May
Distribution – Redefined – Part 2
Posted by
So what’s the answer? As Maximus rightly pointed it out – it’s all in the margins. To understand more clearly, let’s just rethink what a distribution for a product is.
Distribution is the technique which helps the supplier of a product dissipate the product effectively through various channels in hope of improving his reach to all potential and existing customers, while dropping of a margin at each channel that he takes.
In this case, if you take the South Indian outlet, the 2 products are the food and Pepsi. Food – the specialty of the shop. The food chain starts right from the purchase of the raw vegetables that have gone into making the food and end at the purchase of the food by the customer. And in this chain, the person with the largest revenue share is the outlet, and significantly so. Hence, more the food they sell, more they make. So if the cost of food were Rs. 125, they probably make Rs. 80 on it (cutting out the cost of the vegetables, setting up the stall, other fixed costs averaged out, etc). However, when it comes to the Pepsi – that isn’t their core product, and they are merely channel members in the distribution of Pepsi. They don’t even make that much of a margin on it. So, they are lesser likely to part with their change inorder to sell Pepsi than to sell their own food.
Same is the case with Himalayas – Selling drinking water is their core product (incidentally Himalayas belongs to the TATA group). Therefore, they make almost all the money in selling every bottle of water. Hence they have to be ready to give out the change even for something as low in cost as Rs. 25.
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Related posts:
- Distribution – Redefined – Part 1
- The 5 buck snack
- Growing the Telecom crop in Rural India
- The Pilgrimage Story
- Tata Nano – Shining Star of Tata Motors
- Bookmark :
- Digg
- del.icio.us
- Stumbleupon
- Redit it
2 Responses to “Distribution – Redefined – Part 2”
Subscribe!
Irrespective of whether you purchased their core product, the outlet should have given you change. The cost of carrying or converting change for the outlet is zero while the cost of irritating a customer (especially one who blogs) is significant. This is just poor customer service. Service organizations cannot have their client-facing employee behave this way.
Third Eye,
Poor customer service is a part and parcel of every service. It is assumed that there was equally bad customer service on both places. Also, while there is no cost of carrying change, it does hit you hard when you can’t pay change for your core product purchase and hence lose out big time. And change is never there in infinite value.