With the IT market in the major cities fast reaching saturation point, most of the manufacturers are focusing on the B&C class cities and beyond to grow their market share. And to extend their reach and penetration they are looking to partner with regional distributors who are more in tune with the market needs.
Opting for the regional distribution model has its own advantages, which the national distributors cannot provide. For example, logistics, credit management, streamlining of stocks, etc.
Consider the regional business models of LG and D-Link, or even Epson (for its inkjet printers), for instance, who have adopted the RD model since more than a couple of years now and have been performing well. In fact, LG has been doing business through regional distribution for about five years now, and doing it successfully. The above manufacturers enjoy all the benefits zonal partners bring like smooth adoption of schemes, pricing implementation, avoid overstocking, and primarily stay closer to the market, and also bring justice to weaker markets. They also achieved volume sales and better reach.
The channel partners gains are multiple too as the regional model ensures better degree of stock availability and higher margins. It ensures transparent, quick and smooth settlements of claims, schemes and incentives.
The main criterion for any manufacturer at this point of time to stay competitive is to penetrate into the B, C and D category cities and tap the SMB/Es segments which have great potential for growth. And the RDs or zonal distributors can provide the impetus to the products with their deeper and wider reach, geographical knowledge and local market comprehension. This model is beneficial when the manufacturer aims to have a more and more direct presence in the market.
The national distributors function with a set system of operations and have a uniform policy across the nation for the convenience of their functioning. But the regional players can provide customized value addition and so are crucial in terms of the tier II and tier III cities with acute judgment, market scenario and their sub-partners.
Every market is different from the other in terms of maturity, dynamism, growth and volatility, and this makes the regional players invaluable partners for growth for the manufacturers looking to tap the B&C class cities and interior markets The year 2007 could well prove to be the Year of the Regional Distributors.