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While the household expenditure has been on the rise and has buoyed the South African market the state of the global and local GDP has an impact on FMCG manufacturers and distributors alike. Although non-durable goods such as food and fast-moving consumer goods account for the second biggest expenditure category, the size of the basket is shrinking drastically, along with the number of shops. With the Global growth slowing and stress placed on the manufacturing sector, greater emphasis must be placed on building consumer demand and route to market efficiency.
The best market for this optimisation, within the African context, is the informal independent wholesale and retail outlets (otherwise known as main market). Due to the nature of this market, much work must be done to adequately quantify the size and value, however some entities are compiling statistics and research. Depending on which source, the estimated size of the main market within South Africa ranges from R46 billion to R200 billion in sales. For any consumer goods brand, even a small market share within this space could have a major impact on the top line.
Expanding the supply chain and distribution to reach the main market generally adds extra steps and complications. Ensuring the route to market runs efficiently is vital to reduce the possibility of increased overheads, stock shrinkage, and lower margins. For those brands already targeting main market ensuring the bottom line remains critical. The primary concern for any FMCG manufacturer tackling main market is line of sight, -of stock, -of revenues.
From our extensive experience, here are our 5 key aspects to consider when expanding your secondary distribution to include main market.
Managing the financials at this level is imperative to maintain profitability and ensure price compliance. Bookkeeping within the wholesale and distribution is agile and requires plenty of account and cash flow management. With field staff and drivers delivering stock and collecting cash there is little time to upskill and worry about debtors and creditors after the fact. Trying to keep records of shortfalls and returns is often an accountant’s nightmare. A system that can handle the complexities of sku changes, returns, replacements in the field whilst providing a clean nett fiscal invoice helps reduce the hassle.
In an ever-evolving competitive market, data is fast becoming the key area for competitive advantage. The ability to track and monitor every touch point, every data point and aggregate the data is vital. But collection of data for data sake will do no one any good. The interpretation of this data and the ability to glean insight will place the company ahead of the market. Insights around stock level optimization and route optimization will assist in shaving the cost, getting the stock to the client quicker, and ultimately increase customer satisfaction.
Stock holding is a costly game. It takes up space, ties up a lot of capital, and attracts many risks (theft, aging, spoiling). The main market differs drastically from formal distribution in one major fashion – size and number of replacement orders. Merchants are unable to carry large stock levels and often require 1-3 deliveries per week. This keeps the breakbulk wholesalers busy but can often be costly to maintain. At a manufacturing level, having line-of-sights through to the customer enables them to adequately produce enough product to cater for supply and reduce wastage. At a distributor level, however, having visibility of production and an in-depth, accurate understanding of merchant/retails demand enables them to adequately forecast forward cover and replenishment.
Adoption and stickiness of any new application in the field is vital to ensure the returns on the investment. The biggest stumbling block for every new application introduced is the user experience. Having a graphical user interface that is intuitive and caters for all levels of literacy and experience will shorten the learning cycle and improve adoption.
Empowering your sales and field services with a mobile application can bring some additional complications. For the main market or rural distribution lines connectivity to telecom towers and 3G is often a challenge. Access is improving but having an app that works offline is vital. More importantly, an app that stores all the related metadata and auto updates according to the time of capture (not just time of refresh).
FIELDForce is a modularised mobile and web-based supply chain solution that offers field force automation nestled on a distribution and warehouse management platform. The backend system allows business to run an entire distribution supply chain, keeping track of stock and expenditure while the front-end mobile application enables your Trade Marketers, Sales and Field Force to interact with customers, create orders, and deliver clean nett invoices in-trade every time.