Fragmented markets – What is the balance between modern and traditional trade? Modern commerce (eg Shoprite supermarkets) in most African countries, with the exception of South Africa and Kenya, is still in the early stages of development. The contribution is in the low single digits. Reaching a large number of traditional outlets (eg Mom & Pop, Dukas, Sooks) is a difficult and expensive business.
channel strategy – How do the channels work and operate? Companies must map out a clear channel strategy and identify which channel the selected distributor will serve. An ill-defined channel strategy can severely damage any distributor’s deployment. One size does not fit all.
basic output – Are traditional and non-traditional channels well defined? In most emerging markets, determining your point of sale base can be a challenging task. Companies need to understand both the existing and potential outlet base. A well-defined dealer survey (EDS) is a key component of any successful dealer launch.
Territory – Is the territory well defined and does the distributor have the capacity to serve the territory? Companies should build dealer capacity and schedule joint training sessions. Businesses should also ensure they have detailed maps of the territory and a clear understanding of point-of-sale density.
regional differences – What are the regional, urban and rural differences in distribution?
Flow of products and reasons for purchase – How do the products flow in the market? Small supermarkets often buy products directly from the wholesale channel. In some cases, they may purchase certain stock-keeping units from modern trade (for example, Thai consumer goods). The wholesaler is usually very close to these points of sale (radius of 2 to 5 km). They provide a basket of goods and, in some cases, credit, if they have a good relationship with the small grocery store.
Third party logistics -Where do 3PLs operate in the country? 3PLs often cover major highways well. However, in emerging markets they typically have a limited footprint in rural areas.
Selection criteria – What are the key components of a successful distribution partnership? Many distributors fail because critical components of the selection criteria are overlooked. Selection criteria will likely include important components such as capital, infrastructure, storage, transportation, and the required organizational structure.
Service – Evaluate service and delivery for each channel and the service partners they work with. Review the key issues with service and delivery and map the distribution models used.
Customer Service Frequency – What is the frequency of replacement of the product and the reasons for the frequency?
Role definition – What are the company and the distributor responsible for? It is important to review the organizational structure and how the company will support the distributor. Make sure each profile (eg seller) has a clear understanding of their role.
account development – How should account development be managed? This is a critical component of any dealer operation. Not all accounts are the same. In most cases, companies must prioritize and focus their attention on strategic or high-value customers. Companies must also determine how they will divide account development activities between the company and the distributor.
value chain – Do we understand the value and margin of the partner in the system?
cost to serve – What is the true cost of serving? The true cost of service is sometimes underestimated and companies need to have a clear understanding of the cost of service for both the dealer and the company. In many cases in emerging markets, financial cost centers provide limited data and financial modeling is essential to determine the true cost of service. Many distributors fail because compensation is too low and is not periodically adjusted for inflation.
Low cost distribution – What local distribution solutions exist in the market that can be used? Small grocery stores are often located in congested areas, with narrow gravel roads where trucks cannot enter. In these markets you can find wheelbarrows, carts or motorcycles (for example, Vietnam). Leveraging your distribution structure can lower costs and increase product availability. Some consumer goods companies have also successfully orchestrated these lower-cost distribution models and made them work for their operations and product portfolio.
Deposit -How will the new systems impact the existing warehouse? The warehouse function is sometimes overlooked when a company implements a new route-to-market system. Companies must anticipate how the new system will affect the function of the warehouse and what changes need to be made.
shareholding – What is the required service frequency? Outlets in emerging markets often have limited cash flow and, in some cases, limited space to store products. Review the frequency of care required and the need for micro-deposits or wholesalers of supplies.
Key performance indicators – What are the key performance factors? By focusing on the key performance drivers of your business, avoid overextending yourself. Sometimes, less is more. Include key performance measures in your business planning process and assess annually whether you are using these measures to track and improve your business. There is no point in tracking something just for the sake of tracking.
Processes- Are processes and systems well defined and standardized? Always try to eliminate activities that do not add value when possible. Standard Operating Procedures (SOPs) simplify your business procedures and help ensure the same quality across all operations.
skills – What skills need to be recruited or developed? Emerging market operations often lack critical skills. It is dangerous to make assumptions about what people can and cannot do. For any director working with a distributor, conduct a skills gap analysis to determine training hiring needs.
Complexity – Can the distributor handle the level of complexity of the business? In many cases, distributors that distribute all SKUs to all channels fail. Always aim to reduce complexity in the business.
Collaboration – How will the distributor share the information with the company? Too often critical information is only available at the dealer level and not shared with the business. Also consider the role that technology can play in sharing information.
appropriate technology – What technology is necessary? Evaluate mid-tech solutions and identify the “right technology” for your operation. Don’t overdo it.
Patience– How much time do you have? Make sure you have management buy-in. Implementing Route-to-Market requires patience and a continuous improvement mindset. Small incremental changes can sometimes go a long way.
legal issues – Are there any legal problems with the transport of your product category? It is also important to understand if there are any regional regulations that affect the transport and storage of supplies.
Culture – What are the cultural problems? Take the time to understand cultural issues and don’t assume anything. Change your way of thinking when you work in other markets.
Take note of the evolution – Are you taking the necessary steps to adapt to change? Too often, supply chains in emerging markets evolve without any strategic plan. Modern retail and commerce is expanding and the buying patterns of middle-class consumers are changing. Consider how these market changes will affect your business.