Are your Indian distributors underperforming? Here’s what to do

A global company decides to foray into a new market, engages a local distributor to limit its exposure and starts off with flying colours. Gaining advantage in the early entry stage, sales figures are more than expected. However, stagnation soon sets in and problems offset the growth path. The local distributor who had helped the company thrust its revenue is now struggling to perform.

Sounds familiar?

Multinational companies expanding into new market, especially developing nations such as India, are often encountered with similar issues of the distributors underperforming. Let’s find out what really goes wrong and how the wrong could be corrected.

What goes wrong?

Lack of monitoring of the distributors’ performance due to geographical differences. Distributors are often left on their own, which leads to inability to penetrate deeper into markets and lack of business development plans or any strategic marketing of the brand.

Inability to understand the diversity of the Indian market and appointing only a single or just a few distributors to proliferate the brand in the entire country.

Only having top down approach for market strategy would lead to creating one-sided product and marketing strategy, which could spell disaster for a market like India.

Lack of supervision often leads to distributors marketing products of competition. Indian market is often seen to be flooded with ‘me-too’ products and distributors are lured by competitors to give preference to their products over the multinationals’.

Distributors are often left to their means to study the market, they act on actual demand of the product rather than anticipated demand. This leads to delay in product arrival at the point-of-sale and potential revenue loss.

Companies shy away from investing in training for distributors fearing the distributors would be poached by competitors after attaining required skills.

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How to correct it?

It is advisable to have a presence in India even if it is anemic in nature by having at least one person reporting directly to the head office as a representative or employee. However, the responsibility of the representative is not just monitoring, coordinating and communicating with the distributor on a very regular basis, but also expanding the distribution network.

In India, it is a known fact that to be able to cover the market extensively one needs a wide network of distributors, preferably strong distribution partners by region. Further, to reach up to the hinterlands of the country, one requires robust distribution channels, that could take care of logistics issues as well.

Being a diverse nation, with multiple product preferences and dispersed consumer base, multinational companies need to keep adapting to the ‘Indian way’ of doing business, customising their products as per regions and customer requirements. This valuable information could be provided by the distributors – who are interacting with the retailers and end-consumers on a regular basis – making them authentic market research sources.

Putting checks and balances to find irregularities are a must. Non-compete agreements could be signed with the distributors and legal actions should be initiated in case of breach of contract. Also, distributors should be encouraged to carry product lines of other companies that complement the clients’ products to thrust higher sales.

Distributors should be seen as business partners by the global companies, and information about market dynamics, demographics, projected demand as per regions should be shared for greater mileage.

While the fear is not unfounded, however, companies need to understand that just like investing in training employees is essential, distributors should also be provided training for being able to market and promote the brand. Often Indian distributors, at the local levels, are not equipped with the right skill sets to persuade the end clients. Along with constant training and growth opportunities, multinationals should also focus on providing competitive commissions and other benefits, helping them keep the competition at bay.

Along with having all the anticipated issues that multinationals face with distributors in any emerging nation, in India, the complexities are manifold due to a diverse consumer base and fragmented distribution network. Thus, in order to succeed in the country, it would be essential to have a local representation, managed by a local management.

Further, with the distribution chain expected to be more layered in the country, multinationals may look at ensuring a local presence in mostly all the states. Therefore, multinationals could hedge the bets by employing multiple distribution companies, having a robust monitoring system, while providing strategic support to the distributors.

At Tecnova, we have successfully helped companies find the right distributors, aligning the company’s vision and marketing strategy with the skill sets of the distributors, dispersed in different regions of the country, catering to diverse consumer needs. For more information, connect with our consultants at enquiries@tecnovaglobal.com.

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