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.
Distribution 4.0 – Reimagining FMCG Distribution for 2030
The evolution of distributor models from the generic push from manufacturer to end consumer with channel partners to deploying sales reps to categories and SKUs, thereafter culminating in inventory tracking systems plus outsourcing sales reps for better performance and coverage in General Trade (GT) and Modern Trade (MT) paved the way for necessary interventions.
Given that FMCG and FMCD companies are at the vantage point where they are staring at a major disruption in their existing distribution models, the pertinent issues of distributors are forcing the FMCG/CD companies to massively expand their scale and reach in terms of presence and workforce. Essentially, this resulted in increased adoption of technology and an effective plan for workforce management for both core and temporary employees.
So, what could FMCG companies do as they plan for the next decade? If we fast forward to 2030, the overall retail in India is expected to double to $1.5 trillion from today’s $700bn, and while it is difficult to predict how large each retail channel will be, we can expect GT’s share in overall retail, though still dominant, to come down to 50% (from today’s 85-90%). In addition, many GT/Kiranas in Metros and Tier 1 & 2 cities are expected to upgrade to look and feel more like MT, a trend that is already prevalent. MT will continue to grow and could have a share of 25-30% by 2030, driven by its expansion into Tier 1, 2 and 3 cities with different formats and sizes. E-comm could easily account for 15-20% of total retail by 2030 (our research shows that it accounts for almost 50% of retail in China today) driven by higher smartphone and internet penetration, growth of digital & mobile payments, and expanding logistics infrastructure
The scenario, which is more likely, will be the game-changer. It will require Consumer Goods companies to give up the ownership of the distribution model, and partner with multiple players for the best market coverage between urban and rural markets, focusing their efforts on marketing, branding and in-store merchandising to create a best-in-class shopper experience (“retailtainment”). In this scenario, they are likely to partner with aggregators, e-commerce delivery companies, rural distribution companies, and distribution arms of modern trade to drive coverage.
As per Jobs and Salaries Primer Report 2021, with new-age businesses, various hot and upcoming jobs in the space are making entries like Digital Tailor and Virtual Store Sherpa, Customer Experience Leader, 3D Designer, Communications Manager, Sales Consultant for Virtual Brands and numerous other well-paying roles in metro cities.
Click here to read the full report covering all data points and insights
13 Reasons Why Staffing Solutions Can Ease Your HR Woes
Here are 13 reasons why companies should seek staffing solutions: Finding the Right Talent: In India, the country’s working-age population is expected to increase by...Read More
Powering the Next Wave of Inclusive Growth through Business Correspondents
What types of products and services can be provided by BCs? The roles and responsibilities of BCs can be defined under the contract between the...Read More
5g Services in India Unlocking Job Growth Potential
In addition to the direct income contributions from these new business sectors, service innovation will be essential to fostering expansion in the connection industry. 5G...Read More
Quick Commerce: Is this a profitable and sustainable way?
Is this a profitable and sustainable way? The quick commerce trend has primarily accelerated due to its sheer speed, the convenience of ordering, and the...Read More
Optimistic Employment Outlook for Services Sector this Quarter, Nearly 73% of Employers Intent to Hire
Large firms lead the hiring intent by a significant margin Employers anticipate strong hiring intent across sectors by business size. Small services firms are displaying...Read More