Channels Of Distribution: Urban and Rural
FMCG – GO TO MARKET STRATEGY
September 12, 2024
In the FMCG industry, an effective distribution channel is key to ensuring FMCG products reach Target consumers efficiently – This is only possible by choosing the right channel partners for the distribution of products. The key factor to understand in FMCG distribution is for a brand to figure out what is the most effective and fastest way in which we can connect to customers, building a robust distribution channel is an ongoing process and it develops as the brand expands its market coverage and consumer reach. Let’s understand the flow of goods from the distribution channel partners to the end consumers in the context of Urban Distribution
Urban Distribution in very simple terms can be identified by two 2 things
A. High Population Density
B. Availability of Good infrastructure.
Flow of Goods in Rural Distribution
MANUFACTURNG UNIT → CFA → Distributor → Wholesale → Retailer → Consumer
Roles and Responsibility of channel partners in urban distribution
1. Manufacturing Units – Where goods are produced.
2. CFA (Clearing and Forwarding Agents) – Responsible for storage and distribution of goods to distributors within a defined geography, adhering to company guidelines.
3. Distributor – Upon receiving stock from CFA, the distributor takes it to the market in two ways:
• Direct to Retailer
• Indirectly to Wholesaler (who then supplies it to other small retailers).
Now let us understand how the rural distribution works – typically rural markets have low density of population and weak infrastructure support – what approach should we have when trying to establish distribution in the such markets:
Flow of Goods in Rural Distribution
Manufacturing Unit → CFA → Distributor → Wholesale → Retailer → Consumer
Roles and Responsibility of channel partners in Rural distribution
1. Manufacturing Units – Where goods are produced. 2. CFA (Clearing and Forwarding Agents) – Responsible for storage and distribution of goods to distributors within a defined geography, adhering to company guidelines. 3. Super Stockist – To Manage the bulk distribution of FMCG products within a specific region, ensuring efficient supply to local sub distributors. They act as a vital intermediary, bridging the gap between manufacturers and smaller distribution channels. 4. Sub-distributors – In rural distribution play a key role in reaching remote markets by receiving products from distributors and supplying them to local retailers covering small villages, bridging the gap between main distributors and small, often scattered retail outlets.
How to understand the Rural Distribution Penetration
District → Taluka Towns → Villages
Location to Channel Partner Mapping
1. Super-stockist should be located in District headquarters covering 60-70kms. 2. Sub distributors should be located in Taluka Towns covering 5-10kms. By following this distribution strategy we can plan for proper rural distribution.
What are the factors that impact the choice of the distribution channel chosen by a company?
1. Shelf life – For a product category where the shelf life of a product is 7-15 days like bread, milk etc – the distribution channel should be very small, ensuring the product reaches the consumers at the earliest – Bread is a classic example of this – by 10:30 am in the morning the entire process of manufacturing to retailers in completed – starting the market at 4am in the market – from picking up the bread from the factory to supplying to the retailers. 2. MRP – If you product has a high MRP – then your target outlets will become the big outlets surrounding posh residentials, colleges etc. If you have a low MRP product then your target outlets will become all the small retailers typically classified as b & C category outlets covering major areas. 3. Customization: If your product is something in which requires customization – like furniture – then in that case the company would seek out to reach out the consumers with minimum middle men involved. 4. Target Market size: Depending on how far and wide you want your products to be distributed then area wise coverage and channel partner appointment will become key. We hope we have been able to give you a roadmap of how rural and urban distribution works, we hope you are able to find the right distribution strategy for your products too!
