How Does FMCG Distributor Channels Work in India?

Posted by TreasureOrbit on May 26th, 2021

Indian FMCG's market is the Indian economy's 4th largest sector and growth has an enormous impact on the country's economic structure. As India is geographically a large country, distribution networks form a complex structure, and many of us find it difficult to understand its hierarchy.

In a country like India, where most humans consume FMCG products, live away from production sources. The distribution network is a major component of our economy and can also be a strategic benefit to most FMCG companies.

What is FMCG Distribution?

FMCG distribution channels are a path from manufacturers to consumers through which FMCG products can be travelled. They are channels along which the goods, information and finance flow in the system. They are channelled. Although some FMCG companies prefer to deal with consumers directly, most manufacturers use a distribution network to transfer products to their consumers.

Comprehensive planning of the distribution channel, efficient reflection, effort and investments are necessary. The distribution channel margin and costs associated with the management of the distribution channels form a significant part of the total marketing costs.

Setting up a distribution channel, even from a public perspective, offers new jobs for work and also helps people with a broad socio-economic range to access FMCG products.

Understanding the FMCG Distribution Channels

By studying the elements that form those distribution channels, distribution channels can be understood. Distribution channels consist of various independent enterprises that are aligned with producer companies to distribute the products from the source to the end customer.

There are three main channels of the FMCG distribution: agents, traders and facilitators.

• Agents produce sales through the promotion of a product of a company but never stock or buy the product. An agent may be an autonomous person or a member of the company.
• Merchants like retailers, wholesalers or stockholders, buy and stock products in bulk and supply them either directly or to other retailers. Traders usually have their own wholesale and retail departments but sometimes a manufacturing department does.
• The facilitator makes the transport of the goods produced from one place to another easier, as the name suggests. Facilitators include logistical services, warehouse owners, independent distributors who are solely involved and do not promote and trade the manufactured product.
• These three entities are designed to meet market needs, product type and competitiveness strategy through the FMCG distribution channels.

Structure of Distribution Channels in India

• India seems to be a very traditional and unique distribution channel structure
• The Indian distribution network comprises retail, wholesale and logistics infrastructure, among its major components.
• The consumer interacts mainly with retail stores. India's distribution channel has over 9 million retail outlets. These include supermarkets, food stores, paan stores, etc.
• The organized retail distribution penetration of India is only 8 percent.
• Traditional Indian retail offers a range of advantages to consumers, such as convenience, home, credit and personalized services.
• Modern retail, on the other hand, provides regular promotional services, lower prices, a broader spectrum, a great experience and better marks.
• It is because of lower rents, cheaper labour and supplier credit, fewer tax duty rates and a legal framework that has until recently prevented FDI from being available that are responsible for the widely used presence of the traditional market.

Conclusion

India has a very complex FMCG distribution channel with a large geographic area and needs study and practical experience to understand the depths of this difficult network. The above structure gives you a basic understanding and helps you establish a more solid foundation for the distribution channel.

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