Episode 30

Conversations with Business Leaders: Siddharth Bansal, Executive Director, Skipper Limited

Category :  Leadership Paradigms

Building any sort of loyalty in a competitive market is extremely difficult, and even more so when it comes to a commodity business. Let's hear from Mr. Siddharth Bansal, Director, Skipper Limited on how they transformed the distribution model of their polymer business-Skipper Pipes, in order to secure loyalty of channel members and influencers in the market.

We discuss the challenges they faced in abandoning the traditional volume-based schemes and implementing a pull distribution system. Also discussed is an innovative retailer/plumber loyalty program and the benefits Skipper Pipes realized from this.

For more information about the lacuna of traditional trade promotional schemes visit: https://www.vectorconsulting.in/research-publications/consumer-goods-and-retail/a-folly-called-trade-promotions/  

Transcript
Shubham Agarwal : India’s building materials industry is mostly commoditized. What were the challenges you faced because of this?
Siddharth Bansal : So, you know, like most industries, the Indian building material industry has both organized and unorganized brands across the various products in the building material space. Pipes- which, of course, also has a lot of organized as well as on unorganized players. It has one particular feature which is, which we believe is, low customer involvement. You know, as a product category pipe sales have traditionally been more influenced by the distribution and retail channels. It’s sort of a commoditized product. You know, consumer are not really interested in going and purchasing pipes on their own, it’s more dependent on the plumber or the contractor and the retailer. This has, you know, sort of led the industry to become a little price sensitive especially when the channel is the one deciding. You know what, what brand sell, and you know what products they will buy from which company. So, it’s led the industry to become a little price sensitive and also you know, as a result of that there’s low margins for companies to gain(super: margin headroom is low). Apart from this, over the last couple of years which we’ve seen more prominently, is the fluctuating raw material prices, which has really disrupted the industry in its working.
Shubham Agarwal  : Fluctuating raw material prices and low margin business can create havoc in managing supply chains. Can you elaborate?
Siddharth Bansal : R:  ….It was it was a constant battle between, you know, the the head office and, and the plant teams because the plants were were really high on the inventory levels and, you know, there was pressure from the head office to reduce inventory, reduce dead stock. Which was really not necessarily their mistake. So, you know, there would be a little bit of blame game going on that (conflict between sales team and operations). No, you know, we didn’t produce this just by our own decision, it was more from the sales team, but then the sales team said that, yeah, we felt that this would sell, but then the didn’t cell (Any attempt to correct sales forecasts based on past performance does not improve accuracy)and then it reached a stage where there was a lot of inventory that we had which hadn’t moved for like a year or two years or even more (Inventory of some SKUs become out of stock and some excess)..connect here to loss of sales).
…At the distributors. And again, it was the same thing. It was, you know, there was a lot of push sale that was involved (stock pushed to distributors with discounts and schemes) which led to inventories building up at their level (distributors working capital is stuck). And then there was a constant battle between the distributor and the company to pay on time (Distributor goes into credit lock) which they couldn’t because they haven’t sold that inventory(distributors unable to buy additional items). At the retail space you know again because both the channels were both the sources were so clogged that the retailer would not be getting what he wants and then he would inevitably just go to another company to buy those products (loss of sales for the company). So that was, these were some of the supply chain challenges.
Shubham Agarwal : How did you streamline the supply chain and operations?
Siddharth Bansal : ..So, the most important aspect of the solution was that we transitioned from, you know, a push to a pull mechanism. Right. You know why the first step in that was to understand why our current push system was harmful for us. We we realize that a push system can never result in sales continuity. It’s never going to create a business which is going to be ever flourishing for years to come. Do you know every every deal that was struck between the company and the distributor it had elements of price negotiation. It had schemes, it had things like that because that’s how you were able to sell because you’re pretty much just sitting across the table and deciding. Okay. Can you please buy this much, and we’ll give you this much extra You know, and on the retail side, Of course, there was retailer that are juggling with their limited space and their limited capital. And because of that, they were unable to buy some of the things that they actually need, which they want to sell. So, you know, a pull-based mechanism which was more dependent on taking away that decision from the distributor on what he wants to buy to what he needs to buy. You know, we understand what the trends are in your market. We have we have data to support that. And that data is helping us, tell you or at least dispatch only the required materials to you. So, you know that helps the system really smooth in itself out so well that you know we were able to relieve all of that pressure and provide the retailers with the correct SKUs, what they need and the quantity that keeps them satisfied, you know, so that they don’t need to turn to another brand.
Shubham Agarwal : What happened to all your trade schemes, which usually support a push approach?
Siddharth Bansal : So, you know we’ve had all of the different kinds of trades schemes that you can find, you know, Diwali Bonanzas and you know gold schemes and foreign tour schemes and you know all of that. But yeah, one feature common between all of them was that this was for a stipulated time period. It used to be. Say, traditionally a month long or three months long at Max and these were typically done in sort of the lean periods, where your, you know, you give a scheme, and then you’re sort of at least happy that, okay? I’ve done my best to get the sales that are to be that our targeted. But what used to happen with this, was that if it’s if it’s a typical three-month scheme, where a distributor is given a target. We weren’t interacting with retailers back then we were only working with distributors, so distributor was out of wholesaler in, you know, for more clarity we used to just give them the scheme. They would have to work on that they would buy as per their capability. It’s not that they can just magically buy a lot more, but they would, they would take a little bit of extra which would result in stock dumping which would result in them not purchasing in the next quarter. And a lot of the smaller guys would be sort of dissatisfied in this because typically these schemes are ladder schemes, right? So, the the larger distributors are the ones that can actually go on that really nice trip or get that really nice vehicle or whatever. And the smaller guys would just not even try for it because they know that they’re not going to be able to do it.
Shubham Agarwal : How could you manage to discontinue trade schemes especially when your competition has aggressive schemes for the channel partners?
Siddharth Bansal : . so, the competition typically works in this market with quarterly schemes or monthly schemes, they are mostly target linked. And you know, that obviously results in distributors or retailers in buying a lot more than what they can consume or what they can sell. The Loyalty Program. On the other hand, is on the other extreme, which where no one is pressurized to buy. There’s no time limit that you’ve got to buy in. So that obviously helps retailers to work at their own pace. now, the flip side to this is that in, you know, the competition, does come out with very lucrative schemes. typically, in, you know, in quarter, four and typically in low seasons Where our sales team does come back to us and say that, you know, we are being unable to sell because in a particular market because XYZ brand has come out with a scheme where they are giving an absurd amount of, you know, benefits to the to the retailer. That’s something which, which is, you know, which can’t be helped. I mean, we’re not in it to just sell for that particular, period, retailers, that are being associated, that are getting associated with us under the loyalty program or are seeing the benefit in the loyalty program will know that if you buy every week and if you buy, if you keep increasing your range. You can potentially earn a larger percentage, you know, a much higher percentage. So, our loyalty program is not fixed to us in certain percentage because there are, there are multiple additional multipliers there are bonuses. That are given, you know, and it depends on a retailer how engaged he gets. So, it’s sort of like a little bit of gamification to it. So, you know, typical retailer would see that. Okay, if I really want to, you know, earn a lot more, I can make use of these multipliers and then I can earn pretty much more than any other competition scheme.
Shubham Agarwal : How did the way you engage with retailers in your business change?
Siddharth Bansal : Yeah. It’s so the way we engage with our retailers is something by that was sort of non-existent in the past, you know? Because traditionally, we’ve always been a company to a distributor model, Of course, our salespeople were there in the market. They were working with our distributors to go and meet their set of retailers. But that set was very small at that stage because typically it was more of a wholesale model. So, you know, they would just be going, and meeting say about 20, 30, 40 odd retailers in a particular geography. whereas that number has now grown to 300 or 400 retailers in that region. The way we interact with them has definitely changed, earlier it was more of just stepping in and sort of deal striking at that level as well. Whereas now it’s you know it’s a little more informed our people are aware of what the retailers trends have been what they’re what the retailers health is in terms of You know how loyal a retailer is, he to our brand or not so that depends that basically decides the narrative that the sales team is going to be pitching to the retailer plus for our from our sales team point of view, they’ve got a lot more tools in their bag to really now pitch to a retailer.
Shubham Agarwal : Retailer engagement is usually not sufficient. What other initiatives did you take to promote your brand?
Siddharth Bansal : So, our plumber loyalty program, which we call Skipper Sathi is, you know, it’s been recently launched. It’s we’re still in the, the phase of, we’re still in the implementation phase with a lot of our markets. We’ve so the plumber is someone who is very important in our in our sales channel. He you know, he or she is the is the Influencer is sort of the influence of our sales. Because as I mentioned earlier, piping from what we believe is a low, consumer involvement product. It’s a lot dependent on the channel as well as the influencers. So, we decided to launch this program. …., apart from the, the benefits that the plumbers definitely get out of this. The company also gets a lot more visibility regarding, you know, the visibility on plumber purchase trends. It helps us link directly with the plumber. It it helps us send, you know, continuously interact with them, wish them on their birthdays, help them feel connected to the company, which traditionally, they would always just be connected to a company’s distributor, you know, very rarely do plumbers get directly linked with the company. So that’s something that we feel that, you know, we’ve also launched an app along with that where plumbers can, you know, log on to that and they can see that points. They can see what gift they can buy. A question that did come up when we were implementing this was that, you know, will plumbers be open to using an app. But then post covid that helped because you know, digitalization has really ramped up and you know, and we feel that there’s a lot more plumbers that are adapting to that app.
Shubham Agarwal : What are the benefits realized so far?
Siddharth Bansal : first from the plant, point of view is Working capital has really freed up. We’ve seen, you know, probably our working capital. Cycles have improved to an extent that we’ve reduced the investment by almost half. (Working capital: Reduced by 50%) In terms of availability of material at the plant, we are constantly at between 98 to 99 percent availability (Availability: improved to 99%).
..So, mostly distributors are maintaining stocks which are movable stocks. (Distributor availability: 90-93%) So, and at the same time there, we’ve seen in some of the areas that we’ve implemented. This that the distributors have their return on investment shooting up to more than 40-50%. (ROI of distributors: improved to 40-50%)
The company’s reach has definitely improved in terms of, you know, the retailers at servicing (sales growth: 38% YoY)because earlier. We weren’t working with the endpoint retailers. We so A, we did not have visibility of what our reach was. Of course, we had an estimated figure, but the company’s reach has at least gone up by, you know, at least three times in terms of the retail reach (Retailer reach: increased 3 times). we are, but this is a constant journey. We, you know, we think that there would be nothing less than two two and a half like retailers the cross India. And yeah, we’ve managed to touch base with at least 10% of them and going forward. you know, that ther’s a wide playground for us to really play in.
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