Selection of the Distributor


This is a Guest Post by Kandarp Patel who works with a leading FMCG brand in the Sales and Marketing function. This post is in continuation to the previous post.

As we have seen, distributor is very important part of the whole FMCG distribution channel so we need to observe extra care while appointing a distributor. Distributor is appointed with a long term vision in a territory, in a segment and/or in a product range. Right selection of the distributor is very important to achieve the objective of achieving market leadership in the territory. Process of appointing a distributor should be rigorous and objective. Figure shows the process flow of generally accepted distributor appointment process.

Distributor Selection Process

Each step mentioned in the figure involves extensive detailing and field work. It also requires an experienced person for evaluation of alternative parties.
Alternative parties are evaluated and judged based on following broad criteria.
Criteria
Financial capacity
A distributor should be financially strong enough depending upon the market potential as well as your product range. Finance is most important criteria because of following reasons.

  • Distributor is going to stock the required products in bulk quantity from the manufacturer. This requires huge shell out in terms of money.
  • Distributor will provide credit (no. of credit days based on the requirement) to the retailer and institutions.

Distributor should be able to invest in infrastructure, new products, and new initiatives of the company without expecting immediate returns.

Prior Experience
Prior experience of the distributor in FMCG distribution will help in followings.

  • Distributor will take less time in understanding the functioning of various members of the channel.
  • Less time to build good rapport with retailers/institutions.

Infrastructure
Infrastructure required like manpower, redistribution vehicle, godown space should be available of required quality and quantity.
Market reputation
Market reputation of the distributor in terms of relationship with retailers will help in efficiency of his work.
Market knowledge
Distributor’s knowledge of the prevailing market conditions, retailers’ attitudes, competitors’ products etc. will help in getting good hold on the market. Also important is distributor’s interest in knowing day-to-day information & happenings of the market.
Synergy
If distributor also has some other good FMCG product distribution with him, it helps in getting more retail space for your product. That brings synergy in retail penetration.
Technology
Use of various new technologies like SMS, computing, internet in various aspects of the distribution process will help in getting better efficiency in communication, operations etc.
Attitude
Distributor should possess basic managerial skills and should have a positive attitude. He should be willing to experiment with new products and take risks.
Social profile
Age and education level of the distributor are important. Young distributor will have many more years as active life which gives us stability for long term in that territory. Also, well educated distributor will be more adaptive to the changing environment, technology etc.
Future plans
As appointment of the distributor is longer term, it’s important to know the future plans of the distributor for his business.

These criteria give general idea of important factors for judging. Each criterion is evaluated based on detail work and judged based on requirements.

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2 Comments

  1. A few questions:
    1.)How do you think the process will change in case of a new product and a new company? Especially with regards to the terms of engagement?

    2.)How do you track the performance of the distributor?

    3.)Is it a good thing if a particular distributor is given 3 products to sell and he sells one extremely well but he does poorly in the other two? Do you restrict the flow of the better selling one by attaching a condition that you have to sell amount X of the other two to get further supply of the better selling product? or do you rearrange incentives?

    4.) How are the commissions decided? Do we have information about the common range of commissions for different FMCG products?

    Reply

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