Abstract

Market Growth and Concentration Propelling Development of Indian Distribution Channels

With a high level of economic development, rising incomes, and low penetration rates of electronic products, the Indian electronics market has a definite amount of growth potential. The spending power of residents in first- and second-tier cities is an especially important factor.

Indian Distributors Transforming

Rapid market expansion has driven revenue growth for Indian electronics distributors while also sparking a movement where some national distributors are turning towards manufacturing and even managing their own brands. These distributors have a strong grasp of India's distribution channels, which for international brand-name companies means that there is the threat of partners becoming competitors.

Regional/City-based Distributors Increasingly Important

Due to India's sheer vastness and the fact that India's four major regions are developing in different ways, grasping the dynamics in all of these regions is no simple task. Therefore regional, sub-regional, and city-based distributors all play very important roles.

This is especially so for regional and city-based distributors in Central India, Northern India, and Southern India because of added scale and quantity of distribution. These distributors possess the capital and ambition to increase capabilities, including distribution and logistics, channel management and after-sale service capabilities. This is a development trend that provides a way for brand-name companies looking for alternatives so as to lower risks associated with distributors.

Strategic Thinking in Response to India's Changing Distribution Channels

Distribution Strategies that Conform to Local Circumstances

There is no single unifying distribution strategy that can be applied to all of India's regions due to the differences between them. Companies must first gather data - such as consumer traits, potential customer scale - , have a deep understanding of regional characteristics, and then, according to the circumstances in each region or market, adopt different channel strategies - e.g. opting for national distributors, regional distributors, city-based distributors, direct sales outlets.

Product Features and Time of Entry Important Factors to Consider

Besides external factors related to the development of distribution channels in India, companies must also consider important factors that affect distribution strategies such as their own time of entry, scale, and types of products. Two kinds of situations are explained below.

If a company launches a new or mid-range to high-end product but the company's resources are limited, its target markets are naturally limited to first- and second-tier cities, and the company may consider directly choosing a regional or city-based distributors as a partner.

Mobile phone brand companies that have newly entered or just entered India cannot ignore Nokia's hold on 70% of the market. They might consider looking at specific regions to select a regional distributors, city-based distributors, or telecom operator as a partner. This might serve as a way of breaking into or expanding in the Indian market.

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