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Satellite Distribution.docx

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University of Manitoba
International Business
INTB 2200
Luming Wang

Satellite Distribution A concept that has come to be known as satellite distribution can be tried in developing a distribution channel in the rural market. Under this system, to start with, the firm appoints stockists in feeder towns. They take care of financing goods, warehousing of goods and sub- distribution of goods in the area covered by the feeder town. The firm also appoints a number of retailers in and around the feeder towns and attaches them to the stockists. The firm supplies the goods to the stockists either on cash or on credit or on consignment basis. The stockists take care of the sub-distribution job on the terms and conditions determined by the firm. The sales volume of the retailers will vary depending on the potential of the area covered and the capacity of the dealer concerned. Over a period of time, some retailers grow in terms of business turnover. If such retail points also happen to be transportation centres within the feeder town area, the firm elevates them as stockists. The area of operation of the original stockist shrinks in this process, but care is taken to see that his, volume of business does not shrink. This is achieved, in practice, on account of the growth in demand and deeper market penetration. If twenty retailers operate in the network of an original stockist, five or six of them get elevated over a period of time as stockists. Out of the retailers some remain attached to the original stockist and others are attached to the new stockists, depending on location, service convenience and other relevant factors. The process continues as long as the market keeps expanding just like the second-generation stockists, a set of third generation stockists get established in course of time. And at any point of time, enough retail points invariably hover around a particular stockist. Hence the name satellite distribution. The main advantage of this system is that it facilitates market penetration in the interiors of the rural market. However, the firm must ensure that in the process, the motivation of the earlier generation stockists is not destroyed due to overzealous and premature elevation of the retailers into stockists. The Experience of Hindustan Lever and Lipton India We can understand some of the practical dimensions of running an efficient distribution channel in the rural markets by analysing the experience of Hindustan Lever Ltd. (HLL) and Lipton India who are pioneers in rural marketing in India. The salient features of HLL's rural distribution system are as follows: From the factories, the products move to about 40 C & F agents. From there, the products reach 3,500 stockists located in towns with population of upto 20,000. From these stock points, the stocks reach the remotest rural markets going through the semi-wholesalers; some stocks move directly to village shops. The company's salesmen spend 30 per cent of their time visiting the rural dealers and consumers. Special distribution methods are used to suit specific regions, specific climatic zones and villages with specific conditions of accessibility. The products are sold at a uni
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