Sales Model : Automotive Coatings( Trade business )

Based on my experience. This post is regarding the buyer seller model in Automotive refinish business in India. There are following two popular models.

1) Distributor Model / Wholesaler Model

In this type of model, a particular distributor is appointed for particular territory (i.e. city or part of state or any particular part of India). (Ex: Delhi NCR, North India, Western UP etc.).

In this model organisation bills to that distributor and he is further responsible for selling of products in his territory. Most of the lean organisations, new ventures operate in this buyer seller model. In this kind of model, the organisation can control over the cost by having limited manpower, warehouses and other operational costs. While the benefits for distributors are monopoly in product line, market penetrations and reach, profits associated with products, high turnovers.

Some of realistic issues with this models are as following.

1)?????Most of the existing organisations are already billing directly to retailers. Many times these retailers / dealers don’t want to get material via wholesaler instead of organisation itself.

2)?????In this model wholesaler / Distributor wants to spread the products as per his own terms and conditions not what company wants. He will always try to push the material in which he is earning more profits.

3)?????There is always fight between the organisation and the distributor for the most demanded or hot selling SKU’s. Sometimes for not getting profits in those SKUs he will not give justice to those products.

4)?????This model is highly risky. It is easy for distributor to replace the products with competition products, if he gets good deal.

5)?????Companies try to cut the cost with lesser number of resources, low paid manpower’s. But they fail to realise they are lacking service what others offers. Service always matters a lot. Quick delivery of products, Fast addressable complains, regular trials in garages and customer shops.

6)?????Over a period of time, two things happen either distributor becomes strong or there is high demand of company’s products. In first case, distributor will always try to pull legs of company’s salesforce for small things. All things collapse as the greed of distributor increases.

7)?????Many times distributor focuses on selling the hot cake products as these are easy to sell while he forgets to promote other products.

8)?????There is always tussle between distributor for selling of any product in secondary market. Though this is mutual job to sell the product. Distributor thinks salesperson should take orders for him in the market. While salesperson thinks distributor is responsible for selling those products.

9)?????Since the area handled by the salesperson is large, he has to travel a lot. Most of a day he has to stay away from home.

10)??Sometimes company’s fails to realise and examine who is responsible for not achieving the targets. Is it distributor or an employee? ?They sack employee for it. That’s the easiest scapegoat.

At last there is saying, Don’t put your all eggs in one basket. So be cautious.

2) Retailer / Customer Model

In this type of model companies do billing directly to retailers and end customers. Companies do maintain their warehouses for each cluster of territory. The organisation with high sales volume adopt this model. This involves high cost of maintaining warehouse and multiple manpower’s for different jobs.

Some of realistic issues with this models are as following.

1)?????Maintaining stock level at different warehouse is challenge.

2)?????There are n numbers of retailers so n number of challenges comes from the market.

3)?????There is day to day monitoring of sales progress, every day is not same for sales force. So emotional balance is much needed.

4)?????Retailers don’t have capacity to buy products as the wholesaler does have.

5)?????This model involves high level of service from companies if they fail they will lose the sales.

6)?????Retailers don’t take pain to sell products whose demand is not in the market. They are interested only in selling the demanded products. So there is always need to generate demand from companies ends.

7)?????Retailers are not concern to sell quality products in the market. They are concern with profits only. There is a lot of malpractice in product and its mix. So the end user and companies suffer because of these practice.

8)?????Upgradation of technology or introduction of new product without consumer demand is worthless in this model.

9)?????Some retailers are good paymaster while others aren’t. So overall the payment becomes issue for sales person. But the risk is low as compare to distributor model.

10)??For sales person its day to day activity, so this doesn’t require learning.

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