Questions a) How would you describe the Indian distribution network to an entrepreneur who is looking to enter the market? (300 Words) b) Taking into account that many hawkers selling newspapers and magazines throughout Mumbai have a limited budget, what new product strategies would you employ to convince them to distribute your periodical? (350 Words) c) In terms of international distribution channels what suggestions would you make to companies such as Apple to help them gain a larger market share in India? (300 Words) d) What would be some of the first strategies you would implement in order to create a more seamless distribution network in India? Provide reasoning for your answer. (300 Words)
Case 1: Distribution woes hobble start-ups in India
At 4 am every day, you will find a crowd of hawkers near the Chhatrapati Shivaji Railway Terminus in Mumbai. They line up to buy their daily inventory of newspapers and magazines from 15-odd distributors, all located in a dark lane outside the nearby New Empire Cinema.
After making their purchases, the street vendors fan out into the city on bicycles, motorbikes, rickshaws, and trains. By 6 am, the crowd has vanished, and if you walk past the theatre during the day, you will most likely miss the nerve centre of magazine and newspaper distribution in Mumbai.
Most hawkers in Mumbai have a cash budget of around US$3 or US$4 a day, and they usually have a similar amount tied up in unsold inventory (returns). Elsewhere in the country, vendors have even less cash to spare. The key question an entrepreneur wishing to launch a new periodical must ask is: Why would a hawker want to lock up his scarce capital in my product? Failing to ask that question could result in, well, failure.
Most entrepreneurs find it tough to reach Indian consumers because thousands of small vendors are responsible for handling the last mile in the delivery chain. In fact, whether it’s a start-up or an established company, distribution can be a crippling bottleneck in India. During a recent analysts call, Apple’s Tim Cook cited India’s multi-layered distribution as the main reason for his company’s small share of the market.
Modern distribution networks are rare in India; you either create one or have to work with several small and often unreliable players. That’s true of TV and film as well as other consumer products. For example, new TV channels have to depend on tens of thousands of small cable operators, who have set up networks in residential areas.
The improvised cable system reaches almost every corner of the country, but payment problems are endemic, with layers of wholesalers, sub-distributors, and others misreporting sales and delaying payments. The same challenge applies to start-ups that market solar lamps in India. Much of the country sees the sun year round, but none of the pioneering start-ups have found a way of distributing products nationwide.
Nevertheless, distribution is a challenge worth taking on because India is a unique market, even for traditional media such as print and television. It’s relatively open, with a huge under-served population, and the media industry is large, with TV sets in 138 million households and total newspaper circulation exceeding 300 million.
Moreover, the market will double in size as literacy and income levels rise. Not surprisingly, scores of new ventures spring up every year: According to India’s Ministry of Information and Broadcasting, 4853 new periodicals (including newspapers) were registered in 2011 in addition to the existing 80 000-plus.
Distribution barriers are not unique to India, of course. Even in the US, cable operators fight TV channels while Amazon and Google take on publishers. That said, there’s a crucial difference in how these battles affect start-ups.
In India, because of fragmented distribution networks, it’s difficult for a new venture to get its products to a large audience. In the United States, innovative companies can bypass delivery problems by working directly with large consumer-facing hubs such as Wal-Mart (old), Amazon (new), or iTunes (new, new), which allows them to quickly and efficiently reach early adopters.
The Indian entrepreneur’s distribution headaches don’t just affect operations. Seasoned venture capitalists, acutely aware of the problem, are often wary of investing in ventures that must create new distribution networks.
Unlike US companies, which can focus on developing their products before raising capital, and on distribution problems after doing so, Indian entrepreneurs have to tackle both before they can woo sceptical investors. That makes starting up in India at least twice as hard as it is elsewhere in the world.
Questions
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a) How would you describe the Indian distribution network to an entrepreneur who is looking to enter the market? (300 Words)
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b) Taking into account that many hawkers selling newspapers and magazines throughout Mumbai have a limited budget, what new product strategies would you employ to convince them to distribute your periodical? (350 Words)
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c) In terms of international distribution channels what suggestions would you make to companies such as Apple to help them gain a larger market share in India? (300 Words)
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d) What would be some of the first strategies you would implement in order to create a more seamless distribution network in India? Provide reasoning for your answer. (300 Words)
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