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W20187
LDFL INDIA LIMITED: ADAPTING A MULTI-CHANNEL DISTRIBUTION

SYSTEM FOR OMNICHANNEL CONSUMERS
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Anurag Handa, the director of sales for the detergents arm of LDFL India Limited (LDFL), a subsidiary of
LDFL Global, had just one more week to finalize the 2019 channel sales policy, which LDFL needed to
roll out on December 24, 2018. LDFL used multiple channels for distributing its products. LDFL had seen
minor gains over the last two years in the smaller, emerging channels like cash and carry (C&C) and e-
commerce, LDFL had lost major sales in the highest-selling general trade (GT) channel, resulting in a drop
in LDFL’s overall detergent market share in many markets across India. Among the emerging channels,
the C&C format posed the biggest channel conflict for the GT business of LDFL, as C&C channel provided
a cheaper alternate source of supply to the small retailers1 of LDFL, which were primarily supplied by the
GT channel. Part of the reason for C&C channel offering lower prices to its customers was the lesser
operating costs compared to other channels; but more importantly, it was LDFL’s global business tie-up
with these C&C firms that ensured higher discounts for the fledgling C&C business in India than the GT
channel. As a result, the entire GT sales team of LDFL was unable to meet the desired sales results and lost
their sales incentives, even after putting in a lot of hard work (see Exhibits 1 and 2). This was leading to
demotivation in the GT sales team, who felt let down by the top management. Thus, LDFL’s 2019 sales
strategy needed to reduce the inter-channel conflict that had also resulted in LDFL’s products being
destocked by the GT channel in 2018 and the GT sales force demotivation.
Handa had no control over the global agreements that governed the C&C discount structure in India, but he
needed to reduce the channel conflict, as it was demotivating the GT sales force. Handa’s options were to
demarcate specific channels for the sale of specific stock-keeping units (SKUs); focus on stricter price
control across channels, which could ensure a level playing field for GT; customize market offerings for
targeted customer segments; or make changes in the sales organization structure and performance metrics.
Handa knew all the options had benefits as well as pitfalls and implementation challenges. Handa was due
for promotion the following year; a good performance in 2019 was critical to his career progression. Success
with this assignment could improve his prospects; consequently, he needed to act quickly and decisively to
salvage the situation.
1
Small retailers were shops that sold to end consumers.
This document is authorized for use only in Prof. D K Batra's PGDM-II/ Sales & Distribution Management- at International Management Institute - New Delhi (IMI) from Jun 2020 to Oct 2020.
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INDIAN RETAIL LANDSCAPE
India had been experiencing a disruption in distribution channels driven by changes in the technology
landscape and consumer behaviour, as well as the emergence of new channel formats. The main sales channels
were GT, modern retail (MR), C&C, and e-commerce. In 2019, the overall Indian retail market was expected
to grow at 12 per cent per annum, with the MR market and the GT market expected to grow at 20 per cent and
10 per cent per annum, respectively. In 2018, the emerging retail market, which included MR, C&C, and e-
commerce, contributed only 21 per cent of the total sector, with GT contributing the remainder.
General Trade
India was predominantly a land of small shop owners. There were 2.5 million retail stores that stocked one
or more categories of fast-moving consumer goods (FMCG) products. Of these, the relevant universe for
LDFL’s product portfolio was only 1.1 million. GT accounted for almost 80 per cent of LDFL’s business
in India in 2018.
GT was the most established distribution system for FMCG in India. The marketers assigned distributors
exclusive distribution rights for the products in specific geographies, called “territories.” Distributors
supplied the major retail and wholesale outlets in their territories. They supplied stock to retailers’ premises
and offered sales promotion support and limited credit per the agreed upon terms and conditions decided
by the supplier.
Distributors did not find it commercially viable to cater to very small retailers (who purchased from
wholesalers). Typically, wholesalers purchased from distributors in large quantities, stocked in bulk, paid
promptly, and enjoyed higher discounts than other retailers. To retain customers, wholesalers passed on
many of these discounts to the retailers who purchased from them.
Operations within the GT channel in India had remained unchanged for over five decades. Stock pressure
was an important driver of sales in GT, as retailers had some (limited) ability to influence consumer brand
choice at the point of sale. The marketer pushed stocks to distributors by providing extra incentives, such
as discounts or credit; distributors, in turn, put extra stock in retailers’ outlets by passing on these incentives.
The stocking and discount decisions were negotiated based on very rough data about retailer stocks, the
future demand scenario, and the lucrativeness of promotional schemes. The preceding years had seen a
stagnation in sales from the GT channel in India, which was struggling to keep pace with fast-changing
consumer requirements and losing sales to MR as well as e-commerce.
By the end of 2018, almost 97 per cent of retail stores selling to end consumers stocked LDFL products.
Though LDFL distributors covered only 0.5 million stores directly, a considerable part of LDFL’s retail
universe (3 per cent) was supplied by wholesale stores. Wholesalers provided wider reach to LDFL products
by restocking small and scattered retailers across the country.
Modern Retail
MR, like LDFL, consisted of large organized retailers with multiple outlets across the country directly
transacting with marketers. MR outlets were typically located in areas where footfall and consumer demand
were large enough to sustain the very high fixed costs of running large retail outlets. Apart from a great
shopping experience, MR offered consumers a wide assortment of products, lucrative promotional offers,
and loyalty programs. Such retailers negotiated higher discounts from marketers, as the retailers provided
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bulk sales and point-of-sale visibility to the brands, and leveraged consumer data, which was collected very
systematically. Macroeconomic trends that favoured the growth of MR in India included the spread of
digital technology and the Internet, which allowed consumers to compare product offers across different
channels and purchase from the channel with the best offer. Also, the government of India’s demonetization
drive,2 announced in November 2016, added further fillip for consumers to purchase from organized retail
outlets, as such outlets accepted electronic payments. Thus, during this phase, MR was able to acquire a
large pool of consumers quickly; many of them stuck to the channel, with some continuing to use the
wholesale and retail markets under the GT channel for top-up purchases.
Cash and Carry
C&C companies were big wholesale organizations that sold to small shop owners. C&C operations were
somewhat comparable to the very large wholesalers of the GT channel. C&C operated with basic, no-frills
store formats and low-cost locations. Although the C&C outlets offered no credit, they accepted credit
cards, provided a wide assortment of products, and focused on high inventory turnover. In India, C&C
stores were generally outlets of over 50,000 square feet, offering more than 5,000 items across product
categories such as FMCG, electronics, home appliances, and groceries. Such outlets offered retailers not
only spatial convenience but also everyday low and transparent prices. Many GT retailers had begun
purchasing from C&C companies, which helped GT retailers lower their cost of procurement and
operations, thereby maximizing their margins. More than 95 per cent of these products were sourced locally
by the C&C company, which helped to keep their costs to a minimum. As C&C companies employed
directly from the local community, they added to the growth of the local economy and created job
opportunities for the local population.
As global multinationals, C&C companies in India were able buy at lower prices than GT distributors and
wholesalers due to globally negotiated business deals and economies of scale. C&C provided several
benefits to Indian retailers, including a wide assortment of products, competitive and transparent prices, a
better shopping experience, and convenient payment and delivery solutions. C&C players also deployed
trained sales support teams to provide business members with sales support and services at their doorstep,
enhancing the overall buying experience.
As of April 2018, Walmart Inc. (Walmart), Metro Cash & Carry (Metro), Booker Group Limited, and
Reliance Retail (Reliance) operated a total of 92 C&C stores in India. In traditional trade, 2.6 per cent of
all consumer product goods moved through organized wholesale. The ₹68 billion3 market was growing at
13 per cent annually—faster than MR, albeit on a lower base. Though the C&C outlets were designed to
cater primarily to resellers like GT retailers, some end consumers also visited these outlets (see Exhibit 3).
E-commerce
E-commerce in India was driven by many large global companies and smaller Indian retailers offering the
convenience of anytime, anywhere shopping; a wide assortment of products; brand choice; and attractive
prices. Technology-savvy and young consumers were rapidly shifting into this new format. The challenge
for e-commerce was to develop a cost-effective supply chain that could provide reliable connectivity with
the desired service quality. Lack of logistics infrastructure and operational backbone limited growth.
2
In early November 2016, the Indian government announced it would invalidate billions of ₹500 and ₹1,000 banknotes. When
the Indian currency was made null and void, cash was severely restricted in the Indian economy.
3
₹ = Indian rupee; US$1 = ₹65.1434 on April 1, 2018.
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Significant impact on the Indian retail landscape likely would not be seen for several years. Acceptance of
e-commerce was high in urban areas but lower in smaller, inaccessible locations, where the volume of
business was not adequate for a commercially viable direct-to-consumer model. In 2019, the impact of e-
commerce was very significant in the non-food products, like groceries. The consumer habits were
changing rapidly, which was forcing the food product retailers of groceries, fresh and frozen foods, and
household products to adapt their business models (see Exhibit 4).
COMPETITIVE LANDSCAPE
The major detergent brands in India were marketed by the Indian subsidiaries of two multinational giants—
LDFL and Bharat Consumers Limited (BCL). Together, they accounted for almost 65 per cent of the total sales
volume and 75 per cent of the total sales value in India. The companies were fierce competitors, and they used
a lot of media advertising to generate consumer pull for their brands. The companies followed intensive
distribution and were available in all retail formats across channels. These brands drove footfall and sales volume
for the retail channel and their products were, therefore, “must keep” items. The rest of the detergent market in
India was fragmented, made up of smaller Indian players with regional or local presence that relied on retailer’s
push and, consequently, followed selective distribution. These local brands sold alongside multinational ones,
but their target consumers were different, as they mostly served the lower price points.4
LDFL India Limited was a US $2 billion5 subsidiary of the world’s largest consumer goods company,
LDFL Global, which had a worldwide turnover of $80 billion in 2018. Established in 1932, LDFL served
over 800 million consumers across India. LDFL owned multiple brands that dominated the categories of
beauty and grooming, household care, and health and well-being. Superior product propositions and
technological innovations had enabled LDFL to achieve market leadership in most categories in which it
had a presence.
BCL was part of a global major with turnover of above $100 billion in 2018. It was India’s largest FMCG
company, having 35 brands in 20 product categories of daily use (for example, soaps, detergents, and toothpaste).
The company had more than 20,000 employees and an annual sales turnover of $7 billion6 in India.
CONSUMER BEHAVIOUR
From a consumer behaviour perspective, detergents were a planned purchase category in India, and the
women of the household were the key decision-makers. Traditionally, television advertising was used by
marketers to build the brand image, communicate special features and promotions, and keep the brand in
the minds of targeted customers. The factors that determined product choices in the detergent category were
price, quality, fragrance, promotion, and brand image. Since the category was about regular use, and
detergents were not a high-value item, most households had used multiple brands over time and arrived at
a set of specific brands they were prepared to purchase. As such, advertising, point-of-sale promotions,
price-point management, and retail visibility were quite useful in driving demand.
4
Venkat Ananth, “Startups fight big global e-commerce firms to win online grocery battle,” ET Rise, July 13, 2018, accessed
March 18, 2020, https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/startups-fight-big-global-e-commerce-
firms-to-win-online-grocery-battle/articleshow/64955391.cms?from=mdr.
5
All dollar amounts are in US dollars.
6
“Introduction to HUL,” Hindustan Unilever Limited, accessed September 15, 2019, www.hul.co.in/about/who-we-
are/introduction-to-hindustan-unilever/.
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The proliferation of smartphones and access to economical Internet connections significantly transformed
Indian consumers’ purchasing behaviour. Most consumers now used the Internet to search for product
features, read consumer reviews, and compare prices across different retail outlets. E-commerce websites
and other marketers were using the digital medium to gain consumer attention through attractive prices and
consumer promotions. Because consumers were becoming more aware of the availability of discounts, they
were becoming bargain hunters for all product categories. Many consumers traded up to bigger pack sizes
to get better discounts. The phenomenon of showrooming was common, and consumers even bargained
with retailers for better prices by quoting the online prices.
This phenomenon of omnichannel, deal-prone, and price-seeking consumers had a significant impact on
retail channel dynamics. Traditionally, the prices of products of the same brand differed across different
channels, as these channels each provided consumers with a distinct service output. This price
discrimination across channels had been possible when information pertaining to the prices offered by
different retailers was not readily available and was difficult to compare; however, once the information
was digitally available, pricing across channels was visible to consumers and had entirely changed their
store preferences.
Because of omnichannel consumers, retailers faced the challenge of consumer churn. To retain their
consumer base, retailers had to be aware of the prices offered by other outlets in their vicinity and ensure
the best deal for their consumers. Thus, most GT retailers had to make concurrent adjustments in their
purchasing and stocking practices. The net impact of this shift in consumer behaviour was that all retailers
were forced to become very aware of their purchase prices and be on the lookout for the best deal, shopping
from multiple potential suppliers, such as distributors, wholesalers, or C&C outlets.
LDFL’s GT retailers had lodged several complaints with the LDFL sales team about other GT retailers
offering lower prices to some of LDFL’s regular consumers. The GT sales team faced the biggest challenge,
as they could not provide the discounts offered in the C&C and MR channels but had the highest sales
targets. The problem was compounded by the prevalence of the everyday low price (EDLP) policy followed
by C&C, wherein product prices changed daily. This forced many of the GT distributors and wholesalers
to stock fewer LDFL products, while retailers directly purchased from both the distributors and C&C
channels—whichever had the best offers. The GT channel realized that stockholding had to be minimized
to leverage the daily prices and promotional offers of the C&C channel. Thus, there was a considerable
reduction in LDFL stock in GT.
CHANNEL STRUCTURE: THE PUNJAB MARKET
Handa faced his biggest drop in GT sales in Punjab, a prosperous agricultural state in the northern region of
India. He decided to study the problem in detail to find a robust solution. Punjab was a major detergent market;
LDFL had dominated it for many years, with a greater than 33 per cent market share. Market evolution and
the advent of emerging channels like MR, C&C, and e-commerce had reduced the share of LDFL’s detergent
sales in GT from 86 per cent in 2013 to less than 70 per cent in 2018 (see Exhibits 5 and 6).7
General Trade
LDFL’s GT sales team had 12 distributors in Punjab, each servicing about 50 wholesalers and 250 retailers
in well-defined geographical territories. Retailers served end consumers, who shopped for day-to-day
7
“The Neglected General Trade Networks of India,” IndianRetailer.com, November 14, 2018, accessed April 22, 2019,
www.indianretailer.com/article/operations/marketing/The-neglected-General-Trade-Networks-of-India.a6243/.
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necessities in small quantities. Thus, GT was largely dependent on consumer footfall and was present in all
residential areas, providing spatial convenience and a reasonable assortment of products to end consumers.
Many GT end consumers also shopped through MR channels, where they received a wider variety of
product offers and better prices.
Most retailers had to compete for a limited pool of consumers and needed to offer the most competitive
price to retain that pool. As such, retailers were keen to obtain the best commercial deal from their
distributor. Over time, with the advent of C&C and MR as alternate supply sources, retailers actively
compared prices across multiple LDFL channels. Many retailers were increasingly shifting to C&C
channels, where they faced no target pressure and received limited credit, better deals, and greater variety
than GT distributors or wholesalers provided.
Modern Retail
Five major MR chains operated 79 outlets across Punjab. The MR channel in Punjab had steady sales,
attracting primarily GT end consumers. Though MR enjoyed higher discounts from marketers, its expenses
for maintaining its infrastructure, workforce, and promotional and marketing expenses were higher.
Cash and Carry
In Punjab, this format was a membership-based retail store that sold limited SKUs, mostly in bulk packs.
C&C had a membership requirement; customers were usually retailers who paid an annual fee for shopping
privileges. In Punjab, there were three players in the C&C space: Walmart, Metro, and Reliance.
Walmart had been the world’s largest retailer for many years and was LDFL’s biggest customer globally.
The company was renowned for its operational efficiency with proven expertise in logistics, supply chain
management, and sourcing. In 2017, Walmart India, a fully owned subsidiary of Walmart Inc. owned and
operated three Modern Wholesale stores in Punjab, branded as “Best Price”. Each Best Price outlet offered
nearly 5,000 items in a C&C wholesale format. Apart from these, Walmart India had a business-to-business
e-commerce platform, which extended its services to all Best Price store customers (e.g., kirana stores,8
offices, institutions, hotels, caterers, restaurants, and other business members). As a virtual store exclusively
for its members, this e-commerce platform provided a convenient online shopping experience for a similar
assortment of products, and many additional special items.9
Metro was a German chain with extensive C&C-format experience across the globe. They had five stores
in Punjab and 24 stores across India. In November 2018, Metro reported ₹745.2 million, with a year on
year sales growth rate of 16 per cent. A key growth market for Metro was India, where it focused on
achieving profitable and sustainable growth. The company had launched order, payment, and doorstep
delivery facilities for traders and kiranas to popularize online order placement. The company was also
focusing on the HORECA (hotels, restaurants, and caterers) customers by building a distinctive value
proposition for this underdeveloped segment by leveraging its global expertise. The company aimed to have
50 stores in India by 2020.10
8
Small, family-owned stores; also called mom-and-pop grocery stores.
9
Walmart India (homepage), accessed September 15, 2019, www.wal-martindia.in/.
10
“About Metro Cash & Carry,” Metro, accessed April 18, 2019, www.metro.co.in/about-us.
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Reliance was an Indian group with 45 C&C stores under the Reliance Market brand in 2018. The first
Reliance Market opened in 2011, and the stores had since expanded to 37 cities and about 2.5 million
members. The company planned to set up an additional 300 stores in three years to take on the likes of
Walmart, Metro, and others; Reliance had an investment outlay of ₹50 billion for the expansion of the
Reliance C&C stores. In 2018, it had five outlets in Punjab.11
THE PROBLEM, OPTIONS, AND CONSTRAINTS
Handa’s GT team was frustrated by the developments in the emerging channels. In the meeting called to
discuss the situation, the GT team of Punjab presented the following:
The proliferation of the Internet was helping digitally savvy consumers to compare across many websites
and thereafter select the best deals. This behavior was further facilitated by the proliferation of distribution
channels, which offered many alternatives to customers for fulfilling their needs. So far, the overall impact
was not alarming, as many consumers still used the GT channel for their daily requirements and topping
up. Some GT outlets were also trying to provide their customers with an enhanced shopping experience
more akin to MR—though the price points were not matched. Thus, there was a definite shift of consumers
from GT to MR; however, this was not a serious point of contention between the GT and MR teams of
LDFL, as end consumers could choose to buy from any specific channel they preferred.
However, C&C outlets offered GT retailers and wholesalers financial deals significantly better than those
LDFL’s GT distributors could offer. If some C&C promotion did not work, it was quickly changed—
sometimes even daily—leading to insecurity among GT retailers about consistently buying at the best price.
The net impact of this was a reduction in GT retailers’ confidence in the stability of LDFL’s prices that
often resulted in margin erosion for the retailer and, consequently, a severe reduction in the retailer’s
motivation to sell.
GT retailers had become unsure of LDFL price fluctuations in the market, and so they stocked only the
minimum quantities required to service regular demand. Most retailers were ready to replenish stock at
higher prices rather than stock in bulk and risk suffering a loss if the rest of the market started selling at a
discount. Therefore, there was a marked reduction in LDFL stock in the retail outlets, which eventually
contributed to a loss in sales and market share for LDFL in Punjab. LDFL was not preferred by GT retailers
that still contributed to almost 70 per cent of LDFL’s business in Punjab. Ironically, current LDFL discounts
were also insufficient for sustainable topline delivery at C&C outlets, leading to unhappy channels for
LDFL across Punjab.
The area sales manager and regional manager handling the GT business felt that LDFL’s C&C sales policy
was aggravating the challenges faced by the GT business while unduly promoting the relatively minuscule
emerging channels in Punjab. Since LDFL’s major competitor, BCL, did not offer disproportionately
preferential treatment to the C&C channel, BCL did not face the challenged LDFL faced in GT. Research
conducted on the Punjab market by LDFL’s summer interns indicated the following possible causes of
lower sales and destocking by GT retailers:
 The retail sales price variance of an SKU for C&C and GT was much greater for LDFL products than
for other competitors, including BCL. This was because LDFL’s global tie-up—not its current share in
the market—dictated the discount for C&C in India. BCL had no such constraint and offered much
more targeted promotions for C&C operations.
11
“Reliance Market,” Reliance Retail, accessed April 20, 2019, https://relianceretail.com/reliance-market.html.
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 Volatile prices for LDFL SKUs had made it less lucrative for GT to carry LDFL detergent inventory;
thus, LDFL stock levels had dropped across GT outlets. Lesser stock pressure was leading to stock outs
and less retailer push, translating into a loss in detergent sales.
 LDFL’s GT promotions were complicated and took almost a month to settle, while C&C’s flat or tiered
pricing was immediately deducted from the invoice. GT-specific trade promotions like gold coin
schemes, vacations, and Amazon gift vouchers were inefficient, as they did not convert to better
margins for the retailer or help to improve price competitiveness for specific SKUs.
 C&C sweetened deals with GT retailers by accepting postdated cheques, which mostly resulted in 15
days of extra credit. Also, C&C tied up with credit card issuers who offered 0.3 per cent cashback
(weekly stock rotation for a trader could mean a monthly margin of 1.2–1.5 per cent, which translated
to a 30 per cent annual impact). C&C also offered free delivery on special days, which negated the
advantage of door delivery that GT distributors provided to retailers.
On December 20, 2018, Handa held a meeting with his channel team. He set up the deliberations with his
opening comment:
When different channels try to sell every SKU, markets never attain a stable market operating price
(the price at which the product was sold to end consumers), as each player across channels would
try to undercut12 the other, leading to a lose-lose situation for the entire channel system. Margin
reduction of some specific channel was unlikely to ensure price stability, as they all provided
different service outputs to their consumers. While, in most cases, any undercutting in the market
was directly or indirectly funded by the company (using mechanisms like contracted margins,
promotions, visibility, collaboration incentives, or launch plans), in certain situations, the emerging
channels would still do it by cross subsidizing the margins from other products to maintain their
customer equity of best value, EDLP, best buy, etc.
Handa also presented research findings on the criteria retailers used in purchasing decisions (see Exhibit
7), a comparison of commercial retailers buying from GT versus MR (see Exhibit 8), a comparison of the
channels’ value propositions (see Exhibit 9), and a comparison of the financials of all channel
intermediaries (see Exhibit 10).
The GT team came up with the suggestion of product portfolio demarcation. Based on sales achieved and
company priorities, they suggested that LDFL assign a specific channel as primary vendor (PV) for every
SKU. The PV would have the following roles for the SKU:
 The PV would be responsible for achieving the targeted sales volume and business growth of that SKU
in Punjab. Other channel partners would maintain or grow in a non-disruptive manner.
 The PV would determine the market operating price13 for that SKU. The PV would sell the amount that
was the shortfall in the target achievement of other channel partners for the assigned SKU.
 The PV would not be changed frequently; it should have a business goal and timeline of at least two
quarters; however, the performance of a PV would be reviewed every month.
The C&C team suggested a strict policy of ceasing supply in the case of any channel partner offering more
discounts than allowed. This policy would be implemented by communicating the recommended pricing
guidelines for every channel. A fair supply forecast and channel-wise supply allocation in line with pricing
guidelines would be worked out in advance. In the case of a demand surge in a specific channel, supply
rationalization would be followed to manage the potential changes in the price of LDFL products.
12
Selling the same product at a lower price.
13
The price at which the consumers were able to buy an SKU from a retail outlet.
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The trade marketing head suggested that, even though LDFL India did not have control on the overall
discounts for the C&C channel, LDFL was within its rights to impose strict price controls on the C&C
channel. C&C operations were driven by data; based on consumer profiling, customers would be segmented
by C&C. There would be different LDFL product offers (e.g., SKU + promotion + price combination) for
different consumer segments. Such offers would be designed and implemented by the LDFL sales
management team in a manner that would not conflict among different channels.
The head of the go-to-market team proposed that LDFL restructure its sales responsibilities and
accountabilities. Accountability for total sales rested with multiple managers, with each responsible for
sales through a specific channel; instead, such accountability should rest with one manager. This would
ensure that the optimal decision was made for the entire geographic area. Similarly, it would ensure a state-
level business operating plan for market share growth and faster decision-making regarding the resolution
of channel conflict, supply reallocation, and so on.
Handa believed LDFL would prosper in the long term and win against the competition if it managed to
adapt to the emerging channels and the omnichannel consumer better than its competitors. He felt that
LDFL channels would be optimally managed if consumers and retailers could pick the best product offer
from the channel of their choice. He had to decide on a plan that could be reasonably implemented in the
market in a time-bound manner. Though his immediate focus was on achieving 2019 sales objectives, he
wanted his decision to contribute to the long term growth of LDFL in India.
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EXHIBIT 1: ORGANIZATIONAL STRUCTURE OF LDFL INDIA LIMITED
India Sales –
Director
Emerging Trade
North & East South & West GTM Head
Channel Leader Marketing
RM RM (RM)
(RM) Head (RM)
3 Team
6 ASMs 7 ASMs
Leaders
TSMs TSMs NAMs
Notes: RM = regional manager; GTM = go-to-market; ASM = area sales manager; TSM = territory sales manager; NAM =
national account manager.
Source: Created by the case writer.
EXHIBIT 2: KEY RESULT AREAS FOR LDFL INDIA SALES TEAM
For specific channels at the director and regional levels:
 Sales growth—value
 Sales growth—volume
 Shares (corporate)
 Distribution growth
 Cash (payments days)
 Inventory days
 Net outside sales (deducting trade discounts and other sales expenses)
For specific channels at the area sales manager, territory sales manager, and team-leader levels:
 Sales growth—value
 Corporate shares
 Distribution
 New initiative launches
 Spending efficiency
The regional manager’s sales target included general trade distributor and indirect retail targets only.
Emerging channel sales targets included modern retail, cash and carry, and e-commerce targets.
Source: Written by the case writer.
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EXHIBIT 3: SHOPPER BEHAVIOUR DATA FROM CASH AND CARRY
Resellers at C&C
Almost 90 per cent of shoppers visiting these stores were small- to medium-sized kiranas (small, usually
family-owned shops selling groceries and other sundries), while medium- to large-sized wholesalers did not
frequent these stores. Customers typically brought a shopping list detailing only the parent brand name—
no quality, variant, or price details were written down. Most resellers stuck to their usual quantities—even
if there was a good promotion (unless it was a limited time offer). Between 35 and 38 per cent of resellers
bought at least one category outside of their shopping list (for which they were guided by store salespersons
or offers). While resellers frequented Reliance outlets two times a month, Walmart Inc. (Walmart) resellers
preferred monthly shopping. The latest products, assortment, and quality were key expectations from the
store. Resellers preferred a discount percentage; at least 40 per cent of resellers did not know the margin
from C&C but believed it to be the best. Resellers relied on in-store experts (salespeople) to educate them
on new products—more so in upcountry markets. A fixed discount was the most preferred promotion,
followed by quantity linked discounts. Stores perceived that products delivered by C&C had fewer issues,
such as damages or incorrect quantities, and therefore, they placed greater trust in them. Distribution
extension by CC was very minimal. Existing SKUs were sold in-store by providing higher discounts and
promotional schemes.
End Consumers at C&C
Of the end consumers shopping in C&C, 68 per cent made all purchase decisions in-store and planned to
shop in only three to four categories. When shopping, 83 per cent of Walmart shoppers and 41 per cent of
Reliance shoppers decided on a specific brand in-store. When choosing which size pack to purchase, 93
per cent of shoppers decided on the pack size in-store and chose the pack offering the most lucrative deal.
Assortment, new products, and convenience were key customer expectations. Shoppers upsized or
upgraded at least one of their purchases due to expert advice they received at the point of sale.
Note: C&C = cash and carry; SKU = stock-keeping unit.

Source: Written by the case writer.
Page 12 9B20A020
EXHIBIT 4: A COMPARISON OF RETAIL CHANNELS IN INDIA
Consumer Shopper Service Output Service Output

Business
Behaviour and Behaviour and Provided by the Demanded by
Model
Profile Profile Channel Customers
Buy all tiers of
brands.
Buy top-up Will not try new Convenience,
sachets of brands unless availability of
detergents at the current brand regular Right assortment,
General
end of the causes problems or merchandise, availability, and
Trade
month. is unavailable. customized competitive pricing.
Are usually Look for specific treatment, and
outlay- price points. speed.
constrained
shoppers.
Willing to pay more
for brands or a
better shopping Experience, Experiences, deals,
Buy premium-
experience. assortment, new and loyalty benefits, in
tier brands and
Modern Value-conscious product addition to right
are
Trade but not outlay introductions, assortment,
highly brand
constrained. deals on certain availability, and
conscious.
Great shopping periods. competitive pricing.
experiences drove
trials.
Buy products
Purchase is not
that cater to the
consumption based
demands of
but rather for
consumers in
Cash and selling at stores. Bulk deals and Credit, free delivery,
their shops.
Carry Have a list in mind price advantage. and returns.
Compare prices
or are looking for
with distributors
possible goods to
and wholesalers
stock.
to buy cheaper.
Convenience,
Value-conscious
Buy across deals, assortment
but NOT outlay
categories and (availability of
constrained. Fast delivery, quality
brand tiers but infrequently
E-commerce Good shopping products, positive
are fairly brand demanded
experience drives ratings, and reviews.
conscious for products), and
trial and repeat
most purchases. 24/7 shopping
purchases.
option.
Source: Created by the case author.
Page 13 9B20A020
EXHIBIT 5: THE SHARE OF DIFFERENT CHANNELS FOR LDFL DETERGENT SALES IN PUNJAB
(%)
Channel Type 2014 2015 2016 2017 2018

General Trade 86.0 84.8 77.1 73.5 69.5
Modern Retail 3.2 4.5 6.8 7.6 8.5
Cash and Carry 2.5 3.5 6.3 8.4 9.6
E-commerce 0.0 0.0 0.3 1.0 3.0
Canteen Stores
Department*/Instituti 8.3 7.2 9.5 9.5 9.4
onal Sales
*Canteen Stores Department is the centralized buying agency for the entire defence forces of India
EXHIBIT 6: MARKET SHARE OF LDFL DETERGENT SALES IN DIFFERENT CHANNELS

IN PUNJAB (%)
Channel Type 2014 2015 2016 2017 2018

General Trade 35.0 34.8 34.5 33.5 30.0
Modern Trade 48.5 46.5 46.3 46.8 47.1
Cash and Carry 62.0 68.5 64.2 63.5 62.5
E-commerce 0.0 0.0 0.3 1.0 3.0
Trade Market Share 33.2 34.0 33.8 33.5 30.7
EXHIBIT 7: FACTORS THAT INFLUENCE HOW RETAILERS DECIDE WHERE TO BUY
1. Price: The lower the better, typically seen in conjunction with the credit provided.
2. Frequency of service: The more frequent, the better, with the best being on demand.
3. Fill rate: The percentage of the total order that gets fulfilled by the service provider in a predetermined
timeframe.
4. Assortment: The availability of different products, SKUs, and brands.
5. Delivery: The amount of time taken to deliver and the cost of delivery (if any).
6. Credit: The amount of credit and the duration of the credit provided by the supplier.
7. Education: The amount of training provided to salespeople, as well as the education provided to
consumers.
8. Loyalty program: A benefit provided by the supplier for an achievable target and exclusivity agreement.
9. Displays and devices: Devices and displays that aim to improve the shop’s attractiveness to generate
footfall for the outlet and a specific brand.
10. Ordering convenience: Convenience of time regarding when they can order and the time it takes to
place the order.
Note: SKU = stock-keeping unit.

Page 14 9B20A020
EXHIBIT 8: A COMPARISON OF COMMERCIAL TERMS FOR RETAILERS
Buying from GT Buying from C&C

2017 2018 2017 2018
Average amount* spent on detergent in a single purchase
400 400 200 400
(₹)
Number of purchases per month 4 4 6 5
Net landed cost for detergent sold at MRP of ₹1,000 (₹) 874 870 863 855
Average operating cost (fixed) as % of MRP 6% 8% 6% 8%
Average operating cost (variable) as % of MRP 7% 7% 9% 9%
Average days sales of inventory 15 10 12 8
Average number of days the supplier extends credit to the

7 8 2 4
retailer
Average number of days the retailers extend credit to
2 3 2 3
consumers
Retailers’ average selling price to end consumers for
980 975 975 965
detergent with an MRP of ₹1,000 (₹)
Inventory holding costs detergent (₹) 2,000 1,200 1,000 1,000
Notes: Capital cost is 12% per annum; ₹ = Indian rupee; GT = general trade; C&C = cash and carry; MRP = maximum retail price;
*Retailers stocked many products. They set aside a fixed amount for every product category (for all brands in the category).
Page 15 9B20A020
EXHIBIT 9: VALUE PROPOSITION OF DIFFERENT CHANNELS

Market Share
Business Key Success Competitive
(2–3-Year Outlook for LDFL
Model Parameters Advantage
Trend)
Penetration,
frequency of
Consistently
salesperson
declining in
visits, number of
most urban The most strategic channel for
categories
General Reach and geographies, obtaining new trials and gaining
purchased per
Trade speed. where penetration for any brand or
trip, costs per
omnichannel SKU.
visit, loyalty
conflict more
(share of LDFL
evident.
in the detergent
business).
Penetration,
Important channel for upsizing
frequency of
and upgrading existing loyal
salesperson
After a consumers. However, this
visits, number of
consolidation channel is likely to
categories
Modern Experience phase, MR had progressively offer reduced
purchased per
Trade and deals. started to grow margins due to an increase in
trip, costs per
again in the last bargaining power that has not
visit, loyalty
2–3 years. only extracted more margin but
(share of LDFL
also made consumers “deal
in the detergent
seekers” in the long run.
business).
Penetration, C&C will continue to grow, as
Organic growth
frequency of two more global chains are
is high, as is
salesperson coming to India, and existing
inorganic growth
visits, number of players are expanding. This
Cash and due to new store
categories Pricing. channel will soon be above 10
Carry expansion.
purchased per per cent of the total market;
Overall, this
trip, costs per understanding how to leverage
channel is
visit, loyalty this channel for incremental
growing.
(share of wallet). sales is critical.
Penetration, Urban households and tech-
frequency of savvy users with bigger
salesperson purchase baskets are on this
visits, number of channel. It is expected that
categories purchases will rapidly grow with
Growing rapidly
purchased per Convenience the proliferation of the Internet.
but from a very
E-commerce trip, costs per and Cracking the supply chain code
small/non-
visit, loyalty assortment. may be critical to making this
existent base.
(share of wallet). channel margin meaningful to
the company. This channel is
critical not only for sales but
also for establishing a
marketing presence.
Notes: MR = modern trade; C&C = cash and carry.

Page 16 9B20A020
EXHIBIT 10: FINANCIAL COMPARISON OF DIFFERENT CHANNELS
Distributor MR C&C E-commerce

Total MRP amount of LDFL detergent
purchased annually by intermediaries in 2,000 260 280 100
Punjab (in ₹ million)
Number of such intermediaries in Punjab 12 3 3 4
Net purchase price of LDFL detergents as
81.2 80.7 80.1 82.2
% of MRP
Average total operating cost as % of MRP 3.5 8.4 1.5 6.5
Average age of inventory for LDFL
8.0 4.2 2.5 5.0
detergent (in days)*
Average number of days credit is
0.0 0.0 3.0 0.0
extended to LDFL detergent customers
Average LDFL selling price to customers
87.0 92.0 85.5 90.0
as % of MRP
Total investment made in the channel for
144.0 18.0 12.0 6.0
LDFL detergents (₹ million)
* Capital cost is 12% per annum.
Note: ₹ = Indian rupee; MRP = maximum retail price; MR = modern retail; C&C = cash and carry.

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W20187

LDFL INDIA LIMITED: ADAPTING A MULTI-CHANNEL DISTRIBUTION

INDIAN RETAIL LANDSCAPE

Cash and Carry

CHANNEL STRUCTURE: THE PUNJAB MARKET

Cash and Carry

THE PROBLEM, OPTIONS, AND CONSTRAINTS

EXHIBIT 1: ORGANIZATIONAL STRUCTURE OF LDFL INDIA LIMITED

TSMs TSMs NAMs

EXHIBIT 2: KEY RESULT AREAS FOR LDFL INDIA SALES TEAM

For specific channels at the director and regional levels:

EXHIBIT 3: SHOPPER BEHAVIOUR DATA FROM CASH AND CARRY

End Consumers at C&C

Note: C&C = cash and carry; SKU = stock-keeping unit.

EXHIBIT 4: A COMPARISON OF RETAIL CHANNELS IN INDIA

Consumer Shopper Service Output Service Output

Source: Created by the case author.

Channel Type 2014 2015 2016 2017 2018

EXHIBIT 6: MARKET SHARE OF LDFL DETERGENT SALES IN DIFFERENT CHANNELS

Channel Type 2014 2015 2016 2017 2018

Source: Created by the case author.

EXHIBIT 7: FACTORS THAT INFLUENCE HOW RETAILERS DECIDE WHERE TO BUY

Note: SKU = stock-keeping unit.

EXHIBIT 8: A COMPARISON OF COMMERCIAL TERMS FOR RETAILERS

Buying from GT Buying from C&C

Average operating cost (fixed) as % of MRP 6% 8% 6% 8%

Average operating cost (variable) as % of MRP 7% 7% 9% 9%

Average days sales of inventory 15 10 12 8

Average number of days the supplier extends credit to the

Inventory holding costs detergent (₹) 2,000 1,200 1,000 1,000

EXHIBIT 9: VALUE PROPOSITION OF DIFFERENT CHANNELS

Notes: MR = modern trade; C&C = cash and carry.

EXHIBIT 10: FINANCIAL COMPARISON OF DIFFERENT CHANNELS

Distributor MR C&C E-commerce

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