These divisions are looked after by their independent National Sales Heads responsible for their respective divisions. Below these heads, their entire division is divided into zones headed by the Regional Sales Managers who are next in the sales hierarchy.
In our concerned division, i.e. FE , the entire country is divided into 6 zones headed by respective RSMs.
Next in line are the Area Sales Managers who report directly to the RSMs. FE division has a ASM per eight territories. Under them are the Territory Sales Incharge who act as an interface between the company, distributors and retailers. Every WSS has one TSI looking after their order and requirements. To supplement the TSI and ensuring closer monitoring of the retailers needs and payments, the distributors themselves recruit sales representatives called Interim Sales Representatives( ISRs). One distributor normally has 2-3 ISRs depending on the expanse and value of his territory.
SELECTION OF WSS
Criteria are:-
- Capital Investment :
This is dependent not only on the present required turnovers but also on the estimated future capital investments that will be required by the distributor (based on company’s growth plans in the area). Amounts required vary from area to area and markets to markets.
- Relevant Experience :
It is imperative that the distributor has had some prior experience as a channel member in the FMCG sector so that no training is required to be imparted to him on aspects of the business. The distributor should not be dealing in competitor’s products and should be able to function as a dedicated channel for Pidilite. Also, he should have atleast 2-3 years of experience as a distributor in the market. But most importantly the business should not be totally driven by his staff rather has complete self involvement of the WSS.
- Infrastructure :
The basic infrastructural requirements for a WSS are :
- Two rooms measuring atleast (10*10) sq. feet each.
- Delivery vehicles preferably 3 wheelers
- Sales executives called Interim Sales Representatives or ISRs.
- Storage Godown
However, there is no set guidelines for the above criteria with the same being variable with market condition and turnover expected of a WSS. Every new WSS furnishes the Company with basic information in a format specified by the Company called a WSS Appointment Form ( Annexure) which had details about his shop registration number, type of delivery vehicle, computer configuration etc.
INCENTIVES TO THE WSS
- Margin
MARGIN LAYOUT
C&F to WSS
- WSS A buys the product at 108.93 from the C&F agent.
- WSS B buys the product at 108.65 from the C&F agent
- WSS C buys the product at 107.82 from the C&F agent
WSS TO RETAILER
- WSS A sells to retailers at 112.30,with cash discount of 2%.The billing is done at 114.60.Hence the WSS gets a margin of 3%.
- WSS B sells to retailers at 112.30.60,with a cash discount of 2%.The billing is done at 114.60. Hence the WSS gets a margin of 3.25%.
- WSS C sells to the retailers at 112.30,with a cash discount of 2%.The billing is done at 114.60. Hence the WSS gets a margin of 4%.
AT THE RETAILER
- The retailer is given 2%cash discount by the WSS,which is common to all the retailers.This 2%cash discount is divided into two parts-
- Cash Discount 1% on bill.
- Discount of 1% if the money is delivered within 20 days.(the credit perioud)
- The MRP is 127 and the actual selling price varies across retailers.
*All the above margins are in Rs.
RATIONALE OF DIFFERENT MARGINS FOR WSS.
The basic logic of giving higher margins to lower class WSS is that as the business of the stockist is lower in terms of value, he may not be able to make up for his infrastructural costs which are accrued in storing and transportation.
In case of Class A wss,he is able to generate enough volumes to justify his infrastructural costs.Hence even though his margins are lower, he is able to generate very high volumes and meet his additional costs.
- Certificates
Certificates of acknowledgement for achieving the targets for a name like Pidilite are priced by the distributors. They frame them and display them in their offices.
MOTIVATION OF CHANNEL PARTNERS - “KABHI GIFT KABHI TRIP” OFFER
The company consistently comes up with schemes for its wholesale stockiest and dealers to enable them to enjoy better margins and thus motivate them to sell more.
One such scheme is “ Kabhi gift Kabhi trip” offer for the dealers.
Duration: April 2004 to Dec. 2004
Valid on product range : FEVICOL SH/P + SPEEDX + MARINE
Open for: Registered dealers of Pidilite
Workability :
In a nutshell, the offer has a qualifying criteria of purchase of 1000 kg during the scheme period. The dealers satisfying the criteria get points on this purchase which in turn qualify them for gift / trip slabs.
Broadly, the whole scheme period is divided into three quarters namely, April-June, July-September, October-December. Every quarter has a pre-specified target in kgs which when achieved by the dealer fetches him 1 point.
Also, 5 achievable points are distributed among the following heads :
On a purchase of 1 kg , the dealers gets one pt.
On exclusive display of 1 kg of either of the three products the dealer gets 1 pt.
This is specific on pack quantities. For eg, packs of 2kg and below, between 5kg and 10 kg and above 20 kgs. These pack specific quantities fetch him 2pts each.
Again gives him 1 pt per kg.
These points and the target achievement points are added up for all quarters and thus the grand total is reached.
This final point achieved by the dealers makes him fall in one of the gift/ trip slab in the gift chart if the points are greater than 3000.
The gifts range from watches to DVD players, from trips to Goa to even Singapore, Pattaya etc.
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EVALUATION
Once a distributor is appointed, the company generally does not take away business from him, except when the underperformance has been observed over long periods.
While evaluating his performance, his targets performance is studied relative to that of
other distributors in the nearby area (because growth patterns may by regions). Also,if a WSS is found guilty of Stock inflow,he is terminated.
If a retailer has not beenpaying his credit for long periods,he is discontinued from the channel.Also,if a WSS is found guilty of Stock inflow,he is terminated.
TRAINING PROGRAMMES
The WSS prove to a very important channel partner for the company as they forward the goods to the retailers and make them aware about the same. Hence, product awareness becomes a mandate for this level so as to completely understand the product utility and application. Also the company has some policies which the small distributors may find difficult to understand and thus falter in implementation.
To avoid the above situation , the company sends distribution managers from the head office to brief them about the products and also give them the complete system and functioning description. They are also elaborately told about the schemes launched by the company because they would be further responsible to ensure that retailers are rightly aware of the schemes.
This training is mostly given to the B and C class WSS.
The retailers are the most important channel partners as they are the direct link between the company channel partners and the end consumer. They are also given training in the form of seminars and meets organized by the company.
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MECHANICS AND CARPENTERS :
Though large offices, industries and households buy products from the company but the end users are the mechanics and carpenters among other masons. Their recommendation to buy the product is what drives the customer to buy the particular brand of adhesive.
The company arranges meets and knowledge shows for them to make them aware of the products and also to know about their requirements and necessities.
FORECASTING AND TARGET SETTING
Target setting is a result of negotiation between the distributor and the company.
Mid month targets for the next month are given by the company at around 5th -10th of a month. These are set for the RSM, ASMs and TSI in the hierarchy and driven down by them.
At the month end the distributor can negotiate these targets in the range of +/- 10%.However ,we see that the Pidilite products have many seasonal and cyclic variation,due to the very nature of the product and their usage.Alot of forecasting is done on the suggestions of the WSS ,as they are very experienced in these variations.
SEASONAL VARIATION IN DEMAND
Though forecasting is done at the ASM level, there is always an estimation put forward by the WSS depending on seasonal variations in demand. The following graph depicts the demand in various months for different products .
As shown above, from the month of Jan to March , there is a demand for paint related products due to festivals like Id and Holi , when people paint their houses.
In April , with the start of the financial year, many new schemes are introduced . Generally all the products sell during this period . Products like fevicol SH and fevicol SR 900 , sell well during these few months.
As July approaches, sales takes a dip. Due to monsoon , there is no painting of houses. The month of July experiences a slump in demand.
From august to November, demand rises again due to festive and matrimonial season , where people paint their houses, goes for new furniture and other renovations.
CHANNEL CONFLICTS
A. UNDERCUTTING
As in most fast moving goods, Pidilite also faces some channel conflicts.The problem of undercutting is also present. Although the wholesellers are not a formal route to duistribution by the company, they are very much a part of the distribution structure. The presence of a huge wholesale market leads to obvious channel conflicts.In addition to this, the various margins given to the different categories of WSS leads to stock inflows. The various channel conflicts faced by the company today are-
WHOLESELLERS
The wholesalers in this market are a very active link in the distribution of Pidilite products and area involved in bulk purchase from the WSS.Let us take the same price point of 112.30,which the WSS gives to the retailers as well as the wholesalers.
The wholesaler sells the product to the retailer at lesser than 112.30,the price which the WSS offers them.There are primarily two reasons for this undercutting-
- The wholesaler wants the retailer to buy the other non branded products too,at which he charges heavy premium.This more than offsets his loss in selling the Pidilite product below purchase price.
Eg:A retailer dealing in hardware and paints will have to buy other products like Plywood Mica, Nails etc In order to woo the retailer,the wholesaler will sell the Fevicol SH at Rs111,which is lesser than what the retailer would have got from the WSS(112.30).in this way he is able to retain him and persuade him to buy other non branded products.On these non branded products,he gains margin of 3 -4%,hence making the deal very lucrative for himself.
- The wholesaler also avails the benefits of discount in various primary schemes meant for volume retailers,as thewholesaler buy in bulk..The company offers bulk discount and gold jewellery at various volume slabs.By availing these regular schemes,the wholesalers are able to make up any losses from selling at lower than cost price.Eg;
SLAB SCHEME
- >30 Kg 1 Re /Kg off
- >50 Kg 2 g Silver
- >1 Tonne 2 g Gol
RETAILERS
At the retilaer level also there are variations in price and undercutting.The major reasons for undercutiing at the retailetr level are-
Many retailer keep the branded products because it increase credibility of their shop.They are primary dealing in non branded products like Mica, Plywood etc.
Hence,they give discounts on the Pidilite products and woo the consumer to buy other products too.He charges a high premium on the non branded product,which more than offsets the discount given on the Pidilite product.
B. STOCK INFLOW
Many times, A class B or C WSS of different territiory, sells his product in the area charging lesser price because the company offers him more margins,in order to support his infrastructural costs.As explained in sect ,the class C WSS gets 4% margins by company.Hence in order to increase sales,he at times goes to other territories and sells at lower price than the class A WSS available there.
Eg: Company price Selling price Selling price Retailer
(own area) (WSS A area) SP
Class A WSS 108.93 112.30 112.30 118
Class C WSS 107.82 112.30 110 116
In this way, two retailers in the same area end up selling at different prices as the product bought by one retailer has been supplied by a different WSS of different territory.
PIDILITE WSS SURVEY: GHAZIABAD
Name of WSS: M/S Bansal Traders
TYPE A WSS
Experience: 3 years
Bansal Traders is one of the prominent wholesale suppliers in Ghaziabad area.Apart from Pidilite ,he also keeps the products of he following companies-
- Airtel
- Amul
- Godrej
As we can see,none of the other products are competing with Pidilite products.
The Infrastructure
Bansal Traders are Type A wss ,hence they have a very good infrastructural facilities.The facilities available at Bansal Traders are-
- A 20 by 10 sqr feet front office with two telephone lines and
one Fax machine.
b. An unbranded computer(assembled) with 128Mb RAM and
40 GB hard disk,which is as per the recqirement of the
Company
c. A huge godown
d. 3 Three wheeler auto- Bajaj Tempos
e. 2 Hand Rickshaws
Sales Staff
Bansal Traders have one ISR( Inteim Sales Representative) ,working for Pidilite products.In addition,Mr Bansal himself along with his younger brother work as sales executives.
Retailers Covered
Bansal traders cover around 150 Retailers.The various kinds of distributors falling in his area are-
1. Class A - 10 To 15
The class A retailers are catered by Mr Ankur Bansal himself.Around two times a
week he visits these retailers and takes their orders.
- Class B – 35
Class B WSS is visited by the ISR and Mr Bansal’s brothers,again
- Class C – 100
The class A retailers are catered by ISR. Around two times a week he visits these
retailers and takes their orders.
Credit Policy
The WSS sells the goods at credit to the retailers for a 20 day perioud.The retailer has to pay within the limited perioud or the 1% cash discount which is offered by the company,is not given to the retailer.As already explained,out of 2%CD( Cash Discount) given to the retailers,1% is given at the time of delivery and 1%if the retailer pays back wihin 20 days.
In case the payment is not made in 20 days,an intrest n the money @4%is charged by the WSS.
If the retailer does not pay by the end of the month,the remaining goods are confiscated by the WSS,as a accompany policy.This ,however,has never happen at Bansal Traders.
Lead Period
The lead periods in providing stocks to the dealers differs from the SKU and quantity ordered; some SKU’s are delivered correspondingly with taking order but some are sent from the warehouses. A higher quantity ordered has to be replenished from the warehouse.
Stock Policy:
As per the company regulations the distributor is supposed to maintain a stock of 3 weeks; the distributor maintains a stock of 3 -3.5 weeks in monetary terms it equals to Rs. 30 lakh for the distributor.
The stock is formalized by the company; the dealer can negotiate on 3-4 end days, the stock policy is formed for the month.
Return Policy
The company follows a policy of return when the product has not been sold for six months, is damaged or has defects.The replenishment is done with cash and happens at the end of every six months.
Return on Investments
The company does not gives any guarantee to the distributor with regard to returns on his investment which is in line with the market credentials of the company; the distributor has invested Rs. 3 lakhs as security money and around 30 lakhs in the infrastructure.
Promotion Policy
The trade promotions are mostly secondary schemes,which are primarily for the retailers.These schemes are notified to the WSS around 7 of everymonth and then are passed down to the retailers.
CHANNEL CONFLICT: STOCK INFLOW
As already explained, different class of WSS are given different margins on the products.The B and C class WSS are given higher margins in order to help them meet their infrastructural costs.This difference in margins ,at times ,drives the C class WSS to push their products in the territory of WSS A at a lower price.This has happened at the Bansal Traders and there is no effective check which can be done to stop this Inflow.
DUMPING
Another issue,which the WSS told us was the case of dumping by the ASM under pressures of meeting targets in certain months.
He said that it is a tacit understanding between the company and him that at times he shall keep more stock than recquired in order to meet the targets of ASM.He says it is a bit of problem,but most of the business is run by relation,which can not be spoilt.
PIDILITE RETAIL SURVEY
LAXMI NAGAR: Sri Ram Plywood And Paints
(UNDERCUTTNG TO PUSH UNBRANDED GOODS)
This retailer is a hardware store who deals primarily in paints,warnishes and plywood.He buys his Pidilite products from an authorized WSS in this area at the price fixed by the company.
The sales representative vists him once in a week .The delivery of the demand is done the next day only.He prefers WSS rather than the wholesaler in his area because he bcan return the unsold goods to him.Whereas the wholesaler gives him at a discount,he will never return the goods unsold.
UNDERCUTTING
This retailer seels the Fevicol SH at below his cost price from the WSS.The reason for doing so is that he primarily deals in unbranded goods like plywood,mica,paints etc.Hence two main benefits are derived by doing undercutting-
- He is able to woo the customer to buy other non branded commodities by showing them discount on Pidilite products.On these unbranded goods,he heavily charges premium,which more than offset his loss in selling fevicol below cost price.
- Presence of a strong brand like Fevicol increases his shop visisbility and credibility.
GHAZIABAD
RETAILER 1: S.K.Hardware
(UNDERCUTTING BY BUYING FROM WHOLESALER)
The retailer is a hardware shop,who keeps many ranges of Pidilite products.Also he keeps a range of hardware products.Rather than buying the Class A WSS in his area ,he buys from the wholesaler,Agarwala and Sons.
Since he buys in bulk,the discounts given by the wholesalers gives him large margins.The price points which is offered by the WSS and Wholesaler is
WSS (Bansal Traders): 112.30
Wholesaler (Agarwala Brothers): 109
This huge difference forces the retailer to buy from the wholesaler.This retailer also buys the non branded products from the same wholesaler.Since he buys from the wholesaler at a lower price,he charges lesser to the consumer, thus resulting in undercutting.
RETAILER 2:Jyoti Hardware
(UNDERCUTTING BECAUSE OF STOCK INFLOW)
This retailer is a paint shop which keeps a whole range of pidilite products.This shop buys fromb Sharma Traders, a Class C wss , who encroaches in the territory of Bansal Traders( Class A wss).
The prices offered by the two WSS are
Sharma Traders: 110
Bansal Traders: 112.30
This type of stock inflow results in the undercutting at the retailer level.
RECOMMENDATIONS
1. APPLYING SPLIT RANGE DISTRIBUTION :
A split range distribution strategy has been successful in similar cases of large SKU sizes co existence of 2or more main brands where each needs separate attention. A case of Perfetti can be taken for understanding where split range distribution had been largely successful. In a nutshell, Perfetti has three main brands with 10-12 SKUs for each i.e. Alpenlibe, Centre Shock and Centre fresh. They applied split on a equal value – equal volume basis. The same was done at Britannia to provide focus and thus increase sales.
At, Pidilite , for FE division we suggest a split among the range of adhesives for sticking and those used for binding in paints. Then again, to provide atmost focus , we suggest that separate WSS for the two unlike the same handling the entire range and not being able to concentrate on all SKUs.
Lets say , P1 : is the range of Hardware adhesives ( for sticking plywoods, mica etc)
Then , P1a, P1b,P1c etc are the different SKUs in hardware.
Similarly, P2 : is the range of Paint Adhesives ( binders, distemper etc).
Then, P2a,P2b,P2c etc are the different SKUs in paint adhesives.
- Separate salesman for the splits
- Before split, 3 salesmen, 2 beats each all products
- Now 3 salesmen, 6 beats each, 1/3rd the products (one split group)
Now, as the WSS for hardware and paints are different, the ISRs under them also concentrate on separate SKUs. Thus their beat frequency would increase as the products range has largely reduced resulting in more focus and higher no. of visits to dealers.
2. CONSUMER PROMOTION SCHEMES: The comp any should start consumer promotion schemes like scratch cards etc,which will have gifts like watches,radio etc.This can woo the carpenters,painters to buy and recommend fevicol over other brands.
3. “FEVICOL SHOPPE”: Since fevicol has strong brand equity even among children and stationary consumers,it can open up shops specifically for selling home consumption products.This may not drive sales but will be a right step in distribution to do brand building.
Contacts
PIDILITE
1. Shekhar Jethi
Regional Sales Mananger
Parekh marketing Limited
6th Floor,Vikas Deep
Laxmi Nagar District Centre
Distributors
1. Ankur Bansal
M/S Bansal Traders
Authorised Distributors
.
Mr. Lalit Kumar – Distributor, Ghaziabad
150, Durga Tower, Gound Floor,
Raj Nagar, Ghaziabad
Retailers
Laxmi nagar
- Sri Ram Plywood and Paints
Ghaziabad
- S.K H ardware
- Jyoti Hardware
