Hitachi Home & Life Solutions (India) Ltd.(HHLI)
Study Of Sales And Distribution Channel In
Gurgaon Region
Anshul Gupta
Background
•
Product- A.C.s, both splits and windows
•
Segment- Premium
Market Share (%)
•
Pan India Market Share-7%
73
•
Haryana Market Share-13%
13
•
Major Competition- OGeneral, Dicon
•
Overall A.C. Market Leader-L.G.
2
0.5
9.5
17
28
20
L.G.
Whirlpool
Voltas
Samsung
Hitachi
Carrier
OGeneral
Dicon
Others
Present Channel Structure
Manufacturing Plant
(Near Ahmadabad)
Carry & Forwarding
Agent
Hitachi Gurgaon
Branch
Dealer
Customer
Distributor
Sub Dealer
Customer
From The Company’s End
•
Setting Targets
– Overall value & SKU wise volumes(say Splits and Windows)
– Adjusting for winter months
– Firm Plan ( 2 months prior) & Final Plan( First day of the month)
•
Order Processing Time
– 2days
– Via email, fax or phone
– 10-15 units per order
•
Credit Terms
– 0 to 30 days depending on credibility
– Cash discounts upto 2% to encourage early payment
•
Monitoring Visibility
– Intimates the Delhi based marketing team
– Doesn’t pay anything to the outlet owners
•
Sales Force Training
– June to February
– Technical features, communication skills, troubleshooting
From The Company’s End
•
Performance Monitoring
–
–
–
–
•
Value of sales
Number of units sold for each variant
Average collection period
Dealer Review Format
Interaction With Channel Members
– Monthly meetings
– Issues- Volume and value sales, target setting, collections outstanding, institutional
sales, stockouts, damages, incentive schemes upcoming, margins due
•
Motivating Channel Members
– Quantity discounts and lower targets for winter
– Volume and value linked incentives
•
•
Customer Schemes-Free Gifts like bags and T Shirts
After Sales Service
– National Service Centre
– After Sales Service Staff
Dealers ( Mr. Shishir Malhotra, Hitachi Home)
•
Purpose-To cater to customers in metros and big cities
•
Numbers-2 exclusive showroom dealers+1 exclusive Sales & Service dealer+6 non
exclusive dealers
•
Locations served-Gurgaon , primarily the areas housing the shopping malls
•
Sales-150 units p.m. in peak season;20-40 p.m. in winters
•
Incentives– Margins of Rs300-500 per unit
– 7-8% sales related schemes
– Logistical support of Rs 600 monthly
– 0.5% in special incentives like foreign trips
•
Employees-2 in the showroom;4-5 for transportation
Dealers
•
Qualifying Criteria– Around 400 sq feet land
– Adjacent to the main road
– 12-16 feet frontal length
– Initial investment capacity of 7-15lacs depending on location
– Should not be a channel member of any other premium category player
•
Costs Incurred– Rs 5000 monthly salary to employees
– Warehouse rent
Distributors (Pahuja Distributors)
•
Wholesaling + Retailing
•
Purpose-To supply to sub dealers in relatively remote locations
•
Numbers-1 for Gurgaon+3 more for Haryana
•
Locations served-Gurgaon(outskirts),Pataudi,Sohna,Rewari and Daruhera
•
Sales-547 in this month last year and 4000 annual; assigned higher targets than
dealers
•
Incentives– Margins of 1.5-2%
– 7-8% sales related schemes
– Logistical support of Rs 600 monthly
– 0.5% in special incentives like foreign trips -From February to 31st May Sell 600
A.C.s –a trip to the U.S.; 250 A.C.s -a trip to Pattaya
Distributors
•
Qualifying Criteria– Sound market reputation and relevant work experience
– Godowns/warehouses
– Sizeable sub dealer network
– Initial investment capacity of 50 lacs depending on location
– Should not be a channel member of any other premium category player
•
Employees-12 technical+4 salespeople+1 accountant; One salesperson is assigned
around 10 Sub dealers whom he visits everyday
•
Costs Incurred– Rs 18 lacs annual for salary to employees
– Rs 12000 p.m. warehouse rent
– Rs 3 lac annual on transportation
Sub Dealers
•
Purpose-To cater to relatively far flung areas where it’s not cost effective for the
company to reach by itself
•
Numbers-14 Sub Dealers around Gurgaon and 42 Sub Dealers in Haryana
•
Locations served-Gurgaon (outskirts),Pataudi,Sohna,Rewari and Daruhera
•
Sales-Around 2-5 lacs monthly per outlet
•
Incentives– Margins of 2-3%
– Cash discount of 2-3 % on timely payments
– Around Rs 100 per unit and Rs 200 for installation per unit
•
Employees-4-6 per outlet
•
Costs Incurred– Salaries and damages amount to around Rs 60000 annually
Issues
•
After sales service
– Late response from central compliant database
– Sometimes take up to a week to respond
– L.G. usually responds within 2 days
– Confusion about accountability- Company or Distributor?
– Those accustomed to A.C. find it difficult to without it for even a single day
Solution-Accountability
Customer lodges complaint
with NSC via the mentioned
hotline no.
Customer facing
problems
NSC informs the concerned
channel
National Service
Centre of HHLI
The channel informs its
technical staff
Company owned
centralized
channel-Big cities
and metros
Distributor after
sales service
function-smaller
towns
The staff then coordinates with
the customer concerned and
delivers service
Technical staff
Technical staff
Solution-Incentive
•
Grievance Redressal Card
– Time when effect was detected
– Time when the personnel got it sorted out
– Frequency of recurrence of the trouble
•
Personnel required to submit the same to regional offices
•
Company should take account of the time lag between the Distributor being informed and
the defect being sorted out
•
In case the Sub Dealer was the one who informed about the customer’s problem, he should
be given an incentive
Implementation Challenges
•
The sales force forging the Grievance Redressal Card
•
The channel members colluding to lodge false complaints and claim the rewards for having
‘sorted out’ the same.
•
Confusion regarding accountability
To address these issues:
•
Keep the National Service Centre updated about every customer complaint, no matter who
solves it- compare with the Grievance Redressal Card
•
To avoid confusion regarding accountability, it would be best if the National Service Centre
directly communicates to the appropriate personnel.
•
However, regular vigilance by the company personnel would still be needed to maintain
authenticity of the process.
Issues
•
Differential prices
– Dealers who purchase more, get more quantity discounts
– Hence are able to sell to customers at lower rates
– Others suffer due to sales at Market Operated Price rather than MRP-typical of
consumer durables
Solution
•
•
In case of the Dealer, the after sales
service will be taken care of by the
company itself whereas in case of the
Distributor, the same would be done
by the distributor himself
Already suggested an incentive
system for this
Implementation Challenges
•
Still doesn’t address the issue of sales being lost
due to someone else charging lower prices
•
The rising number of sub dealers means that it
is all the more difficult for company to assign
exclusive territories to channel members
This issue can be sorted out by:
•
providing additional advertising support to the
smaller scale outlets and
•
a mutual agreement regarding the extent to
which they would cut costs
Issues
•
Receiving supplies
– Company has stopped the practice of its own technical staff for helping the
Distributor in unloading the supplies at his end
– Distributor staff not being well trained,
– Instances of damage during unloading have gone up, and they take more time
as well, bringing down the distributor margin
Solution
•
Cost benefit analysis
– Cost- Damages that occur during unloading and the extra manpower that
channel members have to maintain
– Benefit- Savings which otherwise would have to be paid to the employees the
company would have to maintain
– If overall loss, take the assistance of the channel member in recruiting staff
that deliver the supplies
– If overall gain, explained to the channel members and bear a fraction of the
damages from its own pocket
Implementation Challenges
•
No matter what the outcome of the cost benefit analysis recommended by us,
those getting advantages from the existing system would always resist any move
towards an alternative system
•
The analysis proposed by us doesn’t account for the time that is lost on the
Distributor’s end, which may be adversely impacting his margins
The possible ways to address such a situation are
•
the company reverting back to its previous system of having its own delivery
personnel, or
•
for the company to train the distributor’s staff to make them competent enough
for properly handling the units
Issues
•
Sales Force Training– All the Sub Dealers reported that they received no technical training from the
company and that a training stint or a demonstration given by he company
would help them a lot in convincing the customer to purchase Hitachi A.C.s.
Solutions
•
November to February are the ones when the demand
Implementation Challenges
•
for A.C. subsides and the turnovers are low
–
company may make it seem
Training for delivery staff of the company’s and
the channel members’ staff who unload the stock
–
unjustified for the company o
Training for after sales service personnel in terms
undertake any such initiative
of technical skills and promptness of response
–
Training for the staff of the Sub Dealer, Distributor
and the Dealer for them to be able to convince
–
The costs incurred on training by the
•
It would be rather difficult to quantify
the customers of the value that Hitachi proposes
the tangible benefits that the
to offer.
company would reap by imparting
These training modules should pay special
attention to the new features about to be
launched.
training
Issues
•
VisibilityShelf Share Comparatives
hitachi
7
14
lg
21
9
8
whirlpool
voltas
samsung
•
Has a shelf share of 12 % , lesser than its market share in Haryana (13%)
•
To improve its market share, it becomes imperative for the company to improve its
shelf share
•
Some outlets had a stockout whereas in some others, the Hitachi units were not
clearly visible
Solution
•
•
Incentives for the company sales
force as well as the outlet to maintain
proper visibility
Regular monitoring by company
personnel-weekly visits
Implementation Challenges
•
As in the previous case, the costs incurred
in providing visibility linked incentives may
be in excess of the benefits it would
provide
•
It would also make the sub dealer think
that Hitachi is under pressure and hence
being desperate. This may tilt the balance
of negotiating power in their favor
•
The advantages from such a move are
again difficult to quantify
Thank You