Challenges in Distribution1

Thursday, October 7th, 2022. Bengaluru Office.

Praveen Kumar was in a pensive mood, staring at the window. It had just been one month since
he had taken over as the Manager of South India, for Goodwin Beauty. He had tough decisions
to make to restore the performance of South Indian market. Now, he had to choose wisely his
next course of action, with a senior leadership meeting coming up in a few days’ time.
Praveen looked at the notes he had made basis his understanding of the industry and the
organization. The first few pages were an understanding of the company and industry
landscape, through his induction period.
1. Goodwin Beauty was amongst the top three players globally in the professional beauty
category. In India, its position is no different and it commanded a market share of 25%.
The market leader, Relizo, commanded a market share of 40% and Lardel Beauty was third
at approx. 17%. The rest of the industry was comprised of smaller regional players. Relizo,
Goodwin and Lardel were the big three in the industry. Outside of the Big Three, regional
players existed in pockets.
2. The professional beauty industry in India was growing at a healthy double-digit growth rate
over the past 5 years with a CAGR of 16%. Indian market was identified as a strategic
“power market” globally for the brand by the global leadership team, with huge growth
potential and investment opportunities.
3. Goodwin India had been a strong performer so far, growing ahead of the industry. Its
CAGR over the past 5 years had been 26%.
4. South India, consisting of Andhra Pradesh, Telangana, Karnataka, Tamil Nadu and Kerala,
was contributing close to 35% of the overall revenue and was a key market for Goodwin
India. North and East India contributed 33% and West-Central contributed 32% of India
business.”
Looking at the next few pages, he recalled his conversation with the India CFO Rakesh Das,
during his induction period.
Monday, October 5th, 2022. Mumbai, Goodwin India Headquarters.
Rakesh: “Hi Praveen, we are really excited to have you here”
Praveen: “Thank you Rakesh. I am equally excited to be a part of Goodwin India.”
“Great, let me give you a background of the current distribution model which we
operate with. You can stop me and ask any questions you have. 2 years ago, South India
had been a “showcase” market for the country, because it was the first to transition to a
Full-Service Distributor (FSD) model. The successful pilot in the South had convinced
the Indian leadership to launch the FSD model across India.”

1
Case developed by Hari Hara Subramanian (PMIR batch of 2011, XLRI – Xavier School of Management). The
case has been released after ensuring anonymity to the organization and the individuals concerned. The case is
intended to be a basis for class discussion rather than to illustrate either effective or ineffective handling of an
administrative situation. The case neither purports to be nor should be used as source of data regarding any
organization or industry.

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 “That is nice to hear. I am curious to know more details about the earlier model as well
and what made us change our distribution model.”
“Good question Praveen. Before the FSD model, we had 60+ small-scale distributors
across India. As you must be aware, in a traditional distribution model, the
manufacturer sends primary shipments to the distributor’s warehouses in key locations.
The distributor, in turn, is responsible for ensuring smooth customer delivery of the
product (in our case – shampoos and conditioners) to customers (salon owners), who in
turn, sell it to consumers.
The distributor’s primary role was to ensure adequate working capital and maintain the
right quality and quantity of warehouse workforce to ensure our products are delivered
on time to the salon owners.”
“And what about the sales staff? On whose payroll are they on?
“Well, prior to the FSD model, they were on a third-party payroll. But with the FSD
model, they are part of the distributor’s payroll.”
“Interesting. So, what went wrong with the traditional model? Isn’t that what our
competitors operate with even today? Why the shift to the FSD model?’
“You are right Praveen. Both our competitors operate through the traditional
distribution model with hundreds of small-scale distributors and not the FSD model.
The traditional distribution model has its fair share of challenges. For one, we had a lot
of coordination issues as our finance and supply chain teams had to interact on a day-
to-day basis with 60+ distributors for stock, finance claims settlements. On the people
front, we had frontline sales staff who were on third -party payrolls, who reported into
our Regional Managers and Unit Managers. In Bengaluru for example, there were 4
small scale distributors for different territories. Likewise for Tier 2 cities in Karnataka.
As a result, each of the Sales Staff at any given point time had to coordinate with 5 or
6 different distributors, depending on the order received from the salon customer.
Claims management was becoming messy with so many distributors involved.
Financial and stock audits of our distributors, it was becoming next to impossible as
our distributors were based in 60+ locations and our internal teams in Supply Chain and
Finance had to visit all these locations, at least once a year, complete process audits and
work with the distributors to improve processes. When we would have discussions with
some of the small-scale distributors to expand our network into newer areas (which
called for financial investments in terms of working capital for warehouses, inventory
etc), we would be pushed back because of their inability to increase working capital.
Even marketing collaterals had to be despatched to so many locations. It was becoming
overly complex and difficult to manage all these transactions. For example, when we
had to roll-out our nationwide Diwali Special campaign for our salons, our Marketing
Executive and the associated agency had to coordinate with distributors in 60 different
locations to get their postal addresses, confirm receipt of POS display material and send
pictures of execution.
The rollout of our latest global ERP software for placing Supply Chain Orders was a
nightmare. We had to handhold and train all these distributors, each of whom had
different capability levels and we found it difficult to handhold them and get everyone

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to use the system correctly. Every three months, one of the smaller distributors would
ask for credit support or be on the verge of closure due to financial issues. The entire
system was on the verge of collapse looking at all these challenges. Therefore, we
decided to try a new model which would have few distributors, who had increased
financial muscle (and therefore would invest in additional working capital), better
systems and processes and pilot the FSD model with South India.”
“Which means that you will have 1 mega distributor for South India, who will have
multiple branches in various cities, bring in more working capital and employ the sales
staff on his payroll. This in turn leads to smoother coordination for stocks, claims,
marketing collaterals etc, all of which were pain points with the earlier model. Am I
right?”
“Perfect. So, we appointed a Full-Service Distributor in South India in line with this
thinking.”
“So, how has the journey been so far? Have you been able to achieve your intended
objectives with the new distribution model?”
“As I said earlier, after a successful pilot in the South, we decided to extend this model
pan India. The FSD model operates on a cost-plus financial incentive as below. Basis
the expected revenue, a projected P&L would be drawn out at the start of the year. The
actual costs will be reimbursed every quarter, post audits and reconciliation. Here are
the relevant contractual clauses for you to have a look.
Contractual clauses related to Finances: Agreement between Goodwin Beauty India
LLC & Full-Service Distributor (FSD) – a few relevant clauses.

1. At the start of the fiscal year, the FSD agrees to sign off on a revenue target for the entire
year with a month-wise breakup This target will not be revised at any point in time during
the year and the FSD is responsible for the delivery of the annual target.
2. Based on the projected revenue, all costs budgeted for delivering the revenue target will
be agreed in a joint meeting with Goodwin and FSD leadership team. This includes costs
like manpower, incentives, etc and investment in assets, inventory etc.
3. The actual costs will be reimbursed every quarter, post audits and reconciliation. If the
actual costs exceed the projections drawn at the start of the year, then they will not be
reimbursed, unless it has been pre-approved with the Goodwin team.
4. Additional incentive for delivering the yearly targets (3% of the annual revenue subject
to 100% target achievement) will be given at the end of the financial year.
5. The distributor margin for all the product categories will be fixed at the start of each
fiscal year.
6. The credit period for all purchases from Goodwin India is 60 days. Failing to pay within
agreed credit period will attract an interest penalty at the rate of 18% per annum.

While we were able to achieve our internal objectives with regard to smoother
coordination for our interactions with the distributor organization, the new model has
also created a new challenges which we are still trying to find a way out.
The accounts receivable (money that our distributors owe to us for purchasing stock)
has increased compared to our earlier model. In the earlier model, the smaller size

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 distributors used to pay advance payments for their orders to us. Now that the volume
runs in crores, bigger distributors are not willing to pay that upfront and because of
them not being able to recover money in time from the markets, they face working
capital challenges and do not pay us back in time. That has been the biggest challenge,
which we are still trying to resolve. What is the extent of write-offs? As per our records,
these 3 distributors combined have had to write off money worth 14 cr. INR from the
market in the last financial year, which equals a month of our all-India secondary sales
(the retail sales done by all our distributors to the salon).
“And why have the new bigger distributors facing challenges in collecting their money
from the salons? Aren’t they supposed to do a better job than smaller distributors? Also,
how are our competitors able to successfully execute the traditional model?”
“The salon industry runs on credit and not every account pays on time and not every
distributor is able to collect the money on time. As a result. Our Accounts Receivable
or Day Sales Outstanding (money which they owe to us) has gone to an abnormally
high period of 145 days against our limit of 60 days. The situation is bad in all three
FSDs (South India at 162, West-Central at 135, North at 149 days). In the earlier model,
we could control this to around 85 days but there were a lot of operational coordination
challenges with so many distributors. My analysis is that the smaller distributors had a
bigger skin in the game, compared to bigger distributors, who are having interests in
multiple businesses and are not able to give this the required attention. I think you will
know more when you start doing your market visits. As far as competition is concerned,
most of the players seem to be following the traditional model of smaller distributors
despite its inefficiencies. Maybe they are ok with it or probably this idea of an FSD
model never occurred to them. The distributors tell me that Some salons have closed
due to low business, in some cases, the owners have gone missing. All of these are
contributing factors, you can find out more and let me know your analysis on this. All
the best to you.”
Praveen reflected on the interaction for a while. He had spent enough time in the market since
that meeting and was not sure if the new model was working as intended. He thought it had
created a new set of problems while solving the earlier problem of internal coordination.
He then turned over the pages of his book, which contained a summary of a difficult customer
interaction he had. It was something he would never forget. He went back in time to relive that
interaction.
Tuesday, 6th October 2022. Meeting with SpaWorld CEO, Bengaluru
Praveen was patiently waiting outside the CEO’s office. SpaWorld was one of the biggest
accounts for the South Market, with more than 15% contribution to the overall revenue. It was
a chain of salons in Bengaluru, mostly catering to SEC A category consumers. The chain was
known for its excellent customer experience and had received numerous awards in the service
industry for its service levels. For Goodwin India, it was a crown jewel and a model account.
SpaWorld was a pioneer in adopting the latest industry practices and technology innovations.
In an industry where employee retention was a challenge, SpaWorld boasted of an
exceptionally low attrition rate.

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However, things had not been rosy for Praveen in managing the biggest key account for the
region. In the first week, he had received a call from Meher Rana, the CEO who was livid with
the distributor’s service levels. A furious Meher had asked Praveen to plan a meeting to discuss
the way forward. Praveen was not expecting a positive outcome.
After the customary introductions, Meher came to the crux of the discussion “Praveen, it is
high time you did something about your distributor. It has been two years now since we have
been dealing with him and every order is a struggle. My team has never faced such a challenge
with any other supplier. We have 15 suppliers across our hair, nail, skin and spa categories but
no other supplier has such a broken ordering process. Every time, we place an order, more than
20% of the items are not supplied. I am not sure if Goodwin does not have stock of a product
globally or if your distributor is not planning his forecast. There is no prior communication
from his end, in case of any unavailability. As an account which does several crores of business,
the very least we expect is regular communication regarding product availability and supply
status.
And don’t even get me started about the account’s reconciliation process. Every time, there are
issues, and our accounts manager is at pains to point out basic flaws in reconciliation. My team
is forced to re-check every entry three to four times, for fear of an excess payment. A lot of
times, we would have paid off an invoice, but the adjustment would have been done against
another invoice and the entries won’t match. They are asking me for a bill but there is no receipt
or invoice. And the amount is huge. This happened 1.5 years ago but till date has not been
resolved. All my accounts are clean, and I have no hesitation in paying unpaid dues, but they
don’t seem to produce proof. It’s quite ridiculous. One of my outlet managers has been
complaining that promotional items like hair dryers, combs, as part of festival salon purchase
offer, which they were supposed to receive from the distributor, as part of last September’s
festive offer, haven’t been disbursed to them till date.
We had a much better experience with your previous distributor AK Marketing, even though
he was a smaller one. Products would be delivered within 48 hours to all our 10 out-lets and
very rarely, would items be out-of-stock. The worst part about your current distributor is he
doesn’t seem to bother. Initially, I gave him the benefit of doubt that he was new to the process
and industry, and it would take some time. But it’s more than two years now and my patience
levels are running out, Praveen. I am not sure what you are going to do but if the situation
doesn’t improve in three months’ time, I may have to look at other alternatives for Goodwin. I
hope you help me with a long-term fix”.
Praveen apologized profusely and promised Meher that he would come back with an action
plan and ensure the service levels improve significantly.
On the same day, Praveen had visited another account, Reflections. This account had stopped
doing business for the past 1 year. There were 134 such accounts, out of a total 1493 accounts.
Prior to that, Reflections was amongst the top 5 key accounts for South. Praveen wanted to
dive deeper into the reasons for the same. After SpaWorld, Praveen was expecting a similar
rant from Reflections. The founder, Ms Ramadevi, a first-generation entrepreneur, was very
crisp in her assessment. “We as an organization, believe that we collaborate with suppliers who
can match our high standards of consumer service. One or two mistakes are acceptable, but we
can’t waste our time following up with a distributor regularly.

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From the customers angle there will be at least three cases within this case – stock status mess,
payments reconciliations and promotions Do you expect me, the owner of the salon, to check
every time for missing shampoos and conditioners from the given order? Once, we were billed
for 35 units, but we received only 28 units. Why do I or my team have to point this out every
time? We have much better things to do. Every time this happens, we get a false promise that
things will be resolved the next time. My team has a record of multiple such instances. Don’t
even get me started about trade promotions. For three months, nobody visited us from your
side. We were not aware of any trade promotions. It was by chance that I had met another salon
owner and through her, I came to know that some promotions were running. Upon asking, the
distributor coolly brushed it off stating that it was an attrition issue. The accounts reconciliation
process is the icing on the cake. There have been multiple reminders to reconcile accounts and
we have grown tired. Every time, there are at least there are some invoices which we have clear
evidence that we have paid the money with bank transaction statements, but his ledger is a
mess. He suddenly pulls out an invoice which is more than 8 months old and says that it has
not been paid. We have a monthly payment system to all our vendors and there is no way this
can happen. For a couple of months, the accounts person visits for the reconciliation and then
vanishes. A highly disorganized distributor, with zero process adherence. We have stopped
doing business in the past year. There are better alternatives in the market so why bother with
Goodwin’s distribution. We are incredibly happy with your competitor’s distributor. Every two
weeks, the sales representative follows up with us, and educates us. They send their person
over for reconciliation every month. There is zero supply challenge. Every week, we place an
order, and the order is received within 24 hours, unlike your distributor who could never deliver
before 72 hours."
Coming back to his notes, Praveen recollected how he had apologized to Ms. Ramadevi as well
and left with a promise to turn things around in 3 months. Those two meetings were the start
of a series of apologies he had given to multiple customers with a commitment to fix things
related to distributor operations. He had to figure a way out else he ran the risk of losing some
important customers.
While he was thinking about this, he flipped back to the notes he had made during his visits to
the distributor office. Next in his notes was a summary of his first meeting at Three Square
Group, the distributor’s office. That had not been great either.

Wednesday, 7th October. Distributor office, Bengaluru:

Praveen was having a chat with Niranjan, the Area Sales Manager for Karnataka. Niranjan
started off “Praveen sir, we are really hoping you will solve a lot of problems for us.”
A perplexed Praveen asked “Lot of Problems? Tell me more, Niranjan”.
Niranjan warmed up “Prior to moving to ThreeSquare Group two years ago, we were on third
party payroll and would report to the Goodwin Unit Manager. Now, we are part of the
distributor organization, and it feels like a step down in our careers looking at the way we are
treated. The deliveries do not happen on time. There is zero support from the back-office team.
On days where we require priority delivery for certain important clients, we do not get any
help. They are highly inflexible in going the extra mile to accommodate last-minute orders. On
two occasions, I had to arrange for delivery on my own, because I did not want to infuriate my

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client. Already, Karnataka sales have hit rock-bottom, with only one big key account
(SpaWorld) contributing to 70% of the monthly sale. All clients had been thoroughly satisfied
with the service levels of the previous distributor (AK Marketing). AK Marketing is now with
our competitor and has already poached a few of our accounts.
In addition to this, we don’t get latest finance reports and adjusted ledgers. When we ask for
help, they just email us the ledgers and ask us to sort it out with the client. As a result, we get
shouted at by the clients because they feel ledgers are not up to date. The targets set are way
too high, and we barely achieve our incentives. On the rare occasions where we achieve our
targets, our incentives are not distributed on time. We have to literally beg the finance manager
to release them. There is no recognition culture here. The HR keeps changing. We have seen 5
HR Managers in 2 years. I still haven’t got replacements for two of my best performing sales
staff who got demotivated and left ThreeSquare. The morale of our sales team is at an all-time
low. I really hope you do something about the situation. I have an important customer
appointment and will take your leave now. Will speak to you soon.”
While Praveen jotted down the gist of the conversation, Krishan, the Head of operations and
finance, immediately walked up to Praveen’s room after Niranjan had left.
Krishan seemed infuriated. When Praveen asked him what the matter was, Krishan responded
“I am sick and tired of Niranjan’s sales team. They are extremely disorganized. They always
bring orders at the end of the day and ask for immediate delivery. One or two exigencies are
understood but it keeps happening every few days. On top of this, they do not want to get
involved in accounts ledgers. They just want everything spoon-fed to them. They do not seem
to be knowing anything about which customer’s payments are overdue, and what adjustments
have been made. They don’t achieve their targets but chase us for incentives. They are only
focused on sales but not on accounts receivables. They don’t want to study MIS reports. The
accounts receivable is at an all-time high of 168 days and they don’t seem to be bothered. They
want us to supply to customers who have not yet paid for their last order and whose credit
period has expired. They want things to work like clockwork without giving any support to us.
They have no idea about their order pipeline and suddenly, they suddenly come up with orders.
I am really hoping you will help us in fixing some of their inefficiencies.”
Before Praveen could gather his thoughts, he was called into the founder-distributor’s office.
Ramandeep was a first-generation entrepreneur who had established multiple businesses as a
distributor in various industries. He had also received various awards as an FMCG distributor.
Basis his successful history in FMCG, he was given the opportunity to run South India
distribution for Goodwin.
Praveen recollected his discussion the previous morning with his manager, Harish, the National
Sales Head for Goodwin. Harish had given Praveen a full download of the distributor’s two -
year journey with Goodwin. He recollected Harish’s words “Praveen, we have had multiple
rounds of discussion with Ramandeep. In the last two years, we have given him six warnings.
There are clear issues in managing employees, supply chain gaps and customer escalations
have reached alarming levels. What was supposed to be a model distributor for the country has
turned into the exact opposite. He just doesn’t seem to make changes, despite accepting his
shortcomings. We have got to make this work, Praveen. The costs of changing a distributor are
very high. There will be a business loss depending on the timing, employee churn, financial
losses depending on the amount of money we can recover. Most importantly, our clients may

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lose trust in our distribution capabilities and competition may spread unnecessary rumours to
woo away our customers. This is a very relationship-oriented industry, and it is best if we are
able to improve the operations of the current distributor. So, try having a discussion with him.
But at the end of the day, it is your call on how you want to turn around the South market.”
Praveen’s thoughts were interrupted by Ramandeep, as he walked into his cabin. After the
customary introductions, Praveen gave a summary of his assessment of the market so far, his
interactions with some of the team members, and customers, and asked Ramandeep about how
he planned to fix some of the issues.
Ramandeep replied “Mr. Praveen, I like the way you have got so involved in this business so
early. I am happy to have you work on this. However, there are a few things which you need
to know. It has taken me 3 years to get this business to this kind of stability. There are teething
issues here and there, but I don’t think there is any major problem with my organization that
requires fixing. You just need to give it time to mature. It is quite easy to find faults with the
business, but you and the higher officials are only worried about finding problems and
loopholes. For the last two years, we have always been problem-solving but to no avail. I think
we should stop making a mountain out of a molehill and focus on positive thinking. Look at
all the achievements we have accomplished. We were the first successful pilot. Everyone looks
up to us. I think you should just give everything some more time and you will see more positive
changes. Do not worry about these small things!”
“But Mr. Ramandeep, don’t you think some of these issues need to be worked on – especially
the Accounts Receivable and Customer Complaints?”
“Mr. Praveen, I like your passion but trust me, none of these are that big an issue that both you
and I need to break our heads for. Customers will keep complaining all the time. They are not
going anywhere. They just try to look for issues. We are the best in terms of customer service”.
“Mr. Ramandeep, it was just a few days ago that I had to apologize to Spa world and
Reflections. Don’t you think that we are on the verge of losing these customers if we don’t
provide good service levels”?
“Mr. Praveen, you are unnecessarily getting stressed. We haven’t lost any big customers at all.
Don’t worry. We have no major problem to fix. Give it some time. It’s just your initial
excitement. Let’s catch up next time once you settle down. I am sure your assessment of things
will change. Wish you all the best. You are working with the very best and I am sure you will
like it”.
After this meeting, a stunned Praveen decided to look at data more closely to get a better
perspective. He then looked over his notes, which reminded him of his discussion with Vipul
Tiwari, the Marketing & Analytics Director. Vipul had come over to Bengaluru for a market
visit and decided to spend some time with Praveen.
Friday, 7th October 2022. Goodwin Regional Office, Bengaluru
Praveen stated upfront that he wanted to understand Vipul’s thoughts on the customer buying
behaviour, including switching costs and customer attrition.
Vipul replied, “Praveen, as you would have understood by now, while our shampoos are
consumed by the end “consumer” in the premium/luxury segment (SEC A/A+) because of the

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price point between 500 INR to 2500 INR, Here, have a look at this product portfolio pricing
chart, along with reference to competitive options ( Appendix 8). What you need to focus on
is your “customer”, which is the salon owner. They are the channel for us to reach our end
consumers and the distributor is a partner for us to service our customers. Understand the
difference between a consumer and a customer, in the case of our industry. In the South
particularly, there has been a heavy dependence on Key Accounts (Salon Chains that are owned
by a single owner). This is a double-edged sword. While the key accounts give a bulk business
because of their volume and scale, in case we even lose 1 or 2 accounts, we take a large hit on
our business. The top 7 key accounts contribute 75%+ of your business. It doesn’t take much
for an account to switch. While consumers are used to a particular brand, it doesn’t take long
for a salon chain to make them switch to a new brand. Usually, the salons convince consumers
to switch to a new brand by stating that the product is not available, has distribution challenges,
or has lesser benefits compared to a new competitor. Our research has shown that a typical
consumer doesn’t like to change a particular salon they visit for a hair spa or a hair treatment
because they like the consistency in experience. A lot of consumers even ask for a certain stylist
to do their hair because of their experience. What this means is our relationship and service
levels with these key accounts must be top-notch.
A single key account switching brands could lead to a 10%+ business loss for you. And
remember, it doesn’t take long for a customer to switch. This is one of the reasons why we run
engagement programs and loyalty programs right through the year. Over the years, we have
been evaluating the success of these engagement programs from two parameters. The first one
– are they giving us the projected uplift in revenue whenever we run them? Our data over the
past 3 years state on that on an average, these programs give us a 26% increase in all-India
sales revenue whenever we run them. However, the second parameter – whether our customers
are happy with the quality of these engagement programs, is a mixed bag. We use a feedback
survey on a 5-point scale (5 being highest) to capture their satisfaction. For South, the average
scores on this have been 2.3 against an all-India average of 4.1. These also reflect in lower
sales revenue increase for South compared to pan India (South is at 17%) These engagement
programs will be of no use if the service levels by our distributors do not meet customer
expectations. Do you have any questions on this, Praveen?”
“What about switching costs and customer attrition?”
“Like I mentioned Praveen, for our customers, it doesn’t take much of a cost to switch. They
need to train their staff to use our competition’s products, which is a time-consuming process,
if there are large number of staff. For example, when we acquired Herbals, a chain of salons,
from Relizo 4 years ago, we had a chain of 85 salons. Each of these salons had a salon staff of
10 to 12 stylists. To simultaneously train 1000 hair stylists practically on all our product
portfolio, including colour-mixing ratios (the proportion of colour to be mixed with the
shampoo to give the desired hair colour), took us almost 30 days with all our training team
occupied for most of the time on this single account. So, for a consumer, the monetary
switching cost is low, but time and effort involved where their stylists are undergoing training
is high. The customers usually ask us to train them before the salon opens or during lunchtime
in batches, so that they don’t lose out on revenue. For us, as you know the cost of losing a key
account is huge as it is not easy to gain a new account. Take Reflections for example. It used
to give us 60 million INR of business every year. Take that number out of our topline for the
next 5 years because it is no longer with us now. If people are happy with a brand, they do not

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like to switch. Most of the times, we have gained new accounts only when there have been
issues where the salon chains are not happy with either the competition’s product, service
issues, training levels, promotions, commercials etc. Or if a new chain is being set up and they
evaluate multiple brands on these parameters and if they find us the best, then they go for us. “
“In effect, it is easy to lose a customer if don’t do some of these things right and not so easy
to gain a new one?”
“You could say so, Praveen. We did so much work with keeping Reflections in our fold, and
we lost it because of issues with the distributor. That was a major hit to our business. I cannot
think of a better example of attrition. If you look at data for the South region, we have been
losing more accounts than we gain for the past 3 years (loss of 10% in revenue and a gain of
12 % in revenue). So, our net gain of customers is marginally positive (+2%) for South against
our national average of 15%.”
These data points had got Praveen worried. Praveen then turned over his notes, which made
him revisit his discussion with Raj Singh, the General Manager of the Distributor Organization.
Monday, 7th October 2022. Distributor office, Bengaluru:
After exchanging pleasantries, Praveen asked Raj “Raj, why are we not missing our sales
targets every year by quite a distance? What is your take?”
“Well, the targets set by the manufacturer are highly unrealistic. I don’t think we have the
potential to grow so quickly. Despite my request during the target-setting discussions, the
growth rates given are on the higher side. I don’t think 15 to 20% growth is possible so quickly.
The team is new. We have attrition regularly. Things are just getting to be stable from a
perspective. We have had 3 rounds of attrition due to incentives, and inter-departmental
coordination issues. The sales employees just do not seem to have the patience to stick it out
and allow me time to fix some of these issues. Amidst all these, if the targets are so high, they
don’t achieve their incentives and it in turn becomes a vicious cycle. I have been asking the
Goodwin management to give me softer targets for one particular year, let the employees earn
some incentives, and then we will be on track.”
“Target-setting apart, don’t you see any other issues from a customer standpoint, which need
fixing? I have had to apologize to so many customers”.
“Well, I don’t think we should pay serious heed. These customers always have a habit of finger-
pointing and nit-picking. They are never satisfied. Yes, there are a few minor gaps from our
side, but nobody is perfect. They just do not seem to get the point. I do not think you should be
too worried about these customer complaints. We will take it slow and work on them.”
Praveen was flummoxed by this discussion. He made a mental note to have a deeper discussion
on Raj’s assessment of the situation after his market visits.
Thursday, 7th October 2022. Bengaluru Office.
After going through his notes, it was time for Praveen to make a presentation and give his
recommendation to the Goodwin India Leadership Team on the way forward for South. Sales
team Productivity of 3.6 was well below India average of 5.8 (Productivity is defined as the
%age of productive revenue generating visits (minimum 5000 INR) a salesperson makes in a
day. For examples, if a salesperson visits 10 salons in a day and gets orders from 4 salons (with
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each salon giving a minimum order of 5000 INR), then productivity is calculated as 40%.) and
because of an excuse culture having crept in, monthly targets were not being met.
Time was flying and a decision had to be taken quickly. Praveen felt a revamp was needed.
The “what” and “how” had to go together. One option was to intensively engage, with extensive
investment of time and management direction, with the existing distributor and strengthen the
capability of the existing distributor. On the one hand, there was no guarantee that a distributor
who had not delivered in two years, would be able to turn around his organization, despite
multiple assurances to the leadership team. What if the distributor disliked the idea of the
company micromanaging his business, and refused to engage?
As a backup plan, the India leadership had preliminary discussions with another distributor,
with excellent people-centric credentials, and he was interested in taking over, but wanted some
more time. While the contract had clauses of terminating the contract with a 3 month notice
period which could be used, there was no guarantee that a new distributor would not face the
same challenges. With the festive season coming up in a month’s time, the second option of
changing the distributor did not seem to be a particularly promising idea. The already high
accounts receivable could sky-rocket, competition would take advantage of supply transitions
by flooding the market and attempting to poach the staff. Building a new team and new culture
was not going to be easy, especially in the middle of the year, with no guarantee of success.
In addition to this, Praveen also was aware of two upcoming projects, which would occupy a
lot of his time, six months down the line.
The first was a new nationwide ERP project awaiting implementation in South India, but a
leadership call had been taken to delay it by a year at least because the basic operations had to
be streamlined first. Going in for ERP implementation without trouble-shooting the existing
challenges, would be a recipe for disaster, according to the Goodwin senior leadership.
The second was the India launch of a globally successful nailcare product from Goodwin
Beauty was planned within the next 6 months and that demanded a very high level of customer
service and customer experience in luxury salons.
By 13th July 2022, Praveen had to present a detailed plan on reviving South India with monthly
business projections and the support required for revival. Praveen thought he had been caught
between the devil and the deep blue sea. It was entirely his call to make. The Goodwin India
senior management had empowered him to make the decision and said that they would go by
his recommendation and support him in every way possible, as long as business objectives
were delivered.
Praveen stared deeply through the window. There was a pathway to the garden, which branched
out into two different directions. It seemed to aptly sum up his feelings. He wondered if he
should be taking the less travelled road. Ironically, he did not know which was the less travelled
road, in his case. There were more questions in his mind than answers.
If he decided to continue with the existing distributor, it would surely take a herculean effort
to make long-term changes, given that 2 years of messaging from the highest leadership level
had not brought a change in attitude and results. And how would he execute his plan?
If he decided to go with a new distributor, he would have a mammoth task of building a new
organization from scratch. Would key employees move to the new distributor? Would the

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existing distributor co-operate? What would happen if he somehow managed to retain the key
customer-facing employees? The industry was a relationship-driven industry and clients (salon
owners) preferred transactions with the same faces. What about Accounts Receivables? How
would they close Accounts Receivables with the existing distributor, who already was poor at
reconciliation-related processes? How would he ensure there is no business loss from top key
accounts?
In both these cases, people were most critical to executing his plan. What would be his people
strategy? What would be his client communication strategy? Which markets should he
prioritize? Was there any other alternative solution? What about the FSD distribution model
itself? Would the earlier model work? Should he go back to that?

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 Appendix
Figure 1:.Existing Full-Service Distributor organization structure

General
Manager

Area Sales Area Sales

Head - Head - Head - Andhra Pradesh
Manager - Manager - Tamil
Education Operations Finance & Telangana
Karnataka Nadu & Kerala

Branch In- Branch In- Branch In-

Trainers : Charge ( Charge ( TN & Sales Sales Sales
Charge( AP &
Karnataka (3), Karnataka) Kerala) Executives (3) Executives ( 7) Executives ( 3)
Telangana)
Andhra &
Telanaga (2), Key Account
Tamil Nadu & Manager ( 1)
Kerala (5)
Warehouse Warehouse Warehouse
Staff (5) Staff (7) Staff (4)

Table 1:Goodwin South India Performance (Figures in INR)

Year Actuals Target

Current Year N (first 3 67 m 550 m
months)
N–1 400 m 500 m
N–2 320 m 400 m

Table 2:Region-Wise Performance (2021) – Goodwin South India

Region Monthly Average Sales Market A/R (number of days

sales outstanding)
Andhra Pradesh & 9 175
Telangana
Karnataka 8 140
Tamil Nadu & Kerala 14 125

Table 3:Key account business snapshot (2021)

Key Account Chain Location Revenue in million

SpaWorld Bengaluru 40
Ben & Jerry Chennai 90
Imran Bashir & Sons Hyderabad 30
Herbals Chennai 25
Herbals Hyderabad 15
Hair Trendz Chennai 60
Hair Lounge Chennai 30
Mirage Hyderabad 10

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 Table 4:South India Business Plan for the Year 2022 (all figures in million INR)

July Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total
Target 30 35 40 50 65 45 45 45 45 45 50 55 550
Actual 24 25 27
Actuals (2021) 25 30 35 40 55 25 30 40 30 35 30 25 400

Sample Qualitative Feedback from other customers

1. Ben & Jerry – “We have 100+ salons and not even a single round of reconciliation of
accounts has been done in the last 18 months. We have reminded them, but they don’t
seem to bother”.
2. Mirage – “They are asking me for a payment for an old bill but there is no receipt or
invoice. And the amount is huge. This happened 1.5 years ago but till date has not been
resolved. All my accounts are clean, and I have no hesitation in paying unpaid dues,
but they don’t seem to produce proof. It’s quite ridiculous”.
3. Herbals- “One of our Hyderabad franchisee outlets has been complaining that the
promotion items which they were supposed to receive, as part of last September’s
festive offer, haven’t been disbursed to them till date”.
4. Hair Freaks- “We have stopped doing business since the past year. There have been
multiple reminders to reconcile accounts and we have grown tired. There are better
alternatives in the market so why bother with Goodwin’s distribution”.
Region-wise employee assessment summary (As analysed by Praveen Kumar)

a) Karnataka: The Karnataka team has a strong loyalty to the distributor and the Sales
Manager Iqbal does not look like he will join the new organization, in case of a transition. The
Sales executives are very strongly associated with Niranjan and look up to him for guidance.
So, the entire Karnataka team is at risk of moving out in case of a transition. Clients have
already complained about attrition, and this would be the fourth set of a full team of new joiners
in the last 2 years for Karnataka. Already, Karnataka sales have hit rock-bottom, with only 1
big key account (SpaWorld) contributing to 70% of the monthly sale. All clients had been
thoroughly satisfied with the service levels of the previous distributor (AK Marketing).
However, AK Marketing does not have the financial muscle to command the distributorship of
the entire South region. The Karnataka back-office is also a close-knit team and barring the
systems operator, most other staff look to be continuing with the distributor, despite all the
inherent problems.
Niranjan (Sales Manager): “The back-office team is a real pain. They never support us.
However, I pledge my complete loyalty to the owners and my boss, General Manager Ravinder.
Ravinder takes all the pressure off me and supports me in every way. He fights for me with the
back-office team and gets things organized My team is also very stable and we have a good
rapport”.
Raj (Sales Executive): “Niranjan is my distant cousin and asked me if I would be interested in
joining, we have a great rapport and he’s never tough. I have seen people in sales be very tough,
but Niranjan is not at so. If only something were done with the Accounts team, and if the targets
can be reduced.”

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Albert (Sales Executive): “I am still learning the ropes as this is my first Sales job. I used to be
a back-office person earlier. It’s been great for me. Niranjan has been extremely supportive.
Occasionally, I am not able to make the minimum visits per today because the territories
allotted are too far between each other. Sometimes I meet Raj on my route. But I am sure
Niranjan will fix it shortly.”
Kumar (System Operator – part of Krishan’s team): “Sir, I have joined a year ago, but I think
during the day, I see the same delivery boys delivering Ramandeep sir’s mobile boxes (his
other business). I Please don’t bring my name into this. I just thought you could examine this
someday. I am sure you will change a lot of things here.”
Ramesh (Head – Finance): “What I fail to understand with the Sales team is – how can they
ask me to supply orders to customers, who haven’t cleared their past overdue amounts? Isn’t
this basic sales hygiene to look into credit history before taking an order? And then they paint
me as the villain. I get punched from both sides. Because of such internal issues, I am not able
to visit customers for reconciliation. Goodwin does not give additional budgets for more
manpower because we haven’t met our Sales targets. They blame Finance and operations for
everything.”
b) Andhra & Telangana: Barring the Sales Manager, most employees are less than 1 year old
in the distributor organization. The Sales Manager has particularly good relationships with
clients, but still struggles to get collections on time. There are rumours of wholesale market
under-cutting, which needs to be investigated later. The Sales Manager Moeen and team are
not very happy with the distributor organization, but Moeen can flip his word any time. The
are opportunities to open a branch at Vizag (currently managed by a sub-distributor, but the
sub-distributors customer-centricity is much superior to FSD, so I would recommend we
evaluate this at a later point in time).
Moeen (Sales Manager): ‘This is one of the most unprofessional distributor organizations I
have worked with, Sir. The culture is terrible. The owner really does not care about the
employees. He’s only interested in the bottom line. He has hardly visited Hyderabad. Only
where there is an accounts receivable problem, we are called and given warnings. It’s getting
miserable to work here. Incentives are always promised but we can never achieve the targets.
Everyone is soft on the Tamil Nadu team, and they somehow get easy targets, which we can’t.
Accounts receivables are high, but I am sure we will bring it down. Customers will not go
anywhere. I have good relationship with them,”
Mohsin (Sales Executive): “I think we are doing a fantastic job with whatever resources we
have. I don’t think anyone can find any fault with the way we handle our jobs. Moeen takes
care of all the problems. It’s just Krishan and his team who are highly unsupportive.”
c) TN & Kerala: This region is the most stable amongst all the regions, with employees very
experienced in the industry. The Sales Manager Ravi has been achieving his targets most of
the time and the back-office team also supports the sales team efficiently. There is a huge
opportunity in the Kerala market, but the existing distributor is reluctant to open a branch, as
he is not sure of managing operations. The Sales Manager is the key figure to be convinced.
However, he is undecided about what to do in case of a change in distributor, in case of a
distributor transition, there is a strong chance that he and the entire team will move to the new
organization. However, he could also move with the current distributor who has other
businesses in Chennai, in such a case his whole team may move in him.

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Ravi: “My friends from Karnataka and AP/Telangana might have told you about many
challenges, but we haven’t faced any at all since the past 3 years. A lot of business comes from
key accounts. There has been stability in the sales team and back-office team. We are all a
closely knit group. So, I do not really what the issues are. We have a pleasant experience and
have got incentives also. It’s just accounts receivable, which is an industry wide phenomenon.”
Pushparaj (Sales Executive): “Ravi is a great manager. We all will do anything to ensure Ravi
is not let down. We all work hard and try our best. I have been here for 2 years now, and it has
been a great experience “
Ravindran (Back Office): “There is a huge volume of orders we receive, but Ravi and his team
are very systematic. They ensure they don’t bring orders from clients who already have an
overdue account payable to us. So, it has been smooth so far.”
Table 5:Some details about Product portfolio – Goodwin Beauty

Primary economic segment: Sec A/A+/B+, affluent, upper middle class with high disposal
income levels - A typical consumer would be someone who could afford to pay upwards of
INR 1000 for a hair-spa treatment, upwards of INR 250 for a haircut. Women contributed 70%+
of total consumers.
Types of products sold across categories: Shampoos, conditioners and other hair products like
masks and serums. Goodwin Beauty would also provide salons with products for hair colouring
(permanent hair colour as well as semi-permanent hair colour).

Category Price points of Competitor pricing Income segment

Shampoo & for comparable
Conditioner (250 products
ml)
Base range 600 INR Relizo: 630 INR, SEC B+/A
Lardel: 580 INR
Premium range 1200 INR Relizo & Lardel: no SEC A
(USP – no products
competitor offering)

Luxury range 2000 INR Relizo: 2300 INR SEC A+

Total number of SKUs: 850

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