Indian FMCG companies use two primary sales channels to market, distribute and sell their products i.e. General Trade (abbreviated as GT) and Modern Trade (abbreviated as MT). General trade is the first model that came into being before the Indian market opened itself to organised retailing. For this reason, it is also referred to as traditional or unorganised trade. Modern trade on the other hand is a purely urban phenomenon, that grew between 1990’s and early 2000 when many corporates and first-generation entrepreneurs entered retail business and investments by international retail firms increased in India. For example, the RPG group launched Spencer’s in Bangalore in 1991.
General trade is around 90% of the overall retail market, and includes conventional Kirana shops, general stores, convenience stores, mom-&-pop stores, paan-beedi shops and other small retail outlets situated near residential areas. Salient features being smaller square feet area, makeshift shelves, cash transactions, owner managed employing personal capital.
Modern trade is around 54% of the urban retail market, and includes the larger format stores such as supermarkets, mini and hyper markets situated in shopping malls and handpicked pockets outside residentials areas. Salient features being larger square feet area, proper organised shelves, corporate managed, with large capital involved.
Importance of General Trade
With a broad understanding on both these FMCG sales channels, let us get to the crux of it i.e. both channels sell FMCG products (agreed their styles are different) but what are the fundamental factors that drive a consumer (like you and me) to pick a “Big Bazar” over a “Gupta kirana store” or vice-versa.
- Convenience: More and more Indians, esp millennials have started to appreciate convenience in their shopping experience. Gone are those days when people would make a list of items, stand outside (like literally on the road) and give instructions to Gupta Ji for their monthly groceries. They love the convenience of walking into a superstore, having nicely laid out aisles and just go binge shopping. Having said that, there are the baby boomers who are pretty clear on what they need, do not like wandering in mile-long megastore and prefer giving a call and sending a list over WhatsApp to their favourite neighbourhood bulk retailer and getting goods home-delivered. So, convenience you see, is very subjective.
- Bulk purchasing: Larger format stores provide a certain sort of discipline to many people, a method to the madness, especially if majority of members in the household are working. The belief is that you purchase in bulk from a hyperstore and the entire month is sorted. Having said that, bulk purchasing only applies to a handful of household items which typically come in larger packs even at the neighbourhood store. Perishables like fruits, veggies, milk, egg, yogurt can anyways be stocked for few days.
- Discounts: This probably is the biggest motivator for shoppers. Modern trade has been famous for providing great deals on most products, and they proudly showcase it as total savings on a bill, whereas general trade only passes on the discount provided by the manufacturer. Agreed, larger format stores do have a variable discount policy (certain days of a month, special occasions and product specific deals), a closer comparison however reveals that for an average shopper, over a period of time (say a year), accounting all factors (frequency, low usage, wastage etc) the difference comes out to be negligible.
- Relationship: A subtle but important factor nevertheless, many buying decisions happen due to past relationship which is only possible in general trade format. A joint family which is used to buying from “Gupta general store” will not be motivated to shift to a “Big bazar” especially until the household decisions are intact.
So, in our view, General trade is here to stay and will evolve and improve to cater to the needs of current generation. You may have already observed (and appreciated) that now your neighbourhood store keeps fancy stuff as well. That’s because FMCG companies are now shying from investing in the traditional retail stores by putting modern shelves, installing VM and working towards standardised discounts. And the entire rural growth story is based upon the general trade because that strata of population buys almost on a daily basis and that cannot happen via a supermarket located 5-10km’s from a residential cluster.
Peri's Love For General Trade
Peri’s genesis is general trade, because of multiple reasons. One, our founding team has years of experiences and deep subject matter expertise in consulting Indian manufacturing companies and their general trade sales vertical. Second, our initial set of customers had 60-80% of their revenue through general trade sales channel. Third, our data analysis experts are fascinated by the diversity and complexity of the Indian geography and have been digging on retail geo-spatial analysis for years. Fourth, we truly believe that Indian FMCG companies need a next-gen, user-friendly, high-on-adoption and logical SAAS solution because they have been struggling with legacy SAAS solution (developed 5-10 years back) who have not spent enough time and effort on overhauling themselves.
The central character (or the hero as we call it) of any general trade automation is the sales representative, also called a frontliner or a field representative. Everything revolves around him, because he is the one who spends hours slogging on the streets, under varied weather conditions, knocking doors of retailers, collecting orders, handing them over to the dealers and then ensure the deliveries are done and money is collected.
Wow, hats off to the backbone of Indian FMCG industry.
In addition to the frontliner, general trade sales channel is further divided into two sub channels depending upon who upon how the order fulfilment or delivery is happening:
Dealer Sales: Dealers are businesspersons officially appointed by the FMCG company to work in defined geographies within a city, to stock goods, handle orders, deliveries and returns. company takes care of marketing, retailer activation, order taking, promotions and leverages dealer’s local knowhow, working capital, time and manpower for a standard margin (ranging between 5-15% depending upon the size of business). In dealer sales functionality, the dealer compiles orders placed by the sales rep during the day, checks and commits inventory in his warehouse, and then makes a dispatch schedule depending upon a multitude of factors like order size, SKU mix, retailer type and importance, route plan and overall viability. Overall, dealer sales is about 80-90% of General trade sales and applicable for most FMCG goods where delivery is not required immediately due to non-perishable nature of products and retailer buying with a long-term purview say week or fortnight or month.
Van Sales: Van model is used in cases where a company need to deliver its products within x number of days of manufacturing, i.e. they are perishables, where product differentiation and margins are low therefore not attracting alot of dealers, and where retailer buys for today and next few days. Van sales begins when goods are loaded from the company’s depot (which gets a regular supply from factory) onto vans and move on defined routes (similar to FMCG beats maybe a bit more elaborate) stopping on retail stores, handing over the goods based on current demand (visibility of the retailer), and collecting money (past and current depending upon the payment terms).
Below is a growing list of General trade modules that Peri provides to Indian FMCG companies to automate their business process, facilitate the field working of sales teams and give a holistic view of the business to the sales middle management and leadership.
In a sales automation software like Peri, the core of everything is the master data and is the recipe for success. For general trade sales, master data includes:
- Product master including packing and pricing
- Employee master
- Dealer master
- Retailer master
- Trade promotions
- Beat master
- Adhoc like unit of measurement, designation, allowances and survey questions
FMCG general trade sales on Peri begins when the goods are shipped from a company depot (or C&F depending upon the primary distribution model) to a dealer called the primary sales. We also give dealers the functionality to place orders to the company depot called the primary orders which saves the inefficient phone calls and follow up by sales managers and depot supervisors.
Dealers are mapped to sales representatives who are then assigned the task of doing physical stock audits at dealer points and report on Peri. This workflow ensures that even when dealer management system is not available, company is still able to extract secondary sale numbers using the mathematical formula opening plus primary minus closing equals secondary.
General trade sales is a manual grunt work, it requires a fleet of sales representatives who will hit the retail clusters day after day to generate incremental demand and take orders. Peri manages this fleet or feet on street as they are often called, in a way which gives a birds-eye view to sales managers and leadership.
Retail universe is perhaps the most important digital asset of an FMCG company who is in general trade sales. Thats because there are about 12 million retailers in India, of which say 50% are part of the addressable universe. Even if a company wants to capture say 10% of it (i.e. 6 lakh) it would need to deploy a very large salesforce (more than 500 reps). Peri allows general trade sales representatives to add a retail outlet in about 30 seconds.
Once retail outlets are added, a Peri user visits a particular outlet, does a checkin and fills a form in case sales call was not productive and no order was taken, less than 60 seconds in total.
General trade sales is all about secondary order taking i.e. order taken from a retailer and placed to a dealer (could be a distributor or sub distributor). Depending upon the spread of SKU’s this takes anywhere between 1 minute to about 5 minutes. This includes checking historical sales data, sharing trade promotions (or schemes) with the retailer, and asking payment terms.
General trade sales representatives typically end the day by handing over retail orders to the dealer and doing a quick check of how much inventory is available, whether there is need for replenishment from the depot. Once this is done, the dealer plans dispatch of the goods using his own commercial vehicle and a delivery agent. Peri provides dealers with consolidated dispatch plan based on committed inventory and a pseudo invoice (because actual invoicing happens on dealers accounting software).
One of the key difference between general trade sales and van sales is that in van sales secondary orders are not placed in advance, instead a vehicle (run either by the company or a distributor) is loaded based on daily forecast, and is sent on a route where it keeps making pitstops to offload goods to retailers. Peri automates this day-start loading and day-end unloading process seamlessly on the mobile phone.
Unlike general trade sales, where accounting and collection are responsibility of the dealer, managed on an accounting software like Tally, in van sales the outstanding and collection management has to be handled at the time of delivery. Peri takes care of this by giving a convenient outstanding dashboard where the van driver can easily check the total and invoice-wise outstanding and go ahead with collection using FIFO or manual approach.