With the fight for the market share moving from the metros to the B&C class cities, business strategies too are being redefined by IT manufacturers as well as the national distributors. The national distribution model alone is inadequate to extend their reach, and this has brought into prominence the regional distributors and sub-distributors who both the manufacturers and NDs are looking to leverage on.
The recent elevation of Supertron (the Kolkata based distributor) and Fortune Marketing (the Delhi based distributor) by Seagate to its NDs (though not yet officially announced) is a recognition of their strong regional network. With a national distributor, Ingram Micro, already in place, Seagate is moving towards a multi-disty approach. This is the new emerging business trend – have a national distributor and regional ones in the major zones.
In an earlier article, I had mentioned how the RD trend is catching up and manufacturers like LG have succeeded with this business model. But RDs can be effective only when the manufacturer can take care of the logistics and has a presence in a minimum of 30 Indian cities. A manufacturer clings to a national player for financial assurance, logistics management, higher market share and a brand name. For instance, Samsung and HP have only national distributors. All the above three manufacturers might be successful in their business in their own way, but the latter’s cost of running a business is undoubtedly higher than LG.
So the best way as Seagate is planning is to have a combination approach like Lenovo’s – Lenovo has two national players and one regional in each zone. This ensures that the regional partner does not become complacent and generate monopoly and also enables the manufacturer to tap the distributor’s expertise. This would give manufacturers the advantage of regional strongholds in terms of focus on specific regions and a better knowledge of market/upcountry geography, specialty distribution and a customized local flavor. And the national distribution advantage of control over products and prices and their key competencies in areas of partner base, product portfolio, as well as cost to serve.
With a multi-disty approach, the manufacturers can better address issues like parallel imports too by reacting locally than taking a national-level decision and meet with faster feedback. The national players are slowly planning to decentralize decision-making and empower regional management, thus further enhancing their business. The new approach would provide partners with customized schemes and a focus on specialty distribution.
The multi-disty approach is a win-win situation if each one focuses on fundamental distribution services such as logistics, credit, availability, service and reach and, of course, their profitability.