Part 1: Understanding Sales Channels & Revenue
1. Primary Sales
This refers to sales made directly by the manufacturer to business partners such as distributors, modern trade channels, or wholesalers.
Example: If a distributor in Ahmedabad purchases goods worth ₹1 lakh directly from the company, this counts as primary sales. Payment terms may vary (advance payment or credit days).
2. Secondary Sales
Once a distributor receives goods from the company, they sell them to retailers and wholesalers. These transactions constitute secondary sales.
Example: A distributor supplying goods to small grocery stores, supermarkets, or wholesalers.
3. Tertiary Sales (Offtakes)
When a consumer purchases a product from a retailer, it counts as tertiary sales.
Marketing and promotional activities focus on increasing counter offtake to drive sales.
Example: A customer buying a XYZ chocolate from a retail shop. Cashback, discounts, and loyalty programs boost tertiary sales.
Part 2: Margin & Pricing Structure
Pricing Level | Example Product: XYZ Chocolate |
Distributor Price | ₹3 per unit (Manufacturer to Distributor) |
Retailer Price | ₹4 per unit (Distributor to Retailer) |
Customer Price (MRP) | ₹5 per unit (Retailer to End-User) |
Retailers can sell below MRP but not exceed it.
Part 3: Trade & Consumer Schemes
Scheme Type | Description | Example |
Primary Scheme | Extra margin for distributors | 1% additional margin on purchases above ₹10 lakh |
Secondary Scheme | Discounts or gifts for retailers | Buy 11, Get 1 Free |
Quantity Scheme | Bulk purchase discount | 50 pieces – 1% off, 200 pieces – 2% off |
Value Scheme | Discount based on purchase value | ₹5000 purchase – 1% off, ₹100000 – 3% off |
Tertiary Scheme | End-user promotions | Paytm cashback, festival discounts |
Part 4: Logistics & Sales Operations
13. Beat Plan
A beat is a structured route followed by distributors to optimize delivery costs and ensure efficient stock distribution.
Example: A distributor may serve different retail clusters on assigned days:
Monday: Beat 1 (City Center)
Tuesday: Beat 2 (Suburban Retailers)
14. ROI (Return on Investment)
The percentage of profit a distributor earns from selling a product.
Example: If a distributor invests ₹1 lakh and earns ₹1.2 lakh, the ROI is 20%.
15. Rate Issues
This refers to price competition between distributors leading to undercutting, impacting margins.
Example: Distributor A starts selling at an extra 4% discount in an area served by Distributor B, leading to external undercutting.
16. Infiltration
When a distributor sells outside their assigned territory, it is called infiltration, disrupting local pricing strategies.
Example: A distributor assigned to North Delhi selling goods in South Delhi to capture additional market share.
Part 5: Market Analysis & Expansion Strategies
17. DPL (Dealers Per Lakh Population)
Measures distribution density by assessing how many retail outlets exist per 1 lakh people.
Example: If a city has 5 lakh residents and 500 retail outlets, the DPL is 100 (500/5).
18. RSI (Range Selling Index)
Indicates product penetration across different outlets. A higher RSI means better distribution.
Example: If a Nestlé sales executive covers three retailers:
Outlet 1: Maggi, Munch, KitKat
Outlet 2: Maggi, Ketchup, Nescafé
Outlet 3: Maggi only
The RSI is calculated based on the number of SKUs sold across the outlets.
To calculate the Range Selling Index (RSI) based on the given data:
Count the total unique SKUs sold across all outlets:
Maggi, Munch, KitKat, Ketchup, Nescafé
Total unique SKUs = 5
Count the total occurrences of SKUs across outlets:
Outlet 1: 3 SKUs (Maggi, Munch, KitKat)
Outlet 2: 3 SKUs (Maggi, Ketchup, Nescafé)
Outlet 3: 1 SKU (Maggi)
Total SKU occurrences = 3 + 3 + 1 = 7
Use the RSI formula:
So, the RSI value is 0.47 (or 47%), indicating moderate product penetration across the outlets. A higher RSI would suggest stronger distribution, meaning more products are available at more outlets.
19. Feeder Markets
These are major wholesaler-driven markets that supply smaller retailers. These play a critical role in expanding indirect reach.
Example: Chandni Chowk in Delhi serves as a feeder market for smaller retailers across North India.
20. Weighted Distribution
Refers to product availability in high-sales volume outlets rather than just increasing outlet numbers.
Example: A premium shampoo brand prioritizing modern trade outlets over small general stores.
21. Go-To-Market (GTM) Strategy
Defines where and how a brand enters the market based on data-driven parameters like:
Top Impactable Markets
Urban vs. Rural Expansion
Retail vs. Modern Trade Focus
Example: A soft drink brand might focus on depth (existing markets) in summer and width (new regions) during festive seasons.
FMCG sales involve a complex mix of pricing, distribution, and trade strategies. Understanding these concepts helps businesses optimize operations, enhance market presence, and maximize ROI.
Which of these concepts do you use in your business? Let us know in the comments!
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