Tuesday, May 15, 2012

Channel Strategy

When asked to any commodity selling enterprise on what is the most important enabler for the growth - the answer has always been - "Channel Partners". Name the topmost Cement, Cola, FMCG or Retail Company - you would see one thing in common that they have the best channel & distribution network. The funda remains much similar in case of Automobile OEMs - Hero Moto Corp & Maruti Suzuki have over 4000 and 5000 Sales Touch Points and they are the numero uno Bike & Car OEM in India. Garnering a network this huge is a gargantuan task and thus emerges as the USP of the OEM.

Ever wondered on the investment required to open a full fledged dealership (3S)? In a current scenario and considering the OEM quality benchmark the investment can soar upto minimum Rs. 8-10 crores. And the amount of time taken to establish a greenfield dealership could be anywhere between 8 to 12 months. All this investment has now taken a very strategic turn. OEMs need to be much industrious in enabling the profitability of its channel partners and expand productively. With ever increasing competition and razor thin margins, even Auto dealers are becoming much more choosy and wary before zeroing down on the investment - this makes a whole lot difficult for the new OEM entrants to exponentially expand in the market.

A look on how the OEM volumes co-relate to their Channel numbers -

Note: Number of dealers indicate independent dealers and not sales/service points.

In the above data it could be easily implied that the sale of a dealer is directly proportionate to its dealer network. VW & Toyota - It is imperative for you guys to understand that to emerge as a no.1 OEM, you need to hit this nail right on its head.

Channel expansion is the key - with rural markets growing then ever and less susceptible to economic vulnerability - Reaching Out will decide the fate of these OEMs. 

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