution offered and are providing

opportunities for innovative brands to emerge.

#DigitalErra Thought Corner

Retailing in India accounts for over 10% of the country's Gross Domestic Product (GDP) and around 8%

of the employment. #DigitalErra estimates India’s Online Retail Revenue to reach $60 billion in 2020

whereas retail market is expected to cross $1 trillion by 2020. Also, India’s online Population is expected

to grow 250 million by 2020. In the developed countries, the organised retail industry accounts for almost

an average of 80% plus of the total retail trade. In contrast, in India organised retail trade accounts for

merely 8% of the total retail trade. This highlights a lot of scope and opportunity for further penetration of

organized retail in India.

The Indian retail sector is one of the world’s most exciting retail destinations. Currently it is witnessing

high rates of growth for the organized sector and is visited by consumers who have some of the highest

consumer confidence levels. The importance of distribution to take products to consumer lies in the fact

that companies who have captured maximum depth of field are the most dominant ones in the market.

wwww.etailingindiaexpo.com

Driven by income growth, urbanization and attitudinal shifts, new ways of distributing goods are coming

to the scene of India’s retail market more than ever before.

Modern Trade:

Modern trade still remains the biggest channel of distribution for most FMCG companies in India.

Modern trade includes supermarkets, hypermarkets and other organized retail outlets, while much smaller

grocery stores are classified under traditional channels. It is expected to grow three times to $180 billion

in 2020 from $60 billion in 2015, said a report.

The rapid growth of e-commerce has retailers thinking of their multi-channel strategy. Many companies

and brands are partnering with large format retailers to drive common consumption agendas. In total, 40%

of sales are generated by modern retail. Reliance Fresh, D-Mart and Big Bazaar are some major examples

of modern retailing in India.

Advantages:

Increased availability of choice in products and services Rationalization and convergence of prices Better quality of food and non-food products Equalization in the standards of living available to consumers between

countries


Direct Distribution

A channel of distribution is the path that a product takes from producer to consumer. Distribution

channels of varying length exist in modern business. A direct channel of distribution is the shortest and

simplest form of distribution channel; it has become increasingly common since the advent of the

Internet.

Advantages:

Using a direct channel of distribution to connect consumers with your product, especially a Web-based

channel, can have many benefits. Most importantly, web-based selling has low overhead and gives your

product a potentially global reach. In the absence of intermediaries, most direct distribution channels tend

to have higher rates of profit than indirect distribution channels. Direct distribution via the Internet is

convenient for customers and available 24 hours a day. Lastly, many customers appreciate the

opportunity to give profits directly to producers and artists.


According to a McKinsey and Co. report on the future of retail supply chains, companies can reduce costs

by about 20% at the distribution centre level, while optimal deployment of inventory can reduce working

capital by about 10%. Direct Distribution examples include ITC which has one of the most extensive

distribution networks in India. Its products are available at more than 4.3 million of the estimated eight

million retail stores in India. Other examples are Hindustan Unilever, Nestle India Ltd and more.

Direct to Consumer

Direct marketing refers to promoting a product or service straight from the seller to the consumer, without

intermediary advertising such as television commercials, radio ads, or public displays. This form of

marketing can be particularly effective for small- and medium-size businesses with little brand

recognition and moderate advertising budgets.

Advantages:

Direct marketing methods track customer responses, allowing for marketing effectiveness to be monitored

for a strong return on investment. Advances in technology have made the development of lead lists and

the tracking of customer responses easier; you can use specialized software to group targeted customers in

many ways, as well as to capture, prioritize, and analyze useful feedback. Targeted lead lists ensure that

time and money are not wasted on disinterested consumers.


Changing Retail Models

Much has changed in the retail landscape over the last decade. One of the fastest growing channels is e-

commerce. The likes of Amazon and Flipkart are changing buying habits in a way that could put

traditional distribution models at risk. A wide gamut of products, competitive pricing and convenient

delivery options have made this the retail channel of choice for a new generation of consumers.

The current marketplace has become increasingly crowded and competitive. It is

imperative for the brand to develop its own identity. As the once-disruptive business model of bypassing wholesale and trading direct-to-consumer via e-

commerce becomes commonplace, brands must do more to differentiate them.


Education

New channel distributions unlock retail india