Reconstap Consulting
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Learnings - Setting Distribution Network in India

5 important learning’s for developing/expanding Distribution Network in India

We are happy to share our learning’s and experience from past projects. These can be useful for the companies (particularly in industrial goods) that want to setup or enhance their distribution network in India.

1. What can be the right profile of a potential partner?

For B2B products, partners having customers in the targeted end-user markets (and catering them with complementary products) might be better than the ones having experience in same product portfolio. This is mainly because of two reasons:

  1. Most of the well established distributors work on “One Company One Product” principle. This means representing only one company for a range of similar products. This would make tie-ups difficult with the distributors that are already covering a product range intended to be launched by a new company. However, if a distributor is facing challenges (on behalf of his current principal) caused by supply constraints, constant quality complaints from customers or depleting margins due to severe competition in commodity products, there can be an inclination to partner with a new principal that can help in overcoming these challenges.
  2. If the distributor is selling low-value and low-priced commodity products it might be difficult for him to overcome his perceptions and undertake efforts to create market for value-added premium products.

2. How many partners are required to cater the market efficiently?

  1. It depends on the number and diversity of end-user markets catered by the products of the principal company. For every major end-user market, appointing one separate partner with clients in that market is recommended.
  2. If several markets are related (for e.g. paints, inks & coatings or food & beverage), appointing a single partner might be sufficient to cater to them efficiently.

3. How to provide technical knowledge to a partner and what are its benefits for the principal?

For products that require sound technical understanding to be shared by the local partner with targeted customers, initial joint client visits by the principal company and partner are essential. They serve two important purposes-

  1. Practical and on the ground training is received by the partner by observing his principal tackle the queries of potential customers and this is then applied in his discussions with other customers
  2. These joint visits also start the business development efforts by value-addition from both the principal and the partner. The partner value-adds by sharing contacts of his existing clients, which can become potential customers for the new principal and also shares his knowledge of local business practices with the principal. On the other hand, the principal’s engagement ensures reduction in gestation time for acquiring new clients by answering their queries in a satisfactory and time bound manner.

4. How to deal with the expectations of exclusivity from the partner?

Overall exclusivity (in case of products targeted to a limited client base) and regional exclusivity (for commodity products requiring partner in every region) is commonly desired by the partners. However, exclusivity should be based on satisfactory performance and granted by a principal company to its partner on achievement of mutually agreed milestones in a time bound manner (18-24 months after initial agreement).

5. How can gestation time for market penetration be reduced?

If major global customers of principal company are present in India, then the partner can develop those accounts in a time efficient manner. This can be achieved by providing global client references (where product usage is already approved) to the partner, which can be quoted by him for gaining a quick start rather than building discussions from the scratch. If this is not the case, it might be logical to expect the partner to take 3-24 months in getting new products approved by the technical and procurement departments of potential clients basis their requirements and acceptability of price.