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“Distributors Have to Evolve Themselves to Be In Business. Margins Are Constantly Declining and Overheads are On Rise Year-On-Year”

Rajchandra-Agencies-Mukesh-R-Gupta

Rajchandra began operations in the year 1998 with Henkel Spic (FMCG) as its first venture into Distribution business. Talking to DeviceNext Mr. Mukesh R Gupta of Rajchandra Agencies said “Our beginning was very humble with the first year turnover being a meagre Rs.35 lacs. With our efforts and commitment we were the top most performing distributor for the brand in Mumbai and overall West Region within a span of three years of our operations”.

With our superlative performance in the Home & Personal Care Products, HUL gave Rajchandra the opportunity for the same category of products. From here on Rajchandra moved very swiftly and established itself as the one of the prominent Distributors in FMCG business. The also added Cadbury India to its business portfolio.

With the new emerging sector of Telecom, the company didn’t wanted to miss the opportunity, and hence ventured into Distribution of Airtel. They were instinctive of the Handset business with the rise of Telecom sector. And thus, they began the distribution of LG Handsets.

As a strategy they have diversified category of products into its Distribution fold. Currently they are Distributors for Airtel Mobility (Telecom), ITC Ltd (FMCG) & Vivo (Smartphones). This provides them an advantage to sail through the challenges smoothly in tough times in a particular Industry or a specific Brand.

Q 2020-21 is very difficult situation for all of us, how it affects the distribution business

Covid-19 has brought immense challenges to every Trade & Industry worldwide and Distribution business is no exception to this pandemic.

The term “Distribution” in itself describes the meaning of a business model wherein the supplier facilitates to supply any product or services to the retailer. Thus, a Distributor has to reach its customers through his sales and logistics team. Due to the government restriction during the Covid-19 pandemic this model has been disrupted very badly and the impact is very huge and long lasting. Cash flow of the distributors has been adversely impacted because of the delayed payments from the Retailers. Even some portion of the debts have also turn “Bad” (due to shutdown of some retailers) because of the high exposure of unsecured credit to Retailers.

 Q Tell us but about your collaboration with major brands and its journey

 As a strategy we have three different lines of business including Airtel Prepaid, ITC and Vivo Smartphones. All three distribution verticals doesn’t correlate with each other, implying that none of the business vertical will hamper or add prospects to each other in normal circumstances. By following this policy (three varied verticals) we have insulated ourselves from the “ups & downs” of a particular business or for that matter a specific brand. For eg. our ITC (FMCG) business was fully operationally during the first lockdown, and as the gradual opening began our Vivo Smartphone business was at its peak. Thus, this policy has benefited to a great extent.

Q As more and more distribution houses looking for online transition what’s your take on this?

Online business can never grow beyond a certain percentage of overall Trade in any particular business category. Indian consumers are very much price conscious and it definitely impacts his/her decision of buying the product “at the right price”. Brands has the sole authority in deciding its business policy, whether to go through offline or online or follow the dual channel strategy. All the major brands have a clear policy on its business strategy, and thus the distributor has to abide by the company’s policy.

Q As a leading distribution house of West India market, your thoughts on overall, Smartphone, Accessories and other market opportunities and challenges

 Smartphone industry has seen huge consolidation in the last 5 years. And we have witnessed big brands of yester years have exited the business or have seen huge drop in business. The top five Brands contribute more than 90% of overall smartphone market in India. This has led to limited opportunities in the Industry for the Distributors. The Distribution margins have also shrunk since last 3 years because of the immense competition between the Brands to provide better specs at affordable price. This scenario in Distribution will eventually lead to consolidation in the Industry for distributors. In the near future the distributors who mould themselves according to the changes and win the challenges coming in their way will eventually survive in the Trade.

Accessories market is very highly (largely) overcrowded. In reality there is no space for such a huge number of players. Even the big brands like Mi and Realme have focused on accessories to a great extent although through “force selling” (bundling) too. And other major brands are expected to follow soon sensing the additional business with greater margins. Thus, the Brand who can scale up nationally or have presence throughout the country will be able to survive in the near future.

Distributors have to evolve themselves to be in business. Margins are constantly declining and overheads are on the rise year-on-year. To sustain and survive in the distribution business the only mantra is constantly growth in business while restricting the working capital requirement and be agile on the inventory and market outstandings

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