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E-commerce: Threat to Distribution Business

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Founder of , believes that the competition from e-commerce space is emerging as the major challenge in the distribution business. Read him further on the opportunities and challenges in the business.

A native of Saharanpur in UP, Atul Malik is the son of a wholesale dealer for various fabric companies including , Siyarams, Digjam and Harry Collection. Having learnt the nuances of garment business from the family, his passion for fashion inspired him to create a niche for himself and started his own sales and distribution company, Malik Sales & Distributors. Malik, in conversation with Images Business of Fashion, shares more on his company and the industry.

Tell us a bit about your company.

I launched Malik Sales & Distributors in 2008 as a distributor for economy brand, Signature, for a small territory in western UP. In a short span of fi ve years, I opened a branch offi ce in Dehradun to cater to the Uttaranchal (now Uttarakhand) territory. Today, I am distributing more than 10 brands including Spykar, Being Human, 109°F, Fusion Beats, Redtape, Gesture, Lawman, W&T , Yellow Jeans and Poison Jeans.

How many cities and retailers do you cater in your region? Which are the top ones?

In Uttarakhand, we are working in 17 cities and with 50 retailers. Here the top dealers are Big Fancy and Amarsons in Dehradun; Sardar Sons in Nainital; Merry King in Haridwar and Shri Gurdaas Collection in Rudrapur. In UP, we cover 33 cities and around 200 MBOs. It includes top dealers such as Dressland in Varanasi,  JSK Lifestyle in Gorakhpur, Bindal Group, Bachoomal in Agra, Multani Femina in Meerut, Sanwaria in Ghaziabad and Modinagar, and Rajan Mall in Agra.

What is your brand-wise category split?

We are largely into the casualwear segment and have more than 95 percent casualwear brands. This is because both the states – UP and Uttarakhand – have young audience. The youth culture is more demanding and competitive, and to fulfil the demand of the target group, we choose casualwear brands. Casualwear segment is quite popular in our region. In fact, people in their mid-40s prefer wearing casualwear and it wins the ratio of 70 percent. Within casualwear, denim is a much-loved category. From parties to daily dressing, denim is worn at almost every occasion.

What are the challenges that you face in the distribution business and what is your strategy to tackle them?

I would say competition from the e-commerce space is emerging as a major threat in this business. The young crowd is tech-savvy and every fashion item is available online. I can say, it is a big shopping trend in the industry. Another challenge is the constantly growing number of MBOs by each passing day. To tackle this, we have to go safe and steady to choose the right business partner who can be a partner throughout the year rather than buying the product for once or twice in the season.

Also, the pressure from the company is so high that it becomes difficult to sustain the balance of supply and demand. Our strategy is straight and simple – focus on the right business partner and provide better services to the market. Instead of grabbing every newcomer in the industry, it is better to grow with the old and right partners. Having the right placement at the right time is always the winning strategy, which has proven appropriate in any aspect of the business.

What is your business process like?

It begins with choosing the right people to work with, be it a buyer or a supplier. It is a chain of people working in the same direction to achieve the common goal that is success! In my view, it is a process of buying and selling the products, and the chain has to go on. The success lies in where the manufacturer and the distributor are in a win-win situation. And, most importantly, the rules of the game are obeyed by both the manufacturer and the distributor. It is the process of right manufacturer, logistic distributor and MBO chain.

On an average, how much margin do you fi x on your sales?

The force of volumes governs the margin and the brand as the normal margin of any brand is fi xed and almost same. Sometimes, it is supported by promotional strategies like End 0f Season Sale (EoSS), turnover incentives, shop-in-shop margins, etc.

What is your promotional strategy?

The promotional strategies help us to maintain the volumes. Some very common sale promotion activities are EoSS, shop-in-shop, annual target schemes, etc.

E-commerce is a big trend today. Do you have plans to optimise the opportunity?

It is spreading like a wildfire, which is cutting the business of a distributor. The technology is offering a direct link between the service provider and the company. As a distributor, I am against this trend, which is stopping the service provider to not invest in any stocks. The market is a common place for all the shops and customers to meet. A customer who is merely coming for window shopping will at least spend some amount of money.

However, the online opportunities are affecting the business of people who earn their bread and butter on daily basis. Since this opportunity is against the distributor and retailer, I would rather oppose such practice and request the companies to discourage such buyers.

What is your annual turnover and year-on-year growth?

It is difficult for a distributor to sustain in the market, as the market is facing tough competition due to . In such a scenario, the annual turnover is around `6 crore with a growth rate of 20 percent.

What kind of financial risks are involved in this business?

Any kind of business involves risks! I learnt that higher the risk greater the profit. However, it does not go that way every time. The investment levels are getting higher and higher these days so the risk is always high. To achieve the numbers and growth, and to work with the best dealers, at times the investment on a single retailer goes very high, which if split and invested would cut the risk.

What are your plans for this fiscal?

I would like to maintain the growth rate and add at least 10 good MBOs to achieve the desired goal.

What are the professional lessons you have learnt in this business?

I would say, never put all the eggs into one basket, be selective and always be highlighted. Being the part of the fashion industry it is important to stay up-to-date with the latest fashion trends, upcoming brands, government policies and competition. In fact, magazines such as IMAGES Business of Fashion help me a lot to stay informed about all the trends and business events, which I try never to skip.