Distribution costs in Beauty Industry – A perspective to consider
My new website was launched on 01st January 2020. Taking this as an opportunity, I have updated some of my blogs from my old site to make it more relevant to the present times.
The subject of my last post was Registrations of Beauty Brands in India. After having several rounds of talks with Brands and Distributors, I am penning down the freshness of the subject – what does it cost to distribute Beauty Brands in India?
Well, before I start on the subject, I did work on something of value for beauty brands wanting to enter the Indian Market. If you would like to receive a copy of the “India Beauty Market presentation,” please REQUEST HERE. This presentation gives a brief overview of the Market.
Having said all that I wanted to, let’s go back to the main subject of this post.
With a handful of global brands monopolizing the beauty and personal care industry in India, there is a constant need for investment flow that certainly cannot match the deep pockets global brands bring. Then there are locally manufactured brands that vie for market share. So if we segment the beauty and personal care products market, then broadly, there are three categories:
- Global professional brands in Hair, Nail & Skin Care
- Locally manufactured professional brands in the Hair Nail & Skin Care
- Last but not least, quality international brands in Hair, Nail & Skin Care that are always vying for attention.
As far as the distribution pattern goes, India being a vast country, there are global brands whose market penetration is deep into the rural areas as well because they can afford that kind of distribution costs. The Made-in-India brands, mostly in the personal care segment, also have an excellent distribution network, given the low cost of production that provides enough margins absorbing the cost of sales. So this leaves the 3rd category of brands – the quality Masstige international brands that are learning to find the right strategy through trial and error
So what are the costs to be considered to distribute a beauty brand?
Import duties aside (which is a different subject altogether), the costs that I call as investments would be:
- Distributor Margin (30 – 35%)
- Retailer Margin (35-40%)
- GST & IGST (Taxes)
- Marketing & Promotional Costs.
- E-Commerce Marketing Investments (Heavy discounting in market places)
However, it is imperative that the Brand understands that in mass distribution, the margins get divided between CHAs, Super Stockists, sub-distributors, and at times sub-sub distributors – such is the supply chain in India. Add to that inventory holding costs, and the distributor’s net margin drops low. And if you want the right distributor, consider the cost of pampering him as your competition has notoriously spoilt him. Free products, Additional discounts, trade offers, free international trips, gold coins, and such goodies are a part of your costs to consider.
All the above covers the B2B part of the costing. Consider this scenario – you have well researched the distributor, given him good margins, he is happy with his goodies, taken your Brand for distribution, and starts putting his best foot forward. Fast forward six months – you ask him for new orders as you have invested well – the answer is ‘There are no new orders from the retailer. The goods are not moving from the shelves’
Hmmmmm Why? – is your question. Pop comes the answer – No Brand Awareness! What’s your reaction? Of course, surprised, perplexed, confused, and you sit there with your eyes fixed on the ceiling.
My Dear Brand – only a flex in a store or a header branding or shelf space rental or standees will not take your product off the shelf.
Marketing and promotional costs are something you probably missed detailing with the distributor:
- What is the Distributor Contribution in the brand building?
- What is the strategy you have to adopt – Pan India, as well as at the local area level?
- What is the kind of investment at every level of marketing the Brand – Strategic, Tactical & Maintenance?
- Have you started it right?
- Have you invested right?
- Have you thought about changing consumerism?
It does not kill your pocket to create awareness if you have the best product for the Indian Market.
On a closing note to Brands & Distributors:-
Dear Brand – Please consider B2C brand building to get your product off the shelves. Create Awareness of your Brand’s presence, whether it is a professional brand or a consumer beauty brand.
Dear Distributor – Invest in educating and training your sales force periodically. Giving incentive is not enough. It could result in dumping, and the stocks will be returned after the stimulus is received.
Today, more than ever, with the Beauty and Wellness industry in focus in India, both – the Brand and the distributor are reaching out to new technology and strategy – innovation being the keyword. With consultancy requests coming from Tier 2 & Tier3 cities like Chattisgarh, Nagpur, Nasik, Pune & Ahmedabad, I can feel the significant change happening to this industry.
My company Argus CMPO specializes in Brand & Marketing consultancy with key vertical being Beauty & Wellness. With over 28 years of on-ground experience, I understand all sides of the challenge. You can get everything right if you have the determination to do so.
Write to me on marketing@arguscmpo.com, and I can help you grow. All good things don’t come with a hefty price tag. Trust me. 🙂