Fast Moving Consumer Goods, popularly known as FMCGs, are the fastest selling products anywhere in the world’s markets. They include anything and everything from tissue boxes to snack food items to cold drinks and cigarettes and groceries such as flour, sugar, soaps, etc. – in short, everything that a consumer may need to fulfill their everyday requirements.
FMCGs, by their very nature, tend to fly off the retailers’ shelves on an everyday basis. And that is why one of the most crucial aspects of any FMCG’s marketing strategy is to ensure that the shelves of their retailers remain well stocked with their products. Any break in the supply chain would mean the consumer would be forced to switch to other brands and thus his brand loyalty may well be compromised.
Distribution Channels defined:
Broadly defined, “a distribution channel is the chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. A distribution channel may include wholesalers, retailers, distributors and even the internet”.
The importance of distribution channels (DCs):
Ultimately DCs, are all about providing utility, both to the end consumer who has been able to get his desired product when he needs it and the manufacturer who has been able to ensure that his product is within “arm’s length of desire’ of the end consumer. As such DCs perform the following important functions:
Help in keeping price stable:
Maintaining price stability in the market is often a function performed by elements of the supply chain. Middlemen may absorb price hikes due to intra-channel competition i.e. He would rather make sure he retains his customer at a lower profit rather than see him switching distributors.
Bringing buyers and sellers together:
Perhaps the most important function of members of the supply and distribution chain is to bring buyers and sellers on the same platform and inform the sellers of the requirements of the end consumer. This is possible because distributors and retailers are a lot closer to the end consumers than the manufacturers. A case in point being Phillips whose light bulbs division regular conducts retailer surveys to find out from them what the consumer wants and why he would prefer another brand.
Eliminating hassle:
Most FMCG manufacturers prefer to manufacture and advertise their products rather than take the responsibility of their storage and eventual final delivery as well, to the end consumer. By handing over the hassle to their distribution partners, they can concentrate on their core business activities.
Making sure that demand does not outstrip supply:
This is another crucial aspect of supply chain management; the distributors/retailers make sure the manufacturer knows exactly what the demand for his product is in a specific market. If the demand is high, the product will not stay long on the shelves, and empty shelves mean customers are switching to rival brands. Conversely, when supply outstrips demand a glut will occur, and prices may fall leading to a loss of profits. Furthermore, it may be difficult to increase prices again once the market has adjusted to low prices.
In today’s markets, no FMCG manufacturer can hope to succeed without paying attention to the logistics of getting his product to the end consumer, and that is only possible through the myriad channels of distribution available to him.
