Given the growth of the distributor network is evident in 2019 and years to follow, channel partners need to start focusing on long tail distributors.
Online marketplaces have seen significant growth over the last few years, providing brands with an opportunity to increase their presence in Tier II and Tier III towns. This has led to increased demand for offline distributors and dealers who now are now providing stocking and return services in these remote locations. Specifically, in 2018, the demand from urban consumers has reached a level of maturity, thus online platforms in an attempt to capture exponential growth are looking out to establish an offline presence in remote towns through the distributor platforms.
For example, Amazon allows businesses to buy on their platform and claim GST credit as well as for their business purchases. This will establish the small distributor market, who used to do bulk purchases as consumers on these platforms and then further sell in Tier II and Tier III town. Also, new platforms such as Meesho allows homemakers to turn into resellers of products within their network on a social channel, leading to the growth of micro-distribution.
With cash becoming expensive and traditional NBFCs tightening their wallets, small distributors may be challenged to arrange for instant cash. Stock dumping by channel partners will stress their working capital cycle which will, in turn, hurt the channel partners resulting in delays and defaults of payments
Small resellers/dealers will grow – Increase the long tail of the distribution
Given the growth of the distributor network is evident in 2019 and years to follow, channel partners need to start focusing on long tail distributors.
What are Long Tail Distributors?
The long tail is a strategy that channel partners adopt to attain significant profit out of selling low volumes to many distributors/dealers/resellers instead of only selling large volumes with low margins to select few customers
Long tail distributors are those set of purchasers which do small and infrequent purchases but form the bulk of distributors numbers. Even though their contribution to turnover may be not more than 20%, but they form a critical component to drive high margin product sales in remote towns. As competition from online platforms to tap this market becoming intense, channel partners need to start focusing on this segment to witness scale.
Long Tail growth will require Pan India presence – Manage risk of credit
Historically, channel partners have been reluctant to nurture their long tail distribution network, given the amount of time, money and risk of credit involved. Deploying a collection strategy to service this long tail involves costs which lacerate the thin margins with which channel partners operate.
This is where channel partners can smartly partner with new-age fintech lenders to take that risk while they continue to focus on business growth. New age lenders customise Supply Chain Finance programs for brands and channel partners, where instant cash is at the disposal of distributors/dealers/resellers to drive the inventory purchases.
Increased conversation and trust between vendor and customer
The ‘high frequency of contact’ nature of the relationships between members of the supply chain indicates the forging of a strong equation between the stakeholders. Despite rapid automation of processes and increased adoption of self-service purchasing, customers do rely on vendors to provide expert advice on inventory purchase. Therefore, we would see channels being considered lesser as lead-generation systemic flows and more as customized relationships to embolden efficient decision-making across the eco-system.
