The 103 billion dollar Indian FMCG industry, growing at a CAGR of 20% is unique compared to anywhere in the world. For starters, majority of its stakeholders are from traditional or unorganised retail as some people call it, which makes consolidation and control a very difficult proposition even for multinational giants like HUL and P&G. Second, it is regionally spread, across the 37 Indian states each having its own taste and brand preferences. Third, and the topic of this blog, the majority of Indian retail transactions are conducted onsite i.e. by visiting retail outlets at periodic intervals, by human resources called the sales representatives or frontliners or feet-on-street.
Crisis like COVID19 exposed the pitfalls of this physical engagement model. And manufacturers would need to act quickly to prepare and reconcile their workforce in the post lockdown reality.
Prevalent Sales & Distribution Models
Let’s look at the Indian FMCG manufacturers having a packaged, branded product portfolio in any of the top 3 product segments namely Food & Beverage (44%), Personal Care (24%), and Household Care (15%).Below are the typical sales and distribution methodologies it would employ to make the product reach end-consumers with the overall aim of creating a profitable business model:
- Pure Wholesale: Manufacturers that favour this model typically have a good quality, decent tasting, and minimal differentiation product, in a safe category, say biscuit or namkeen. They activate wholesale buyers in top cities within few hundred kilometres of the production unit, give a great margin, delivery assurance, offer personalised service and bingo, the deal is done. The wholesale buyer makes sure the product reaches counters where he has captive presence and retailer is offered higher margin (vis-a-vis competition) to push sales to end consumer. Now if the product feedback is good, the ball sets rolling and the manufacturer has built a low margin, steady business. Such companies have none or couple of sales resources with minimal processes and automation. As per our experts, these manufacturers would have severe sales impact in situations like COVID and they need to find ways other than automation to mitigate the risk.
- Wholesale & Retail (80/20): Because the wholesale model is dependent on bulk selling to limited customers, it is high risk with little predictability because the wholesaler can shift to a new product or altogether stop buying. Many manufacturers therefore prefer having some degree of control by opting for a hybrid model (80% wholesale and 20% retail) where they first activate handful of key retailers in their native geography, say few cities within 50-100 kms where product can be easily delivered by company vehicles on a regular basis. Their brand recall, retailer loyalty and confidence in turn attracts wholesales from further areas who are happy to pick up bulk orders. Such companies employ upto a dozen sales reps, with minimal automation. As per our experts, these manufacturers would also have serious sales impact in situations like COVID, and they can mitigate future risks by increasing the retail business share (from 20 to say 40%) and implementing automation in the organisation to gain stronger control over the business.
- Retail & Wholesale (80/20): When handful of product in the manufacturers portfolio get good traction, production is automated with excess capacity, they jump to the third model where they gain direct control of retailers in majority of the geographies (say 25-50 cities) by putting their own sales reps or feet-on-street. Around 80% of business comes from direct retailing and 20% is still indirect, handled by wholesale buyers. They manufacturers have sizable sales team, and typically with low-t–high degree of automation (depending upon a multitude of factors like company culture, geography, and quality of senior sales management). As per our experts, these manufacturers would entail low-high impact on sales in situations like COVID, and they must give a hard look at the quality & depth of their automation to mitigate future risks. In this blog, we will specifically cover this category of manufacturers.
- Pure Retail: These are exceptionally large manufacturers who have elaborate portfolio, often spanning across multiple categories and they enter a geography only when they can deploy their own sales team. They have massive database, often in sync with Nielsen (world’s leading market research agency), have a set of exclusive distributors (often having their own sales teams as well), retailers who are extremely loyal to them, two or three brands as market leaders with steady sales growth, and rely on above the line (ATL) marketing activities plus trade schemes for incremental push. As per our experts, these manufacturers would benefit in terms of a sales jump in situations like COVID, and may identify opportunities to augment their automation strength on certain specific areas.
Tale of Tier-2, 3 Manufacturers
As the old saying goes
it is the middle tier in any macro or micro structure that bears the maximum pressure and takes the maximum brunt because they are neither fully-in nor fully-out
Same is the case with tier-2 and tier-3 Indian manufacturers, who have been working extremely hard with creating the right product, activating the right distribution channel, spreading the word to retailers using a large sales team, and struggling with consumer loyalty.
Peri CRM wants to work exclusively with these manufacturers, hand-in-hand to:
- to create awareness about power of automation
- to align their business process around automation
- to remove inefficiencies built in their business processes
- to respond to crisis situations like COVID19
- to have a blue-print in place for the next 12 months
- and to derisk their sales, distribution, and brand attractiveness in similar future events
Why Mobile-First and ASAP?
The traditional approach to automation would have been to float broad business requirements in the market, attract few software vendors, narrow down to a product, agree on commercials, create a business requirement document or “as-is” and business blueprint or “to-be” and then invest the next 3 months to 1 year in implementation, with less than 50% probability of success (as found in multiple research studies). The top two reasons behind the high failure rates of legacy automation projects are: most enterprise applications were client installation, heavy-duty in nature, requiring elaborate implementation and setup and biggest with a mandatory desktop or a laptop 2) by design, their data capture forms were cumbersome with multiple fields, their data grids elaborate
The modern approach is to go mobile-first by choosing an industry-benchmarked salesforce automation solution, with a vendor with agile deployment methodology. Below are the reasons we believe, this is a no-brainer for all tier-2, 3 Indian manufacturers because of the following reasons:
The immediate need for tier-2,3 manufacturers working on a hybrid sales and distribution model with retail dependence of anywhere between 20% to 80% is to digitise the retail universe which includes the following fields:
- Clean Retail Outlet Name: without any special characters, white spaces and spelling typos
- Accurate Mobile number: 10 digit, validated mobile number
- Photographs: Basic photograph of the facade preferably with retailer name
- Outlet categorisation: to know the retail format and business potential
A mobile-first CRM digitises the retail universe data with the aim of assigning it to field representatives and this very act ensures that magnitude of automation is distributed across a team (not just the headquarter MIS team) which means it becomes a shared responsibility. In our experience, a company which launches mobile-first CRM can digitise anywhere between 500 to 1000 outlets per sales representative which means that a team of 50 can digitize upto 50k outlets in the very first month. We recommend companies to first digitise their A class outlets in the first go so that the return on effort becomes high.
One of the top advantages of a mobile-first CRM is that the entire sales organisation is tied to a single thread i.e. a single version of reality which noone can refute. This ensures that the work allocation, communication, and performance assessment happens on standardised parameters. And in situations like COVID19, this proves to be a great boon as the disruption is minimum.
A situation like COVID has paralysed mobility of professionals who have been instructed by governments to work from home. But work from home is a relatively new concept for the Indian non-IT industries, and an unheard phenomenon for sales, marketing and distribution teams whose primary work happens on the field. Imagine being a mid-aged sales representatives of a tier-2,3 manufacturing company handling a highly dense city like Delhi, where the daily routine was to knock doors of 40-50 retail outlets and couple of distribution points. Work from home can prove to be painful, boring and unproductive. But not for companies who had implemented mobile-first CRM’s sometime back. When FMCG companies introduce a mobile-first solution, an important element of work from home that is touchless work assignment, gets automatically addressed. Which means frontliners are accustomed to independent working, managers are accustomed to remote monitoring, senior management is accustomed to top-down business analysis and data-driven business review.
FMCG sales is highly dependent on retail connect specially for tier-2,3 manufacturers who may not have pull brands in their product portfolio. Retailer shelf is a sought-after commodity which means that there are multiple brands within a product category say biscuits, eyeing for the shelf space, and “out-of-sight means out-of-mind”.
A mobile-first CRM has the advantage of keeping retailers connected through regular reminders (through sms or WhatsApp). And sales representatives have the retailer history based on which they can make phone calls during lockdown situations like COVID19.
The COVID pandemic is proving to be an economic meltdown which may last for months or years, depending upon how soon the curve is flattened and a vaccine hits the market. Till then, FMCG companies will have to absorb the impact on their sales due to reduced consumer demand, especially for non-essential products. One way to prepare for the slump is to be very clear, through hard data, which geography, which segment of retailers, which products will have the maximum impact. And a sureshot way of doing this is through a data visualisation/analytics platform sitting on top of the mobile-first CRM.
A harsh reality about an economic downturn (triggered by events like COVID) is that manufacturers would not be able to sustain the large sales team which they were maintaining before the event. The typical areas where inefficiencies were concentrated will become glaring during a crisis situation. Few examples where the HR department of a manufacturer may focus are:
- Newer territories: where cost of operations is higher than the business returns
- Highly dense pockets: where the work of two resources can be done by one
- Low relative performance: resources who have been performing low, relatively
- Less tech savvy: resources who are slow on the tech adoption curve and may find it even more harder working remotely.
The biggest benefit of a mobile-first CRM is to level the playing field, and give equal opportunities of performing to all members of a sales team. Which is where the performance assessment comes into play. Although this can be done manually, few mature software solutions provide a comprehensive performance assessment framework which includes:
- Industry-recommended, gold standard KPI’s
- Importance and weight allocation to KPI’s for various roles
- Baseline measurement of KPI’s for each resource
- Daily, weekly and monthly computation of these KPI’s
- Point computation for each resource and relative ranking
As an automation partner to Indian FMCG companies, Peri CRM wants to stress the importance of pegging on the automation journey, ASAP. This is because we are entering a new world order (post COVID era) and the economy, consumer behaviour, competition, GT and MT models, human resource output and sales number are not gonna be the same. And a sureshot way of preparing your sales and distribution capabilities is to transform the business processes to a mobile-first solution under any one of these software categories:
- Business process automation (BPO)
- Field sales automation (FSA)
- Salesforce automation (SFA)
- Customer relationship management (CRM)
- Dealer management system (DMS)