Fast moving consumer goods (FMCG), also known as consumer packaged goods (CPG), are the most common type of consumer product. Also, it includes the manufacturing, distribution, and marketing of these products. This includes both durable and nondurable goods, such as food and beverages, as well as personal, health, and home care products. FMCG products are those that people need on a daily basis in human life. All segments of society consume these goods on a regular basis. They aslo spend a significant portion of their income on them.
The FMCG product group contributes significantly to the economy. The products in the FMCG category have a high turnover rate. The international FMCG market comprises the broad range of long lasting and unsustainable consumer products frequently bought from soap, toiletries, cosmetic products, cuttlefish, tooth cleaning products and detergents as well as non-sustainable consumer products such as glassware, batteries, plastic and paper. Personnel and household services are the leading segment with the highest income in the entire market.
What exactly is FMCG distribution?
FMCG distribution channels are routes that FMCG products take from manufacturers to consumers. They are the pathways through which goods, information, and finance flow throughout the system. Some FMCG manufacturers prefer to deal with consumers directly. However, the majority of manufacturers use a distribution network to transfer goods to their customers.
Setting up a distribution channel necessitates extensive planning, an effective thought process, effort, and investment. The distribution channel margin and the expense incurred in managing the distribution channels constitute a significant portion of the overall marketing cost.
Even from a public standpoint, establishing a distribution channel creates new job opportunities for labourers. Also, it aids in the availability of FMCG products to people from all socioeconomic backgrounds.
A strong distribution network gives manufacturers an advantage over their competitors in terms of competitiveness. As a result, channel management and distribution are crucial components of a company’s overall business strategy.
Most manufacturing companies in India face the challenge of designing, building, and effectively managing a distribution channel.
Understanding the channels of FMCG Distribution
The elements that make up distribution channels can be studied to gain a better understanding of them. Distribution channels comprises of various independent businesses that work with manufacturing companies to distribute products from the source to the final customer.
FMCG distribution channels has three key players: agents, merchants, and facilitators.
- Agents generate sales by promoting a company’s product, but they never stock or purchase it. An agent can be a self-employed individual or a company employee.
- Merchants such as retailers, wholesalers, and stockists buy and stock products in bulk before distributing them to other retailers or, in some cases, directly to consumers. Merchants are typically self-employed, but a manufacturing unit may have its own wholesale or retail division.
- Facilitators, as the name implies, enable the transportation of manufactured goods from one location to another. Facilitators include logistic services, warehouse owners, and independent distributors who only store and transport manufactured goods and do not promote or trade them.
FMCG distribution channels intends with these three entities in mind, based on market needs, product type, and competitive strategy.
FMCG distribution channel structure
The structure of the FMCG channel differs from country to country, but one can describe all channels using basic concepts such as directness, levels, density, variety, and novelty.
- Directness relates to transactions that take place between manufacturers and customers even without involvement of a third party. When a manufacturer uses distribution channels to supply products to the consumer, this is referred to as indirect distribution.
- The concept of level refers to the number of channels involved in transferring a product from the manufacturer to the final consumer. In the automobile industry, manufacturers work with franchise dealers, who then sell the products to the end user. This is a single-level channel. In the FMCG industry, manufacturers frequently sell goods to wholesalers, who then sell them to retailers, who then sell them to consumers. This channel has two levels.
- The number of outlets available in a given area is its density. A distribution channel is classified as an exclusive or intensive depending on the number of outlets. Automobile distribution has fewer outlets in a city and is regarded as exclusive, whereas soap distribution has hundreds of outlets such as wholesalers, supermarkets, and grocery stores and is regarded as intensive.
- Variety refers to the various types of outlets where one can purchase a product. Biscuit distribution may be diverse due to the fact that they are sold in a variety of locations such as paan shops, grocery stores, canteens, supermarkets, general stores, and even online. Saree distribution may be limited due to the fact that they are only sold in specific stores.
- The term “novelty” refers to the new distribution channels used by manufacturers. Online sales and vending machines, for example, are relatively new to India and are regarded as a novelty.
In conclusion, FMCG distribution networks are the routes that FMCG goods take from producers to customers. They are the conduits through which goods, knowledge, and funds flow through the system.
The Fast Moving Consumer Goods (FMCG) industry has been very active over the last decade. Because the industry is volatile, all businesses strive to retain their customers by investing in innovative and better techniques to provide the end consumer with a flawless experience.
Factors such as evolving distributor aspirations, changing position of modern trade as a distributor, increasing complexity of the FMCG market due to increased categories and skills, increased shelf space competition, and induction of new distributors impact the conventional distribution model .
To comprehend the complexities of the FMCG distribution channel, we require some research and experience. The structure described above will provide you with a basic knowledge of the distribution channel and will assist you in laying a more strong foundation.
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