As partners in a firm that specializes in retail launch strategy, we often get calls from entrepreneurs and export houses who want help in launching a new brand in India. Our clients usually have great products, sound financial backing and a good business vision. They come to Centric for sales strategy, marketing support and ‘old-fashioned’ ground up advice to help mitigate the risks of launching new brand’s in the highly competitive Indian market.
In our experience, new brands often face disappointment at the last mile because they are unable to identify the key triggers for retail entry. And that’s because trade partner feedback is not incorporated in business strategy prior to launch.
We believe, theoretical knowledge and conference room discussions are important, but Retail Launch Strategy needs to be supplemented by hard facts from the trenches. By incorporating the requirements of trade prior to an expensive brand launch, brands have a higher chance of success.
Based on our experience in MNCs and smaller Indian companies, we have put together a few pointers to consider prior to retail launch in India. These are related to trade and retail requirements, as we assume the brand already has an identity and other marketing material in place. Some of them have been shared below:
1. It’s not just about the Margin
Many new firms believe the trade will stock any new offering for a slightly higher margin. This is a fallacy. Trade partners know their store space is limited and take a long time before deciding on whether to invest in a new product.
Trade partners look beyond the margin and focus on the brand in question, potential ease of conducting business and whether it will appeal to the end consumer. The margin is always important, but secondary off-take and stock availability is equally critical while partners evaluate a new retail launch.
- Eg. An established bio-tech company wanted to launch a new line of personal care products. While the founder was willing to offer a generous margin to compliment his wide range, he was unable to appoint a reputed distributor. Our interactions revealed this was because his offering lacked packaging visual appeal and a well planned POP support campaign. Trade partners were sceptical of secondary off-take due to low tempt appeal in a competitive environment. Hence high margin alone does not guarantee success.
2. Need to establish a Relationship with the trade
While reviewing a new brand, trade partners want to get familiar with the company behind the offering. Their questions cover the background of the promoters, production facilities, supply chain investment, product benefits and much more. Usually we find their conversation shifts to understanding how the new offering is differentiated from competition and whether it will be relevant to their customer base.
Retail partners are concerned about the safety and efficiency of the product, for if a new product does not work, it is the trade partner who faces the consumer’s wrath. Often retail launch strategy – does not consider this crucial aspect of business, and it directly impacts the success of the brand.
- Eg. An MNC client wanted to launch a new line of apparel in the market. We found despite of attractive margins there was high resistance from modern trade. We worked on look books, story line and a wider merchandise mix with the client leader. Once we started representing the brand – we began sharing its history, details of their large captive production facility in India and capable design facilities in Europe. Trade partners were more receptive, especially when they learnt about captive production facilities, and we were able to initiate product placement in high footfall outlets.
3. Positioning in the Competitive Context
While defining a retail launch strategy, most brand owners review the competition and establish a positioning from a branding perspective. Theoretically this seems adequate. However the trade is already selling these brands and are quick to point out ‘me-too’ offerings from differentiated products. They look for real benefits to consumers – rather than simple marketing claims.
- Eg. A client producing a staple food product for mass distribution, wanted to launch the produce as a branded offering in select metros. Our research revealed the market was dominated by a single large player with an established brand who offered limited margins but with lack of adequate supply during peak seasons.
- During the engagement, we found trade partners wanted an alternative brand with strong supply chain who would invest to grow the business. We worked with the client to design attractive packaging, identify the right product mix and other retail support points. We also stressed on the client’s huge farm capacity – already supplying to the wholesale market – during discussions with the trade. Based a mix of product offering, supply side commitment and competitive commercials, we were able to place the brand in large format stores and key accounts.
4. Appropriate Marketing Support
In a market filled with global brands and established Indian players, new brands need to ensure they have base level marketing support to begin conversations with trade.
Retail launch strategists need to consider meeting hygiene requirements with respect to packaging aesthetics , POP material and other in-store consumer facing marketing material. Unless these basics are met, trade partners are hesitant to engage with brands. Firms also need to prepare themselves for the longer haul and spend money for secondary off-take once distribution is in place.
- Eg. While representing an FMCG product with ‘clinical looking’ packaging, we faced stiff resistance to trade trial. At one stage, a distributor summed up the situation as follows, “The product may be excellent but with this third rate packaging – I won’t keep it on the shelf. Jo dikhta hain woh bikta hain”.
5. Sales Support systems
New brands need to demonstrate their capabilities in terms of quality, supply chain investment, product launch commitments and marketing support. Trade partners hesitate to stock products with fluctuating quality, or brands that not invested in marketing support for off-take or where availability is an issue.
The trade view these functions as essential aspects of sales support and need concrete answers to their queries prior to launch.
- Eg. Our household care client has a strong position in South India. The brand does brisk business and is well accepted, in-spite of its premium pricing. At one time, our client was plagued with erratic supply of certain packaging materials. During this phase, our trade partners were very disappointed with the firm and reduced the store space given to the brand. It took the team a fair amount of time and consistent action, to come back to their initial position and gradually win back the trust of the trade.
6. Sales Team and old fashioned face-time
Brick and Mortar retail sale is a high intensity activity with a significant amount of footwork and trade partner face time. Tech support helps but cannot replace the warmth of a face to face interaction. Hence the sales team needs to visit trade partner outlets, share information, request for space and accept feedback. They may need to provide local store activation support and work on secondary off-take.
Hence the role of a well trained and properly managed sales team – that works in a disciplined manner to achieve sale targets is a critical trigger for retail success. We strongly recommend building a region wise sales team and hiring experienced professionals to get the job done.
7. Commitment to a well thought business plan
Retail success is at times, a long drawn process. It involves a detailed distribution plan, retail growth markers, product investments and marketing support.
Trade partners are quick to identify firms who do not exhibit long term commitment to mutual growth. Retail Launch Strategy needs to be well thought out and addresses the business horizons of a longer period of time. By staying the course and demonstrating through action, a new firm can establish the foundations of a long term relationship.
- Eg. In most of our engagements, we begin by informing the client the overall cost of retail entry. It’s not just the product and marketing expenses, costs include fixed expenses (warehouses, transport, tech support, software etc) and variable expenses (salaries, marketing support, trade campaigns etc.) Working on a realistic business plan with accurate break even horizons and a true understanding of the magnitude of investment is critical for success. Else the entrepreneur will leave the journey mid way, in the face of obstacles an experienced person would have anticipated and planned for.
In Summation :
There are a wide range of factors that impact the retail launch strategy for a new company in India. In order to battle global MNCs and established Indian brands – new entrants need to have a well thought out strategy, experience professional support and a commitment to a pragmatic business plan.
- We recommend promoters consider a holistic overview of the situation, engage trained experts to do the ground work and take an informed decision based on hard facts. Retail success is sweet but is built on the foundation of hard work and long term investment.
Thank you for reading this post. It previously appeared in the Hindu Business Line. Link is given below:
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