10 Things to Keep in Mind for D2C brands while expanding Offline
While I understand that going offline and expanding via GT/MT is the flavor of the season but be very cautious. 10 pointers to help you do it the right way
1. Unless you are operating at entry level price point (1000 Rs for a Fan, 10 Rs for a beverage, 5 Rs for chips etc) GT or MT is not a demand creation channel. It is a channel where you capture demand. For most startups, there is no demand to capture and hence this fails
2. Demand creation and distribution goes hand in hand. You are not HUL or ITC that you want 60% Weighted Distribution before spending on creating demand. Do not scale distribution if there is no demand gen plan
3. The odds of defeating a legacy brand in premium price points in GT/MT is 10x more difficult than doing it in E-Com. Legacy brands have decades of relationship and outlets are tied up through different trade schemes. And they have hero SKUs which makes the outlets depend on them for their day to day survival. They will arm-twist the counters. So unless you are whipping the ass of the legacy brands online, you really have no right to win offline. Go offline only when you have very strong PPCMF online
4. Your offline sales team alone can’t be responsible for sales. They can be responsible for inputs( visits, availability, visibility and all other inputs to drive demand). But if you keep questioning them on numbers alone, they will leave. And every attrition in new markets will set you back by months. If there are 3-4 attritions over 1 year, word spreads in trade that this is not a good brand to work for and you will never attract good talent
5. Your distributor is not responsible for sales numbers alone. Distributor solves 3 things- supply, credit and placement in stores. They can never influence sellout from stores. If you keep pushing primary to distributor, he will quit. Once 2-3 distributor churn happens quickly, the market will get spoilt forever
6. Do not hire from market leaders in your industry when you start. They are never used to the struggle of not having offtake. Hire from number 3-4 player who understands the struggle of having a product without fast sellout
7. There is no need to optimize on margins on day 1. Trade does not care about absolute margins. They care about Earns( Margins)*Turns ( Stock Rotation). As your stock movement increases and rotations improve, margins get corrected. But without stock rotation, very difficult to sustain channel
8. Do not worry about wholesale on day 1. Wholesale works when there is huge pull for the brand. Without pull, there cannot be wholesale
9. Do not expand to multiple cities till you crack a single city. It is easier to generate demand in a city. Impossible to do that across the country at the same time unless you have infinite budgets
10. Invest in being data driven from day 1. It is a cultural thing and very difficult to change course midway. When sales are good, ask why it happened. Because someday sales won’t be good and then you would not know what to do because you never cared about what was working when things were good