Background
Each market has it own set of unwritten rules, the US market for industrial supplies has very interesting qualification and entry gates; though its supposedly a free economy, it does have its gatekeepers and the same is true in many markets.
PROBLEM / OPPORTUNITY STATEMENT
Products from certain geographical areas or of certain competitive quality may not be allowed to enter the target markets, unless and until the right business proposition is made.
CRITICAL CONSTRAINTS
Volatile commodities with fluctuating prices are unsuitable for credit or finance backed distribution proposition, also any distribution where geopolitical influences matter.
KEY OBSERVATIONS
The key gatekeepers of any industry forum are some of the biggest barriers in attempting to enter new markets, even if entertained and played by their rules, the chance of succeeding at a scale is highly restrictive.
SOLUTION
We usually look for two things to enable a distribution relationship. One is high margin for distribution and retail and two 20-30% lower cost proposition against maximum sales price. Being able incentivize and trigger reward, loyalty system per sale is key winning proposition.
APPROACH TO SOLUTION
1:4 or 1:6 ratio is the preferred margins in distribution to retail networks, i.e. the cost to maximum sale price should be by a margin of 4x to 6x; or in the case of lower margin, the volume of supply should be high, i.e. the minimum order quantities would be in the Metric Tonnes. A key component of the solution is the financial instruments of trade such as being able finance through third parties or arranging for temporary liquidity to offset trade delays, if not establishing long term credit lines.
KEY SOLUTION METRICS
At one go, 300 stores distribution contract was achieved for organic food products, Nationwide distribution was achieved through super dealer contracts and strategic partnerships.
SOLUTION LIMITATIONS
Only applicable in cases of direct manufacturing relationships, with B2B and B2C direct market launch capabilities, wherein the demand for the product being retailed can be directly generated from manufacturer.
PROCESS APPLIED
A comprehensive business growth model for identifying distribution and retail points, fund generation for operations and network development.
REVENUE IMPACT
In case of new products with disruptive supply margins, the market offers immense returns to the distributor and retailers for at least a minimum period of 18-36 months. Usually, 36 months is sufficient period to exhaust and saturate the market growth with such distribution partners.
AD-HOC CONTRIBUTORS
Use of technology enabled marketing is ideal and would allow for direct relationship with end consumers.
KEY BENEFITS OF SOLUTION
The formula does not fail, as long as 18-24 months of market development period can be enabled, this pretty much guarantees wide market coverage and success.