Are Distributors Loosing Their Importance?

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The Plywood-Laminate and entire wood panel industry have always been dominated by distributors. The choice of a distributors and their sales network have been a crucial move for any company to ensure the success of its brand. The Ply Reporter surveys have repeatedly found sales numbers in favor of mighty, wealthy and established distributors since beginning of the publication in 2001. But 2018 onwards, we are witnessing, many manufacturers talking about direct selling to retailers. The Ply Reporter planned to conduct an interactive article on the subject where we sought the views of various top distributors on the subject “Is the direct retailers’ preference is somewhere undermining the role of distributors?” This interactive-market based article will be published in continuation in coming months as we at (Ply Reporter & Big Sea Market Research) are getting deeper to find the degree of this change and its reasons. This article may be a very crucial document for many of such companies who are in wood panel manufacturing and entrepreneurs who are retailers or whole sellers.

The change in market dynamics is purely induced by over supply and is set to cause profit disruption at every level. The oversupply scenario has compelled to disturb the entire stakeholder chain and trust, that was the strong thread of Plywood Industry and trade since decades. Manufacturers don’t have option to depend on Distributors, hence they are looking for those counters or even small retailers, who can give them sustainable sales and margins, but is it happening?

The role of distributors has always been pivotal and defining for a brand in any product in consumer durable product segment. Looking at entire building material product category market, even in present times, the role of distributors remains fairly strong and even dominating. But what appears is, the dynamics is being challenged by the change indemand- supply status. Particularly in plywood and decorative laminate segment their importance and role is often being discussed at manufacturers’ level where Ply Reporter interacts.

The logic made by manufacturers is ‘distributors role is just limited to be the financer where they are appointed for the safety of payments and volumes. Manufacturers often comment that ‘in present scenario, distributors are neither generating volumes nor giving timely payments. On the contrary few producers advocate the ‘direct retailer’ model. They feel, many Retailers have good financial capacity who can buy truck loads and are enjoying the margin of direct purchase. Although it is just what they feel, it is not the result. The outcome is yet to
be known and hopefully ascertaining the result may take in another couple of years.

With huge production capacity addition in Northern India, it has become painful and near to impossible task for a producer to utilize even 60-70% of its capacity. As a result, manufacturers are trying some different strategy and tactics to spread themselves in market where as retailers who have been buying from distributors are grabbing direct manufacturer link for which they have been waiting from decades. Manufacturers understand that they are not getting good volume, price and payment from distributors so better to go for direct retailers but is it a successful tie up?

A few producers (very few) who are having deep pocket, are exploring some long term strategies such as initially they are improving their products quality, creating good sales team, adopting organize working culture, giving more focus on presentation and branding building, then a steady plan to move to reaching Architects, Interior contractors and OEMs in next phase. Whereas some producers are adopting shortcuts to sell their products and are giving materials to anyone, either retailers or small dealers or semi-wholesalers without following standard selling prices or certain policy mechanism. To this we at the Ply Reporter call “Gorilla selling” where a producer act according to his immediate need and greed.

The change in market dynamics is purely induced by over supply and is set to cause profit disruption at every level. The oversupply scenario has compelled to disturb the entire stake-holder chain and trust, that was the strong thread of Plywood Industry and trade since decades. Manufacturers don’t have option to depend on Distributors, hence they are looking for those counters or even small retailers, who can give them sustainable sales and margins, but is it happening?

Speaking to hundreds of distributors across the country ( and going on), we at the Ply Reporter, witnessed fear and question mark among many whole sellers who have crores of rupees worth credit in market with equally worth crores value of material stock. The larger view point was that change is happening but it will not be fruitful for any one. Majority of distributors shared their views that being well connected to the market network, they are also entering in manufacturing some products and selling but genuinely commented ‘what will happen to retailers when every month they will have a new supplier reaching to their neighboring counters on further lower price?’ The distributors have been managing it smoothly but what to expect when market is on its own?

During this changing scenario, The Ply Reporter team did an extensive survey and found that no any particular segment is responsible for this change, but situation has compelled the industry and trade to try and explore the options for sustaining their business. We also found that both models (Distributors or Retailers) could be successful if you plan with a vision of long term strategy such as quality, team & brand building and accepting formal business culture.

The distribution policy is very important decision for any industry. The wise people are spending money, effort and time to find the right way but the greed is pushing manufacturers and undeserving retailers to collaborate which are emerging as a cause of disturbance in present. Few selected opinion and views of people as follows.

During this changing scenario, The Ply Reporter team did an extensive survey and found that no any particular segment is responsible for this change, but situation has compelled the industry and trade to try and explore the options for sustaining their business. We also found that both models (Distributors or Retailers) could be successful if you plan with a vision of long term strategy such as quality, team & brand building and accepting formal business culture.

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