The Gray Hair Speaketh

Why distribution is a key differentiator, and why deliverability is not the same as distribution!

Sharing some thoughts in this video around why distribution still wins the game, even in this era of e-commerce, which enables deliverability!

Detailed transcript:

Why distribution is still a significant factor and why distribution is not the same as deliverability.

That’s what I’m going to talk about.

For the last several decades as I have traveled around the country, whether on work or on vacations and have visited other metros or tier 2, tier 3 cities and towns, sometimes even smaller places, what has always fascinated me is to see the presence of certain brand logos wherever I go.

And there are the usual suspects, the ones which you see everywhere, the Marutis of the world, the Mahindras, the ACC cement or many of these, some of them are B2B brands, some of them are pure B2C brands, but just the very presence of these across the country is always fascinating to me.

Even before the advent of e-commerce and especially before, in fact, it was this significant distribution that allowed a product to be available across the country and the interesting thing the way I saw it was that for a company with such wonderful distribution, if they had to introduce a new SKU, a new category item or something like that, all they need to do was to power up that distribution network and suddenly the product will be available across the country.

And even if there is a small uptake across the country, that launch has just happened just like that and which is the edge which some of these old and traditional brands have because in those days when they were building up their market, unfortunately, there was no other option except to get physical distribution.

Now today, a lot of brands feel that it may or may not be necessary because hey, I’m selling on Amazon or I’m selling on Flipkart and my product can get delivered to every pin code in the country, etc.

And you feel that that’s a reasonable alternative to having physical distribution on ground.

And somehow I do not quite agree to that thought process.

The reason is this way that on an e-commerce platform, first of all, if you are, let’s say, a detergent brand, you are one of several, like tens or sometimes hundreds of such alternatives which are available to the customer, it’s not like your brand will be in their face when they come even to the detergent section of the e-commerce store.

It needs to be searched, it needs to be scrolled and found, and it’s competitive because you’re there, your competitors, everybody is there, it’s a level playing field.

And the factors which may influence choice on that platform, maybe around price, maybe around terms and other things, unless there is a tremendous brand value that you’ve already built for your brand, if somebody comes looking for your brand, and if somebody feels that price no matter, nothing matters, this is the only brand I want to purchase, then it’s fine.

You may believe or may perhaps be okay to say that I don’t need physical distribution because e-commerce gets me the market and people are coming to the online stores and looking for my products, they’re willing to pay a price and they’re willing to buy and then we’ll deliver it wherever the customer may be.

But it’s a luxury that few brands can actually claim to have.

So if you’re a new brand and you’re just launching out and hey, maybe you’re powered with tons of venture capital money and everything, so you can do big, high decibel campaigns and suddenly people start noticing you and yes, at that point of time when your big campaign is running, people will search for your products, will find it and maybe purchase it.

But loyalty is actually a thing of the past in real sense.

And in any case, if you’re a new brand launching out today in 2024, it’s not before 2029, maybe that you can think that my brand has really got built and people are coming and searching for me and finding me, doesn’t matter whether I advertise or not.

It takes a long while, it takes a long time to build that kind of a draw for a brand.

So the option for you could be to constantly advertise, constantly be in the face through advertising, which is not always affordable, not always easy.

On the other end, if you invested the kind of effort and money in building distribution, so now think about it that you’re in a small town in West Bengal or Orissa or wherever and there are people there and as they walk around, they ride their two-wheelers, their bicycles, their cars and on those walls or in those stores, they see the logo when they walk in, they notice something different, they notice your new brand and logo and check it out.

They get a physical feel of what the product is, if it’s a food product, they get to taste it, if it’s a fragrance, they get to smell it and there’s a good chance that they may try it out even if they had another brand which was a preferred brand for them.

So would that be more long-lasting?

Chances are at least in those areas where you build a distribution, there’s a good chance that you may find it a more sustainable brand preference story because it’s less likely that 5 or 10 or 20 other competitors will want to be next to you in that shelf and put time and effort and investment in doing so and that’s what makes you stand out.

So I believe that there is, of course, a huge role that a brand plays and establishing a brand, establishing the draw for the brand, it plays a huge role, but it takes time to build one and in today’s day when there are challenger brands which keep coming all the time, I’m not sure even whether even the old well-established brands can take a moment to relax and say, okay, I don’t need to advertise, I don’t need to be out there because there is enough market pull that I’m generating out of my legacy.

It’s not always that easy and in that sense, if you’re a new brand, if you’re somebody who has just come up, you would have absolutely no choice on that front because you’ve not even established your brand so far.

So basically the debate is whether to invest time and money and effort in building physical distribution or only focus on an online delivery model or do both and of course, if you have the means and if you can do both, I would say 100% that would be choice number one.

Nothing beats the physical presence in a store across the country, across various parts and if you have limited budgets that you can’t really put feet on the street across the country, can you do statewise, can you do a particular market and at least establish yourself there and then continue to service that space, continue to have your sales folks keep going, meeting the retailers, meeting the distributors, ensuring that any challenges that they have are being taken care of and ensuring that there is physical presence, there is visibility, there is shelf space, all that you are getting and establishing your market in those pockets wherever you establish distribution.

So much as I am a digital marketing professional, I do believe that physical distribution is a brilliant winner, a brilliant differentiator and all the old brands who have built their strength and their numbers over the years, I think it’s thanks to that fabulous distribution that they set up and which they nurture, which they sustain and that’s a huge moat which they’ve established for themselves against a challenger brand.

E-commerce is about deliverability that my product can reach any part of the country.

It is not about demand generation, it’s not about brand preference, it’s not even about visibility.

So that’s the difference.

Invest in creating a distribution network for your products.

I think it will pay back well.

Thank you.

March 27, 2024 - Posted by Sanjay Mehta | Business Model, Ecommerce, Retail