By Ram Ramsunder

The Net will play a key role across sectors and functions in this millennium. From the distribution perspective, the Net can help companies deliver their products or services directly to the end-user without having to go through channel intermediaries. But, in the hurry to jump on to the e-Commerce bandwagon, Indian companies should not, obviously, overlook the obvious.

Across categories-consumer durables, consumer softs, or beverages-and across markets-urban and rural-the bulk of the demand (70 per cent) is for entry-level, plain-vanilla products: the Maruti-800, the 165-litre refrigerator, the 20-inch CTV. Thus, a basic demographic and psychographic exercise shows that the chances of Indian consumers being Net-savvy, or even possessing a pc at home are marginal. Thus, e-Commerce will not foster the revolution it is expected to in the way in which companies advertise their offerings and sell them-not, at least, for the first few years of this millennium. My conclusion: in the first 10 years of this century, traditional distribution and channel-management techniques will continue to play an important role.

To continue to grow at the rates that they did in the last 2 decades of the 20th Century, however, companies will have to necessarily look at the rural market. In this millennium, the rural consumer will drive growth in several sectors. The agricultural economy is booming, there is wealth in the rural areas, and there is latent demand for many products. The Net will have some part to play, but companies will continue to be obsessed with conventional distribution-systems--and rightly so. I, therefore, foresee a growth of just 5 to 7 per cent a year for e-Commerce in India in the near future.

What will, however, happen is that the conventional distribution-system will itself change. It will remain conventional in that the broad principles governing it will remain the same, but its constituent elements will change in character. For instance, the retail end of the distribution network for consumer durables is traditionally a small entrepreneur. This entrepreneur is, in most cases, a person who has not had any training in management.

In this New Millennium, such entrepreneurs will think and act big. Not on the scale of a Wal-Mart, but big nevertheless. Already, in the South, you have chains like Vivek's or Vasant's. They may not go national but, from Chennai, they may move to Madurai, Tiruchirapalli, or Hyderabad. Consequently, the retail channel will be stronger, more professional, and will possess economies of scale in distribution. And the bargaining-power of the channel intermediaries will, consequently, increase. Thus, the relationship between the manufacturer and channel-partners will be a more balanced one, with power not being concentrated with either, but spread out amongst all the constituents of the distribution network.

As the trade becomes more professional, manufacturers will have to move away from the personality-and monetary-incentives driven techniques they now use in trade-management to a more systems-driven approach. The focus of both companies and retail intermediaries will be to increase the efficiencies of operation so as to ensure that both earn pre-determined returns.

One of the prevalent management trends in this millennium is supposed to be disintermediation. What this means is that intermediaries will face the threat of extinction as Net-enabled companies can sell directly to customers. But this is not as black-and-white as it seems to sound. Sure, the customer will have more access to product- and service-related information than she ever did, but the company will still have to deliver the product to her. Thus, there could well be the need for an intermediary who takes care of logistics. His role, though, will be very different from that of the traditional dealer.

Dealers play a role in influencing purchase-decision. That will change with Net-enabled commerce. The customer now knows exactly what she wants. But the company may not wish to take care of the delivery itself because that may not be its competence. Besides, the company could feel the need for a dealer who takes care of post-sales service and maintenance. So, the role of the traditional channel intermediary, and the services provided by it will change.

Another trend that we are likely to witness is the emergence of specialised channels. What is relevant for one product-category may not be relevant for another. Thus, companies will create dedicated channels depending on the unique requirements of their products.

The future of distribution management is the integrated channel solution. This will emerge by 2005. The integrated channel solution will be built around customers-not products. Thus, one channel solution could focus on delivering durables to the customer, no matter what those durables are or who makes them. Another could focus on delivering agri-products to the farmer. The same channel could deliver seeds, pesticides, fertilisers, and even drip-water solutions. These channels of the future will have two characteristics: they will be efficient in moving products from point 'A' to point 'B.' And, two, they will have in-depth knowledge of the customer. Indeed, over time, specialised channel-partners could emerge not just around customers, but also markets.

One of the key distribution-management skills companies will have to deploy in this century is the ability to manage conflicts between channels. This will become critical as the number and scope of non-conventional channels increase.

For most companies, the Net presents a great opportunity. In the normal scheme of things, they are far removed from the customer. The Net collapses the entire chain. Today, companies can listen to and track the customer. And they can link the product-development process, and even the manufacturing process seamlessly to the customer. The Net facilitates the capture of customer information on a real-time basis. However, there is a flip side to this: complaints will have to be resolved immediately. I believe the Net will see the emergence of a new paradigm in relationship-driven product- and distribution-management.

In Electrolux, for instance, we have a policy: if a manager fails to address a complaint in 8 hours, it moves to the next level. This goes on till it reaches the CEO. Companies need to institute systems like this till they become a way of life. For, innovations such as these will form the basis of the discipline of channel-management tomorrow.

Ram Ramsunder is the CEO of Electrolux India

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