 Namaskar. I'm Professor Devadeep Purukayastha from IIT Bombay. Welcome to my course, Business Fundamental for Entrepreneurs, Part 2, External Operations. This is the fifth module in the third week. And today's module is about sales channels and distribution. But before I get into the topics for today, let me very quickly take you through the discussion flow of the course itself. In the first week, I started with how you can research the market, competitors, products, players, emerging trends, etc. Which is very important to build your business or start a new business. Then I talked about customers, customer segments, types of customers, and importantly customer value proposition. In the second week, I talked about value-based marketing. How do you create value for the customer and capture some value for yourself? How do you communicate the value and how do you deliver the value on-ground? I talked about branding and positioning and advertising. And all along, I've been trying to highlight skills that you can develop if you want to choose a career in marketing or market research or customer management, etc. So with that, we come to today's module. And today's module, we will start with a basic definition of what is a channel? What's a sales channel and what is distribution? And then I'll talk about how do you do distributor management and retail store management. So with that, let's start. What is a sales channel? Now think about it. There are 150 crore Indians, or 1.5 billion Indians. And there are about 7 billion or 700 crore people in the world. Now think about a product like a Samsung phone or a Tata soap or a Godridge detergent, etc. They are being made in a few factories in India or around the world. If it's an Indian company selling in India, they'll have a few factories in India, maybe 4, 5, 10, 20, 30, factories which are making those products in India. If it's a global company, they may have 10, 20 factories around the world which is catering to all the consumers of the world. So you or any of the Indians, 150 crore Indians cannot buy a Unilever shampoo or a Proctene Gamble soap or an ITC chocolate straight from the factory. So you need to have a channel which means a way across which a product, a chocolate which may be made in Himachal Pradesh or Mumbai or Chennai reaches you wherever in India you are. And that pathway is called a channel. So if you look at the screen, a sales channel is a network that businesses use to sell the product and service to crores or millions of consumers within India or outside India. Examples where you can buy a product will be a neighborhood store, a Kirana store which is maybe 100 meters from your house. So the product may have been made a thousand kilometers away in a factory but you're buying the product from a small store maybe 100 meters. So how is the product flown? That's the channel. You may be going to a supermarket or a mall or a pharmacy or you could go to a single brand store a Reebok or Adidas or Nike or Levi's and you could be buying a product maybe within one kilometer range but products which are made thousands of kilometers away or even outside India. You could be buying a product from an e-commerce platform like Flipkart or Amazon or Nike or you could be buying it from a Facebook advertisement or in Instagram. So the way the product flows from a factory to you is actually the channel for that company, for that product, for that brand. And companies choose their channel which means how do they reach you very carefully depending on what product category it is. So if it's a soft drink, it will have a very different channel than if it's a smartphone. If it's a heavy detergent or rice or flour or oil, cooking oil, it will have a very different channel versus if it's a laptop or a PC. An expensive product like a car will have a different channel than a scooter or a bicycle. So based on that companies determine their channel. So let's look at a pictorial representation of channels and then we'll look at some pictures of the steps in a channel. So as I said, the product is being made in a factory in India or outside of India. There may be one factory in India or there may be ten factories or maybe twenty factories or five factories depending on the product category. So if it's a bulky product, a voluminous product like a soft drink or an atta which means flour or rice or detergent, you don't want to carry the product thousands of kilometers very expensive to transport the product. So you may have small small factories across India. But if it's a light product like an Apple iPhone, Apple may have just a few factories around the world, maybe one in China, one in India, one in US. If it's a car, you will not have many factories. A car manufacturer, a Tata or Hyundai or Maruti, may have only one or two factories. So that's the factory workshop which is the warehouse where on the top side, on the top of the chart that you see on the screen, you'll find that next to the factory there will be a factory warehouse. So when the cars, the Maruti cars are being made in the Maruti factory, they will be in a factory warehouse next to the factory itself. If it's a Cadbury chocolate or a Febel ITC chocolate or a Duff shampoo or a Pantene shampoo, they will be made in a factory and stored in a warehouse next to the factory. That's called a factory warehouse. But that's not enough because there are only a few factories and therefore there will be a few factory warehouses. So you have to spread it out to other warehouses which are called redistribution warehouses. In India sometimes they are called as carrying and forwarding agents or CNF agents. So from a few factory warehouses, two, four, six factory warehouses, it may go to 40 or 50 redistribution warehouses. For example, a redistribution warehouse outside Bombay. Also in Nagpur, in Amalabad, in Delhi, in Chennai, in Bangalore, in Guwahati, in Kolkata. So these are redistribution warehouses spread across the country. If it's Apple, for example, a global brand made by let's say a Foxconn company in China, Foxconn will have a warehouse next to the China plant, that will be called a factory warehouse. But then to distribute it across Africa, Apple may have redistribution warehouses or distribution warehouses in many countries in Africa, Middle East or Philippines, Malaysia, Indonesia or in European countries, East European countries and so on or Brazil or this. So one factory warehouse or a few factory warehouses to many redistribution warehouses, but that's not enough. Because in these warehouses, the goods are stored in bulk. So these will be huge warehouses. So if it's a Maruti warehouse, which may be an open warehouse, they may have 1,000 cars, so 5,000 cars. If it's a Unilever or an ITC or a Goadridge distribution warehouse, the warehouse may have many, many, many tons of soaps and detergents and shampoos or thousands of bottles of soft drink. So you need distributors who will buy the product in not in a truckload or in a huge quantity, but in smaller loads. So a company may have a very large warehouse outside Bombay, but within Bombay they may have 20, 30 distributors. They're probably not buying in big truckloads. They may be buying in cartons and we'll see some examples later on. In Bombay, those of you who are familiar with Bombay, there may be a warehouse in South Bombay, one in North Bombay, one in East Bombay, one in Central Bombay. Same with Delhi, West Delhi, East Delhi, South Delhi, North Delhi and so on. Same with Kolkata. If it's in the rural areas, it could be at the district headquarters. So the distributors will be there in the district headquarters or one part of the city. These distributors will buy product from the company and then they will supply to the retailers from which consumers like you and I will buy. Retailers may be in tens of thousands. So Bombay city may have 30,000, 40,000 retailers. So that's how the channel is. Few factories, 2, 3, 4, 5, maybe 1. Each factory has a warehouse next to it called the factory warehouse. Then across India, there are redistribution warehouses in every state. Then there are distributors which will probably be in every city or district headquarters. There may be in a big city, there may be many distributors and then you've got thousands of retailers. And those are retail shops which are next to a house, 100 meters from your house. Or if you're a village, if you're living in a village, it's in the center of the village. Or if in a small town, somewhere in Meghalaya or Mizoram or Jammu, it may be a few shops in that small town in that state. Let's now look at a few actual examples. But before I go to the actual examples, I just wanted to highlight to you that if you buy a product from an online channel, which is Amazon or Nike or Flipkart or from Facebook or Instagram, an advertisement in Facebook or Instagram, or a company website, some of the factory warehouses, redistribution warehouses remain the same. But instead of physical distributors, what happens is those distribution warehouses then feeds into an online e-commerce warehouse. So Amazon will also have warehouses across India. Flipkart will have warehouses across India. Nike may have warehouses across India. Mantra may have warehouses across India. The ITC online store may have warehouses across India. So then those warehouses or distribution points will pick up from the company warehouse and then they will advertise on the online channel, which is the Amazon page or the company website, and you and I can go and buy from there. As I said, I've got some physical pictures and examples. Let's look at them now. But before I go to the actual pictures and some examples, I wanted to stop a while and talk to you about the difference if you buy instead of from a retailer next door from an online channel, Amazon, Mintra, Flipkart, Nike or the ITC online store, etc. The difference here is that from the redistribution warehouses, it doesn't go to the distributor. The goods don't flow to the distributor. It flows to the warehouse of the online platform. So it will flow to maybe an Amazon warehouse or Flipkart warehouse or a Nike warehouse or a Mintra warehouse. Or if it's a brand like a device online store that you're buying from, it will go to the device warehouse maybe. And then you have this online store portal from which you and I can go and buy. And remember that in today's world, many of us can look at the same product in different formats. So for example, let's take a Samsung phone. You can probably buy a Samsung phone in an electronic store in your neighborhood if you're in a big city and even in smaller towns. If you're in a village, you can go to a district headquarter town. There will probably be a Samsung electronic store. So you can go to a traditional store or it could go to a mall. There are malls all across the country. Many malls you'll find there's a Samsung store or there's a Chroma store or there's a Reliance electronic store or there's a Vijay sales. And you could go to a mall and you could buy a Samsung phone there. You could also instead of going to either a small store or a mall, buy the same Samsung phone from an e-commerce platform. Most of us probably buy electronics from e-commerce because of the discounts. So it could be Amazon or Flipkart or a Tata website. You could also sometimes go to a Facebook and see an advertisement there for the electronic item and buy the product from the social media. And finally, of course, you could go to the Samsung India website itself and buy from the company portal. And the fact that you can buy the same product from different channels is called Omni channel. Omni basically means everything channel. It's all around you. You can go to a small store, a big mall, a social media platform, e-commerce site or you could go to the company portal and buy it. And most companies now want to create the Omni channel experience. I said earlier that I'll show you some examples. So let me now start showing you the examples. So this is a traditional store. You'll probably have a store near your house, whether in a village or in Mumbai or Delhi or Chennai or Guwahati or Bhuvaneshwar. There are plenty of stores like this. And if you look at the store, there are lots of products in that store but which is not made in your neighborhood. It's probably made in a factory 1,000 kilometers away and it has gone through layers and layers of distribution to reach this point. This is a mall. Most towns and cities have it. District headquarters have it. Most of you would have gone to a mall. And again, it may not be 100 meters away but it may be in a central area of your town, maybe 2 kilometers, 3 kilometers, 5 kilometers away. And you could buy from there. Then there's a single brand store where only one brand is sold. So this is maybe the Apple store that opened in Mumbai recently, about a year back. And you could go into that store and buy an iPhone. But from the omnichannel experience, remember, you could also buy an iPhone from a mall or an e-commerce platform, etc. So that's a single brand store because only one brand. And similarly, you have Nike stores and Adidas stores and Levi's stores and so on. These are online sites. Most of you are familiar with it. The difference between a single brand or a mall and this is a single brand will probably have one brand. A mall may have 100, 200, 500, 1,000 brands. An online site may have 10 million, 20 million brands. And maybe 100 million items, which means all the sizes and the shapes and the colors. You get a huge range of choice in an online site. And you also get a lot of discounts. And then there's a company website, like I talked about. This is a Levi's website. And then social media. As I said, your customers are here. Find them with MetaEd. Meta is the owning company of Facebook. And basically this is where you can advertise in the Facebook social media platform. So with that, let's now pause for a while and encourage you throughout the course to have your course journal and think about what you have heard from me so far. And think about some of the questions I put on the page. Write it down on your course journal. At the end of the course, you can look back at your journal and remember what you have heard. So now I encourage you to think about a product that you use. It could be a toothpaste. It could be a double toothpaste. Or a hair oil. Marico hair oil. Or it could be a PC. Or your scooter or bicycle. Or a pencil. Natrage pencil. Camelin pen. Whatever it is. Where did you buy it from? It was where you bought from is the last point of your sales channel. Remember you could have bought the same phone or pencil or hair oil or soap or rice or atta from many channels, many stores. Why did you buy from the store that you bought from and not from other stores or online? Think about it. And what was your experience when you bought it? Whether you bought it online or physical? Or maybe you looked it up and checked out two, three areas. Maybe you checked out the price in a small store. Maybe you went to the mall and checked the price out. Maybe you went to the company store and checked the price out. And maybe you went to two websites. E-commerce website Flipkart or Amazon or Tata and checked the price out. Why did you buy from where you bought? And that will start you thinking about channel management. So reflect for three minutes.