Focus of consumer goods companies has shifted back on expanding direct reach after a lull of the past 12-18 months wherein they had concentrated on increasing throughput per store rather than overall reach.
Focus of consumer goods companies has shifted back on expanding direct reach after a lull of the past 12-18 months wherein they had concentrated on increasing throughput per store rather than overall reach. The wholesale channel, which constitutes 35-45% of overall trade, is facing a tough time, leaving no other option for consumer goods companies other than going direct. Due to the liquidity crunch-led lower offtake, players are now focusing on expanding direct reach (sales managers moving beyond wholesale channel and serving more retail outlets directly per day), increasing automation among sales force (giving handheld devices to sales on feet, especially in rural areas) and big data analytics to improve sales efficiency.
Not only do many local and regional consumer players transact in cash, but they are also dependent on the wholesale channel for distribution. Hence, demonetisation has dealt them a severe blow. Assuming that a section of local/unorganised players and wholesalers move into the taxable bracket, it will lead to higher compliance costs and lower their competitiveness against organised players. This presents organised players an opportunity to clock decent market share gains, especially in segments where the unorganised share is larger such as in packaged foods, dairy, household insecticide etc. Also, the liquidity crisis and crackdown on black money will impact operators of counterfeit products, a positive for the overall branded space.