The Hindu Business Line : Visibility's the name of the game

(In the previous issue of SaleSense carried in the Catalyst edition dated June 24, 2004, the author stated that dumping stock, which takes place at every stage in the retail chain, can be good as well as bad, and discussed its negative effects, which put the health of the brand at risk.)

LOOK at benign dumping, then!

Dumping of stock at the retail point very simply means stocking retail shelves far beyond the natural demand that the product actually commands. The retail point is the ultimate showcase opportunity for the company's stock.

Take the case of a new brand that enters the market. This is a whole new brand of salt. The market leaders currently share the market in equal measure. Walk into a typical kirana shop and all you see is these two brands, literally sharing the shelf fifty-fifty!

In comes the third brand. The new baby in the market. In theory, the new brand has an aspiration to occupy 15 per cent market share in the course of the coming year. Going strictly by that, stock pressure must be at a minimum norm of 15 per cent at point of start of distribution. In a market that is polarised between two strong brands, even this 15 per cent shelf share is a difficult thing to attain.

A consumer walks into a store, looks keenly at all the offerings in the salt category, is confronted by the two big brands that occupy 85 per cent of shelf space, decides that the big brand is the one he will be with. He buys it and walks out, to the detriment of the new brand's purchase possibility. Big is beautiful in retail markets.

Brands need to therefore dump during launch. Dump enough stock to attain visibility levels that are critical. There is always an optimal level of stock that is necessary to trigger an interest in a new brand.

You need to calculate that quantum and arrive at a percentage of shelf stocking vis-a-vis competition. You need to dump that much of stock on the retail shelf for launch. Anything less than that will make your brand an also-ran in the choice stakes of customers!

Yes, in such a case, you will have to take back old date code stocks and pump in fresh stock, but that is a price a brand pays to get noticed and picked up. There are indeed very few brands in the world that can afford slow build-up of volumes in very competitive categories! Build the cost of stock returns into your brand plans at least for the first two years of your brand effort in the great Indian market.

Look at another point of benign dumping, then! The retailer in the marketplace understands money best. Stock at his shelf occupies money space. Stock when sold makes money for him. The retailer is really not only a point where pull-generated consumers land up to make their purchase. It is also a point where some amount of push works. Subliminal push even! When your corner retailer says that a particular new brand is really getting lots of customers in, you will go for it! When he simply says its good, it works for you as a consumer!

A retailer will invest his time and effort in a brand that occupies his shelf space. Not on a brand that does not sit on his shelf without enough depth of stocking. The retailer looks keenly at his money stake in the business. If he sees ten cases of a new brand of tea bought by him with discounts that make for an added bottom line, he will strive to push it out!

Big companies in the FMCG game are pastmasters at this game of benign dumping. This kind of dumping can actually help in stopping the franchise for a new entrant in the market. Imagine a new entrant in the category of a fairness cream. The existing dominant player, fully aware of the kind of pull his product commands, will dump five weeks' sales worth of stocks on the retailer just before the launch of the competing offering.

The retailer knows it will all move out. The retailer has stocked up with the bait of very high discounts. The new brand in the market will not even get a toehold in the outlet at least for four to five weeks! What a nice way to stymie the launch of a new brand from the just-emerging competition!

Dumping can be benign! Use the tool with intelligence.

(The author is a business strategy consultant and CEO, Harish Bijoor Consults Inc. He invites question on sales and distribution which he will answer in his column.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Will indiWin?

Gaining the advantage

Visibility's the name of the game

Rehearse your lines to sell services