After my previous blog on same subject, I received number of phone calls and messages to discuss on the subject. As I stated in the beginning of previous blog, this is just noting down how the pattern of distribution channel is changing, and why these changes were required. Here, again I am putting some more information after discussing this with my seniors and my friends in Lubricant industry in India. Few more distribution channel and its effectiveness are being discussed here, these are more of non conventional type of distribution channel.
Exclusive Shoppe :
Exclusive shoppe concept was introduced around 12-15 years back. This was effective for few years but could not last for longer period. Here I would like to note down that major visible exclusive shoppe was introduced by Valvoline (in private sector) and Servo (among PSUs). Purpose(in my view) for both these companies were different, it was purely brand image improvement for IOC with an additional channel for sales. Whereas, than upcoming brand choose this way to increase their reach to markets where they were not available or sales were low compare to potentiality of that market. Valvoline has started these shoppe with quality branding, with end in mind. They wish to exit market after establishing strong market presence and getting sizable distributor in that market. They were successful in many markets yet they had to shutdown few shoppe due to losses. Most of these losses were not due to low volumes, but because of bad debts. This shoppe concept can be made more sustainable with some innovation in operation.
Bike Points & Car Points :
Leaders in lubricant industry again lead industry to this new concept almost a decade back. Castrol started bike points on two level, one through Franchisee model and other through Non- OE garages. This was promptly, followed by all leading private lube companies. This was initially, new channel to sale directly to service stations with great scope of branding. But now, due to high competition, demands/bargaining power from such service stations have zoomed up. Mid & small sized non-franchisee model is still operative and provides opportunity to by pass competition at retail out lets. Similarly, few companies also set Car point and tractor points as well.
Distributor turned manufacturer:
In last 5 years or so, this new trend is seen. Many big distributor of reputed companies launching their own brands. Few of them has invested in plants whereas others have gone for toll blending. Many new plants was started during this period and their major revenue comes from such new batch of manufacturer/ marketers. Mostly, this kind of small companies are working in their own market and not having dream to go nation wide. These are small marketers & their volumes are ranging from 2 KL to 25 KL a month. Low base oil prices has provided them a huge opportunity to survive even with lower volumes. However, with government actions like demonetization and introduction of GST has lowered their margin and have proven big obstacle to this comparatively less organised part of lubricant industry. But with all these adversities, this section is going to be indirect competition to many big companies as these distributors are those who have burnt their fingers in distribution business. And now these people are preferring to push their own brand instead of brands owned by big companies.
In last few years even small OEMs have also gone for their own brand of lubricant and distributed it through their own dealers. A decade back big OEMs like TATA, Leyland, Cummins, kirloskar, JCB and other earth movie equipment manufacturer was available with their own brand, but now even small manufacturer of pump set or mini tractor have their own brand. Many small OEMs in industrial segment has also introduce their genuine oils eg. electronica is leading wire cut machine has tie up for EDM oils with one of oil company.
Yet to see new channels
If we see towards developed market of US or Europe, we will see few options like “Quick Oil Change” where customer get prompt services for oil change. These are mostly, a franchisee model and exclusive for particular lubricant brand. In India, we have recently, seen few quick car wash but they either don’t offer “oil change service” or even if they offer this service its not their primary focus.
Service at Your doorstep :
This days we have seen few operators who provided servicing with oil change for 2- wheeler and cars at customer’s home or workplace. This is seen in metros as well as some big cities. These service providers are small players compare to “quick oil change” workshops available in developed countries, but these could be batter manged and become Indian version of “Quick Oil Change” model. Currently, there are very few service provider who have been stable in this business as they have many challenges from finance to manpower.
In past Indian lubricant market has been dominated by PSUs through their Fuel pumps. This was before 1991 when Indian market were made open for foreign players. At that time, they were dominating because of less competition. But, few years back we have seen success of “R Connect” of Reliance Petroleum(“R Connect”were the retail chain of reliance that sold products required by fleet operators. They marketed Tyre, Lubricant, filters and auto parts). Even though, the success of this channel were for very short period, they have to shutdown “R Connect” due to government policies in fuel retailing policies. But in current political conditions subsidies are being reduced and further policy change may favor private players in this segment. And success of “R connect” type of operation may be repeated. On other hand service level at retail out let of PSUs are also improving and they may also start similar kind of retail out let that can push their lubricant products to commercial vehicle segment.
Need Some thing new
Businesses need innovations in products, promotions etc., same way we need to think something new about distribution channel. One need to think about the distribution pattern that can make a lubricant company different in crowded market place.
That’s all for now.. waiting for your comments and suggestions. you can also mail me on email@example.com