Reinventing Distribution 4.0 – Formalisation of Workforce

The degree of informalisation of the Indian economy is one of the highest across the world with ~88.1% (as of 2019) of the entire workforce categorised as “unorganised”. While this quotient is high, reeling from the wounds of the ongoing pandemic has deepened this impact. But for consumer goods companies, what is important to note is the effectiveness of the underlying distribution network which makes the products available and accessible. Today, with omnichannel gathering traction and changing consumer sentiments, there appears to be a need for recomposition for distributors’ operational structure and methodology. This, in turn, synergises with the overall goal of formalising the workforce for better outcomes.

Issues in current Distribution Channel Set-Up

On the demand side, a lot of new retail channels are emerging that are disrupting “Where” and “How” shoppers are shopping. We have seen the growth of modern trade in the last decade, e-commerce/online retail in the last 5 years, and now hyperlocal delivery models like “Click & Collect”, etc. As shoppers move to an “Omni” mode of shopping, expecting the products to be present “when” and “where” they shop, FMCG/CD companies will need to adapt their distribution models to enable this.

On the supply side, factors like changing aspirations of distributors, changing role of modern trade as a distributor, increasing complexity of FMCG business due to increasing categories and skills, increasing competition for shelf space in GT, the rise of private labels, and the rise of new distribution “aggregators”, are impacting the traditional distribution model.

Sales force turnover (across all levels, and especially at the field sales level) is also increasing, and research shows that it can be as high as 100-150%, annually. This is due to stiff competition from new-age businesses like e-commerce delivery, food-tech companies, mobile phone retail, electronics and apparel retail (single and multi-brand outlets), QSRs, jewellery chains, Modern Trade chains, etc. This is making it very challenging for FMCG companies to recruit and retain salespeople, putting further pressure on their model and margins

Increasing channel conflict on pricing, discounts, and range between General Trade, E-commerce and Modern Trade is increasing pricing and margin pressure on FMCG companies as they juggle their volume growth ambitions with prices and margins while trying to build their “Omni” channel presence. While the end consumer may be benefiting from this conflict through lower prices, the pressure on margins across the value chain continues to grow.

These blind spots can be solved with simple and comprehensive Digital Workforce Solutions which are tech-enabled approaches for an integrated end-to-end productivity suite. The brand verse is redefining strategies to align people, processes and technology to navigate through headwinds. It is imperative for organisations to decode the composition for this changing distributor landscape to drive formalised growth.