Presented by – Group 7
Sales, Distribution and
Retail Management
Samsung Mobile Phones
ABOUT THE COMPANY
As of June 2018, Samsung Electronics' market-cap stood at US$325.9
billion.
Samsung is the market leader in mobile phone segment as of FY 2018
followed by market disruptor Chinese brand Xiaomi Corp (14.9%)
Samsung hosts a diverse portfolio of mobile handsets with 150+
models
Smartphone users jumped to 382 million by 2018. By 2021 the share
of the population in India that use a smartphone is predicted to rise to
33.3 percent.
India is already the second largest smartphone market in the world
after China,
In Q2, 2018, smartphone shipments to India reached 33.5 million
DISTRIBUTION STRUCTURES OF COMPETITON
LG DISTRIBUTION STRUCTURE SONY DISTRIBUTION STRUCTURE
SUGGESTED DISTRIBUTION STRUCTURE
Indirect Sales Channel
SAMSUNG should follow a Multi Channel- distribution
Model
• Manufacturer - CFA - Distributor - Retailer Channel
• Manufacturer - CFA - Retail Sales Channel
• Franchise Outlet Channel
CFA Agents
The C&FA will act as a company depot or
warehouse . Samsung must have 28 CFAs , one
for each state
Distributer
There is at least one distributor present in every
city/ state depending on the volume The
distributors re- invest in the products
Modern Retail
Such Retailers should buy from Samsung directly
without any intermediary like Croma , Vijay sales,
Reliance digital
SUGGESTED DISTRIBUTION STRUCTURE
SAMSUNG should follow a Selective distribution approach
• The number of levels present in each channel ranging from 2- 3 .
• Samsung should follow a selective distribution strategy for regular feature phones and smartphones and exclusive
distribution strategy for High end smartphones
Samsung Online Channel
There is no intermediary in online sales . But only in case
of certain exclusive products , they may be sold through
Samsung e- store or a third-party website like Amazon or
flipkart .
Institutional Selling
These sales to Key corporate accounts for its corporate
segment of mobile handsets .
High value sales and must be sold through a direct
channel , as the need for information and customer
specialization is high
AUTOMATION IN DISTRIBUTION
• Order processing software is a software system designed
specifically to save businesses time in a significant part of the
sales process to add text
• By having single view of demand, inventory and supply, Order
management systems provide a way to not only increase
efficiency, improve fulfilment but improve the customer
experience.
• It eliminates costly and rigid inventory segmentation across
channels and business units with a single, real-time,
consolidated view of inventory across the enterprise, from your
suppliers and manufacturing facilities to your warehouse and
stores.
AUTOMATION IN DISTRIBUTION
OWIMS
• OWIMS or Order Warehouse Inventory Management System is
a system designed for efficient management of-
• Purchase orders
• Warehouses and Inventory
• Payments
• Various schemes and tie ups provided to the dealers
• It manages the customer’s data too, it’s always beneficial to
know the customer’s past order history
• Benefits of integrating this with accounting and back-office-
Optimizing inventory to meet product availability and ROI
goals; Providing inventory visibility
to supply chain partners; Stating inventory accurately in
financial reports
AUTOMATION IN DISTRIBUTION
TERRITORY DESIGN
COVERAGE PLAN
• Average time spent by one salesperson at one selling
Total number of selling points 2500 point: 20 minutes
under one distributor
No. of selling points covered by 432 • Number of selling points covered by one salesperson
one salesperson per month per day: 18
Number of salesperson required 5 (Approximately)
under one distributor • Salespersons will follow the straight-line method to
cover the areas
Total salesperson required 10
• ERP platforms
INFRASTRUCTURE REQUIRED BY DISTRIBUTORS
Capital Assets :
Warehouse area of atleast 300 square Atleast 5 small good carrying vehicles Atleast 3 Large good carrying Vehicles
metre with atleast 20 metre square of
office space
IT -Computers, Printers, Phones Clean Washrooms The office Should also have a dedicated
space for carrying out operations review
by company officials
INFRASTRUCTURE REQUIRED BY DISTRIBUTORS
Human capital :
Skilled Labour (Atleast 3):
• Accountants
• Manager
• Store Keeper / Stock Boy
Unskilled/ Semi-Skilled Labour (Atlest 5):
• Drivers
• Loaders
• Caretaker
• Watchmen
SUPPORT PROVIDED BY COMPANY TO DISTRIBUTORS
Technical Support : ERP Software , Invoicing etc.
Manpower Support : Salesforce for Initial operations
Training Support : Training Programmes for Sales People
Motivational Support : Incentives, trips etc. on target achievement
Market Research : Provided to enhance the reach of roducts in the market place
Promotional Support: Promotional merchandize to incentivize channel partners
Inward Delivery Support : Support for Inward delivery of goods
Contigency Support : Support provided to recover from outward incidents
LOGISTICS
Quantity Requirement at Each Distributor
Distributor 1 7200
Distributor 2 7200
Phones Per Carton 12
Volume of One Carton (25cmx30cmx20cm) m3 0.015
Requirement Per month at Distributor Carton 600
Volume Requirement m3 9
Volume of Ashok Leyland Boss 1413 A1 (24ft) m3 9.296987
One Truck Needs to go to each of these distributors monthly
PAYMENT/CREDIT TERMS GIVEN TO DISTRIBUTORS/DEALERS BY
SAMSUNG
• Bidding System: It is used by the company to select dealers. Strength of the
balance sheet and the reputation of the dealer is looked at before authorizing
the dealer
• Incentives: To the distribution channel are through the certificates of
recognition
• Zero Credit: This policy is followed by Samsung when dealing with
distributors and dealers. However, the distributor may allow for a credit period
of seven days (7 days), depending on the health of the retailer’s balance sheet
• Offers: Offers like goods free with goods are almost always given by retailers
to push sales during festive seasons. Company does rarely gives such offers.
Company’s promotions maybe through scratch cards, free trips and/or
microwave cooking kits etc. Explicit offers are generally made by the retailers.
PAYMENT/CREDIT TERMS GIVEN TO DISTRIBUTORS/DEALERS IN THE
MARKET
• Distributors are provided with credit to offer stock required for their regions however their
payment should be all cleared systematically.
• All prices and discounts offered by Supplier are subject to change upon reasonable prior
notice. Any such price change shall not apply to any purchase order submitted by Distributor
prior to the change
• In the event Distributor fails to cure the arrearage by paying the amounts due, together with
interest and late fees, within thirty (30) days after written notice thereof, Distributor will be
deemed in material breach and Supplier may immediately terminate this Agreement
• All prices shall include the cost of packaging and crating for shipment. In no case shall
Supplier be liable for negligent packaging or crating or for any other damage suffered by the
Products in shipment
• Supplier may, from time to time, offer discounts in writing to Distributor. Supplier shall
have no obligation to offer such discounts at any time in the future and may withdraw the
offer of such discounts at any time for any reason.
MARGINS AT EACH LEVEL
Distributor
Type of smartphone Margin (as a percentage of MOP) Margins are calculated on Market operating price
Low End Fixed margin of around Rs100 (MOP) which is an amount lower than MRP. It is
Mid Range 4% - 5% illegal for a retailer or distributor to sell below
MOP
High End 2% - 3%
Retailers Franchised Outlets
Type of smartphone Margin (as a percentage of MOP) Type of smartphone Margin (as a percentage of MOP)
Low End Fixed margin of around Rs100 Low End Fixed margin of around Rs100
Mid Range 7% - 10% Mid Range 4% - 5%
High End 4% - 5% High End 2% - 3%
RETURN ON INVESTMENT FOR PRIMARY CHANNEL PARTNER
Initial Investment for Distributorship
Low end ₹ 2,000 2000 ₹ 40,00,000
Inventory 30 days Mid Range ₹ 10,000 5000 ₹ 5,00,00,000
High end ₹ 50,000 200 ₹ 1,00,00,000
Warehouse Advance ₹ 2,00,000
Vans ₹ 2,50,000 5 ₹ 12,50,000
Credit given ₹ 1,29,38,333
Security ₹ 5,00,000
Total Initial Investment ₹ 7,88,88,333
Recurring Fixed Costs (Monthly)
Personnel Cost
Sales Getter ₹ 25,000 5 ₹ 1,25,000
Driver ₹ 15,000 5 ₹ 75,000
Helper with Driver ₹ 8,000 5 ₹ 40,000
Warehouse Manager ₹ 20,000 1 ₹ 20,000
Helper warehouse ₹ 8,000 1 ₹ 8,000
Total Personnel Cost ₹ 2,68,000
Utilities Cost ₹ 20,000
Fuel Cost (Total kms - 10000/month) ₹ 75 500 ₹ 37,500
Warehouse Rent ₹ 2,00,000 1 ₹ 2,00,000
Total Recurring Fixed Cost ₹ 7,93,500
RETURN ON INVESTMENT FOR PRIMARY CHANNEL PARTNER
Assumptions
Variable Cost (Monthly) 1. It is assumed that the distributor will keep an
Low end ₹ 2,000 1500 ₹ 30,00,000 inventory of 30 days.
Mid 2. It is assumed that the distributor has no pre-existing
Cost Price of phones ₹ 10,000 4000 ₹ 4,00,00,000
Range
infrastructure like warehouse & vehicles. Hence
High end ₹ 50,000 200 ₹ 1,00,00,000
everything must be bought in thereby entailing a cost.
Total Variable Cost ₹ 5,30,00,000
3. Mobile phones has been categorized into three
Revenue
categories and their per unit cost has been assumed as per
Low end ₹ 2,100 1500 ₹ 31,50,000
different variant averages.
Selling price of Mid
₹ 10,500 4000 ₹ 4,20,00,000 4. Security deposit initially provided by the distributor
phones Range
High end ₹ 51,500 200 ₹ 1,03,00,000 will earn an interest of 8%. This will accrue to him as
OTHER Income
Total Revenue ₹ 5,54,50,000
5. It is also assumed that order taking, and fulfilment
Variable Contribution ₹ 24,50,000
channel are different. This is done to streamline the
Variable Profit ₹ 16,56,500 whole system.
Annual Figures
6. Vehicle cost has been normalized to ₹ 2,50,000 as per
Total contribution ₹ 2,94,00,000
Expenses ₹ 95,22,000 year cost, assuming that vehicle functions for 5 years.
Net Profit ₹ 1,98,78,000 7. Credit given by distributors to retailers has been
ROI Year 1 25.20% considered for 7 days.
CHANNEL CONFLICTS
MAJOR CHANNEL CONFLICTS CONSEQUENCES OF CHANNEL CONFLICTS
• Emergence of more than one channel highlights the • Price Wars
inadequacy of the previous one in some form
• Customer Dissatisfaction .
• One channel targets customer segments already being
• Sales Deterioration
targeted by an existing channel
• Distributors Exit
• Online-offline retail conflict : ‘Showrooming’
• Poor Public Relations
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QUESTIONS
THANK
YOU!
