Hardik Harsora

The 3 Most Crucial Challenges The Retail Industry Has Faced Since Decades

We have entered the digital age. Many pundits have called this the age for e-commerce to
flourish. And they are right.

However, retail will continue to dominate the Indian marketplace of 125 crore people for times to come. The majority of India’s population is located in villages which have poor, or no
access to digital platforms. Plus, our mentality of “dekho, parkho, khareedo” will continue to fuel retail dominance. No wonder the retail segment is expected to double its growth in the
next 5 years.

Manufacturers and retailers will step into the arena with ambitious plans to spread across cities and states. With a topography like India, retailers (and distributors) are crucial for
manufacturers to reach consumers.

However, challenges continue to plague both entities. For instance, sales per square foot in Indian retail stores at Rs.1,500-2,000. It is much lower than the international average of
Rs.8,000-12,000 per square foot. This doesn’t just impact retailers, but manufacturers also.

For manufacturers, setting up a wholesale and retail network poses many challenges. The 3 most critical ones have been highlighted in this article:

1. Channel Partners

The biggest challenge for manufacturers is aligning with the right channel partner. ‘Right’ here implies a partner who gets the desired reach and revenue. A channel partner handles
functions like logistics, supply, ownership of sales, collection, and more.

The first step for this is profiling. Manufacturers must profile their preferred channel partner on the basis of parameters like investment capacity, experience in handling logistics and
sales, profit margins, expertise and more.
However, the lack of effective processes to guide manufacturers is blatant. This means they falter at the most important step. And almost certainly, the channel partner they choose does
not meet their expectations.

2. Distribution

Demand is rarely constant in India. Even sectors like FMCG and electronics are impacted by macroeconomic policies. Sales can spike or drop sharply in the blink of an eye.

Manufacturers and retailers would prefer “just in time” stocking of goods. But a surge in business means that retailers could be stuck with empty shelves and no quick way of getting
more product. Likewise, a lull in the market could lead to overstocked shelves, which increase liability on manufacturers and channel partners.

3. Support

Support is a key area where manufacturers and channel partners encounter challenge. Support includes training, marketing, customer management, revenue sharing and more.

Lack of training about after sales service provided to dealers means most complaints are rerouted to manufacturers. Thus, the manufacturer has to invest in setting up service
centers, hiring and training staff, and managing them. If manufacturers provide adequate training to dealers for customer support and incentives them appropriately, they can free up
resources for marketing, increasing market share and revenue.

The lack of effective processes and guidance mechanisms create many cascading obstacles for manufacturers. They spend more time managing daily affairs and complaints, instead of
big-picture thinking. A well-oiled system that guides organizations to focus on crucial functions, and associate with effective channel partners for the rest, is the need of the hour.


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