Traditionally, there was a set hierarchy of IT distribution in India of National Distributor (ND), Regional Distributor (RD) , Distributor (Disti) and dealer which was functioning smoothly and efficiently. With onset of new channels like e-commerce, this traditional set-up and standard model of distribution is disturbed. Today, Companies have multiple options to send their products to the end user.
In the current boom of e-commerce, it has been observed that there is huge disparity in prices of the same product. At times, there have been instances where the same product is available at a cheaper price at a store than the price quoted by a disti.
While the company continues to make profit either ways, it is the distributor who suffers loss. Also, with more customers embracing the online mode of purchase, distributors and dealers find it difficult to compete with the online pricing model.
Till now it has never happened that goods (products) are supplied from a non-metro to a metro market. Frequently, it has been observed with launch of certain schemes floated by the company and backend structure, quantity is often dumped in a non-metro region.
For instance, if a distributor has a capacity of 200 quantity (qty) and under some scheme 500 qty is purchased , he sells 200 in the metro city and remaining 300 is sold out in other region with a price cut. This inevitably affects the local distributor’s deals and transactions. The local distis have many a times raised and voiced their concern about this dumping and price difference but no concrete action is initiated so far by the companies. On the other hand, disti ends up locking up his inventory which is nowhere profitable.
It is therefore absolutely essential for the companies to have a fixed structure of their sales network. Alongwith increasing awareness about the product in the market, they should protect interest of channel partners as well.
Companies manages to sell its complete inventory but the net profit is marginal. However, it is easier for the companies to engage people for buying out the products, stacking up in warehouses and deploy staff for market. But they should not overlook the fact that the market capacity and schemes of the metro and non-metro market are different. The existing disparity has already caused a lot of resentment among the distributors.
Earlier with octroi, official distributors would restrict their selling in the city limits. Even online retailers were compelled to sell within city limits as even they had to pay octroi for out of city delivery.
With abolition of octroi and LBT claims, online sellers now have an edge over the players. It’s always win-win for companies as even in this scenario, it’s the company that benefits by selling it inventory.
Fierce competition results into price cuts. From the customer point of view, when customers get a better deal online, they try to bargain and question dealer for a similar price. This adds to the trouble for a dealer, as even he can see that the product is readily available at lower price. When in turn dealers question distributors, but doesn’t have answers.
This has led to a scenario wherein customers now prefer buying online!
After implementation of GST, scenario might change but it will largely depend on the policies that companies adopt. If they continue to give huge discounts to bulk purchases, the things may not look good in long term.
There is a possibility that companies would look out for options that would opt for bulk purchases and might choose pan-India billing. This might also bring in closure of the non-metro market offices of companies for cutting cost and adding to profit.
It is therefore need of the hour that association across states, city levels come together and address this issue.
Under Make-in-India campaign, manufacturers must be provided with subsidy, tax holiday, funding support, land, electricity, water at affordable rates. This would encourage manufacturing in India and provide a push for global marketing.
Today, most of the hardware components are imported. Hardware and Software are two sides of the same coin. But if you see the policies, they appear to be more conducive to software industry. There is no significant acknowledgement to the hardware industry and service/solution provider.
Without any government support, there are dealers who have worked hard at grass root level, and have generated employment. Such efforts needs to appreciated and acknowledged by the government body.
Looking forward, online purchasing will grow and we have to look at it as an opportunity. We should develop our own apps and design own marketing strategy. We have to deploy technology to make our venture profitable and for that we all have to unite.