By UCHE AKOLISA |
Big retailers, direct marketing and high operating cost are bullying middlemen out of the distributorship business in Nigeria, Hallmark checks have revealed.
Once upon a time, getting a distributorship deal for any popular brand or product from any of the blue-chip companies, big players in the fast-moving consumer goods sector or even the service industry was not just a status symbol, it was really all many a businessperson needed to become a millionaire, overnight.
Indeed, many Nigerians millionaires were created from the dealership of major blue-chip companies like Nigerian Breweries, Guinness, Coca-Cola, 7up and so on. Even the coming of the mass market telcos following the liberalization of the telecoms sector gave further credence to this established convention as many Nigerians were made wealthy from their dealership on SIM cards, recharge cards and other accessories. Not even the initial growth of other technology-driven enterprises like pay-TV had been able to alter this established pattern.
However, the music has changed as changing market dynamics is threatening to throw many middlemen out of their entrenched distribution circuits. Many distributorship businesses are presently closing shop or are barely struggling to survive. The coming of big retailers such as Shoprite, Yudala, Justrite and e-shops among other modern urban market channels is forcing out the once-critical distributorship channel from the products dissemination value chain. In the same breath, rising cost of operations and the push and pull of new and constantly changing technologies has forced many manufacturers and businesses to jerk up distributors’ revolving capital, engage in direct marketing and setting up widespread depots, leaving the wholesalers in the cold.
For instance, when it started its business in Nigeria some 20 years ago, premium pay TV, Multichoice, owners of the DSTV brand had offices only in Lagos and Abuja while tens of dealers and super dealers interfaced with subscribers. Today, with about 4 million subscribers in the country, the company has in a bid to better serve its subscribers, opened regional offices in the geo-political zones, though it still retains its dealer/super dealer arrangement across the country.
On its part, Coca-Cola has streamlined its distributorship, preferring to use mini depots it tagged MDCs for direct sales to retailers. For the telcos, the dealership business has been almost wiped out with the coming of the regime of per second billing as shrinking margins have literally forced out intermediaries even as the self-owned Experience Centres take care of most of the businesses that they would have done.
Mrs. Bose Olayinka, was the CEO of the defunct Fesab Limited, a distributorship business for a popular beverage brands located at Iju Road, Lagos. She closed shop due to low patronage and lack of revolving capital to support the business. Olayinka who is now a retailer blamed the decline in distributorship on the influx of all manners of people into the business and dishonest staff.
“There are too many people doing distributorship. Also, if you employ dishonest staff, they will be stealing from you until the business crumbles,’ she disclosed.
Mrs Lola Gabi, a distributor of Coca-Cola, and Nigerian Breweries (Maltina) blamed the worsening economy and shrinking profit margin for the decline of the channel. Gabi who has been in the business since 2000 and had in 2008 won a Coca-Cola certificate of recognition for outstanding performance said, ”Due to the state of the economy, distributorship is not what it used to be. They keep increasing the capital. What that means is that I will not get as much bulk supply as I used to receive.”
Mrs Gabi noted that cost is also passed down to the retailer who in turn also reduces his stocking capacity. “If the price for a carton of drink is higher, the customer (retailer) who used to buy 10 cartons will decide to buy less.”
A marketing expert and CEO, Imperial Marketing Limited, Mr Sola Kolawole, who confirmed the development, attributed it to manufacturers quest for alternative routes to the market and the advertising dynamics in the modern marketing space.
“Most organizations tend to operate key account (major distributorship) systems that require huge capital outlays which make it almost imperative that they source bank facilities to run and many banks are not lending. Some organisations have devised alternative routes to the market by encouraging direct sales to retailers which reduce their costs. However, there is also the advent of modern markets like Shoprite and other superstores, and many people prefer to go there. These are some of the things that are taking businesses away from traditional key distributors.”
The Director-General, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, blamed the decline of distributorship on the intensity of competition and the desperation of brands to retain market share.
“All investors are facing intense competition. So, many are desperate. That is why they are compromising the distribution chain to keep their customers,” Yusuf noted. He added that with information technology, a lot of transactions (such as travelling) that would necessitate a third party are being done directly with consumers online.
It is not clear where the tide would leave the distributorship business in the next 10 years but experts foresee that the future is bleak for the industry. Kolawole in particular anticipates that, with the exception of the ‘cash-rich’ distributors who have the funds to play it big, the decline in the channel would continue to worsen due to lack of creativity on the part of traditional distributors.
“They have not helped themselves. They just sit back and wait for people to come and buy. For lack of creativity, they will continue to have declining influence,” he submitted.
And that in a sense is why the dinosaur went extinct.