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

wwww.etailingindiaexpo.com

most dominant ones in the market. 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

wwww.etailingindiaexpo.com

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.

wwww.etailingindiaexpo.com

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.

wwww.etailingindiaexpo.com

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. 

wwww.etailingindiaexpo.com