End-customers now have abundant choices, as do retailers
Vikas Bagga has close to 30 years of experience in powering success stories in leadership roles for lifestyle and fashion brands. Bagga till recently was the sole resident representative for Iconix Brands, specifically for Lee Cooper Footwear in India. Ventures that have been led by Bagga include Woodland, Lotto, ID, Lee Cooper, Merrell, Geox, Rider, Alberto Torresi, Provogue, Li Ning, Jazba and Lotus Bawa. Bagga talks about distribution and the business of footwear.
What are the qualities that you look for before taking on a new vendor?
As a practicing consultant, on behalf of my client(s), I carry out a thorough validation exercise aimed at assessing the quantitative and qualitative abilities of the prospective vendors in terms of their:
Existent / available / planned / allied capacities to undertake a new project on a consistent basis. Assess ability to deliver in time in relation to a given quantum of production orders;
Requisite certifications in hand pertaining to quality, service levels, safety norms and excellence in production; y Infrastructure in terms of plant & machinery, human capital, R&D centre, access to ancillary units within the country and overseas, warehousing, etc;
- Client base-be it domestic or export led, consistency in operations and reputation in industry;
- Specialisation, if any in fabricating a discrete category / subcategory / gender based products;
- Self-sustainability of the vendor unit to operate at all times;
- Financial arrangement-fair to both sides;
- Flexibility to produce smaller lots;
- Open to comply with norms prescribed by the principals.
How do you ensure quality of your products?
Quality-related norms should be objectively defined by the principal / customer and not left to subjective arbitration during the ongoing or post-production phase. Once defined, these norms should be mutually endorsed.
Though the industry has not fully moved towards this regimen, but certainly made giant strides on this front. Just not export shipments which are subjected to multiple checks during the various stages of production and pre-dispatch inspection, but now for the last many years, even final products made available by the vendor partner for domestic consumption too go through rigorous checks.
Quality failure identified at pre-dispatch stage go through the imposition of penalties depending on the mutual agreement. Importantly, both customers and vendors are now sensitised about the quality standards that ought to be maintained. Trained quality checkers and freelance quality control experts use various measures coupled with their experience to exactly pinpoint the variations that stand unacceptable given the peculiarities of the footwear manufacturing / trade practices.
In terms of distributors, what have been the major changes for the last few years?
Given that the end-customers now have abundant choices, as do the retailers, it has become incumbent upon the distributors to exercise their discretion to continue, add or delete brand / labels / products to or from their portfolio of offerings.
The current economic slowdown has in many ways rationalised their sales projection, forecasting, pre-order booking and optimisation of operational costs. The sustainability quotient overrides all other factors; hence it has become critical than ever before for suppliers / manufacturers / brand owners and existent / prospective distributors to evaluate the business relationship along with expectations of either side on a realistic note. The offtake, throughput, topline, bottomline derivatives are all under an acute scanner as no one wants to be on the losing side.
Additional support, stock corrections, discount sharing, manpower support and mandate for servicing multiple channels of sales-some of these could even be exclusive are some of the variables that are being frequently sought by distributors to align with suppliers / brands. Eventually, it all boils down to the reigning strength of the brand(s) on one end and those of the distributors in the reckoning on the other end to align / freshly tweak a deal, that may have some concessions beyond the standard policies practiced by the brand, albeit it gets formalised as per the "merit "of the business plan for a particular region / territory / period.
What are the challenges that vendors and distributors are facing?
- Excessive clearances / compliances to run production units;
- Shortage of trained manpower; y Forced, long holiday breaks in several industrial zones owing to manpower movement cripples production cycles and sheer pace / momentum of the otherwise available capacities;
- Technology transfer and adoption of best practices remains a challenging task;
- Higher Infrastructure costs, be it for procurement or running the facilities;
- Overall slowdown of the global and Indian economy poses a fresh challenge for vendor run plants;
- Liquidity crises post-demonetisation.
- Slowdown in the economy has impacted the sentiments of the retail fraternity, who in turn depend upon end customers for retail sales;
- Business as it is remains impacted post-demonetisation owing to lower offtake and liquidity crunch;
- Pre-booking mode, prevalent in the industry for the past few years has taken a somewhat regressive turn, which has impacted the forecasting and sourcing at brands end-thus growth indexes are stressed either end;
- Heightened overheads and operating costs coupled with extended credit period to retailers hitting hard; Perennially ongoing discounts on e-commerce channels make many an offline distributor sit on inordinately high inventory cover. The distributor and offline retail community cohesively believe that in the current times, the window to sell the products at full price has greatly shrunk.