Distribution Management Relaxo Footwear Orissa

Submitted by:
Nitin Kumar Amit Kumar Suraj Nandakumar

Table of Content
Chapter Introduction Relaxo Footwear Distribution Network Research Methodology Analytical Framework Data Analysis Statistical Tools Limitation of Research Findings Recommendation Page No 2 3 5 6 7 10 13 14 15

Introduction
A journey of a thousand miles begins with a single step
Such is the story behind the creation and flourishing of Relaxo Footwear, the company that has established itself as one of the most stalwart, quality conscious and avant-garde footwear companies in the Indian economy today. Headquartered in New Delhi, India, it maintains a fine combination of comfort, style, and workmanship and is embarking upon appreciable growth plans for the future. The company began as a small enterprise in the year 1976 and was officially incorporated in 1984 and further went into public listing in 1995. According to the 2008 Business Survey, it has now emerged as the second largest footwear producer in India. Relaxo Footwear commenced its journey with the manufacture of Hawaii slippers. It has now grown into a large-scale entrepreneurship catering to the basic needs of the quintessential Indian citizen. From a modest sale figure of Rs. 1 million in 1977 to more than Rs. 5000 million last year; the company has experienced a record-breaking growth since inception. Today, the company manufactures over 3 lakh pairs of footwear per day, which approximately adds up to over 10 million pairs per year. Each pair is given thorough attention by the dedicated and skilled employees working at the 10 state-of-the-art manufacturing units in Northern India. Thus, it is no small wonder that the annual turnover has multiplied 2.4 times in the last 3 years from Rs. 305 crore in 2007-08 to a whopping Rs. 550 crore in 200910. Whats more, with over 30 years of experience and 100 million satisfied customers, Relaxo keenly looks forward to achieving an estimated annual turnover of Rs. 1000 crore by the year 2012.

Distribution Network
The Relaxo distribution network has evolved with time. The focus of the company has always been to provide desired products and quality service to the company's customers. In order to achieve this, one Distributors in each market has been appointed as a "Registered Distributors," a stock point for the company's products in that market. Through this Distribution Centre, wholesalers and retailers placing bulk orders directly with the distributors as well as through the company salesman. The company salesman grouped all these orders and placed an indent with the Head Office. Goods were sent to these markets, with the company salesman as the consignee. The salesman then collected and distributed the products to the respective distributors, against cash payment, and the money was remitted to the company.

The distribution network of Relaxo is one of the key strengths that help it to supply most products to almost any place in the country from Srinagar to Kanyakumari. This includes, maintaining favorable trade relations, providing innovative incentives to retailers and organizing demand generation activities among a host of other things. Each business of Relaxo portfolio has customized the network to meet its objectives. The most obvious function of providing the logistics support is to get the companys product to the end customer. But after all these innovative activities there are loopholes in the distribution system particularly between Distributor and Retailer. As we have interacted with around 350 retailers in the area, so we have analyzed the distribution network of Relaxo Footwear. We have analyzed the Distribution Network of Relaxo from the following aspects: Problems in selling the Relaxo Products and Comparison of Relaxos Distributor viz-a-viz Competitors Distributor

Research Methodology
The research is divided into two stages. The first stage is exploratory research and is done to identify the problems of the retailers in the assigned area. Then we prioritise the list of problems as per the responses and select five major problems with the service and operations. The second part of the research is descriptive study which tries to explore the major reasons of dissatisfaction of the respondents on the prioritised problems.

Objective of the Project:

To find the effectiveness of distributors in Promoting Relaxo To find out the market image of Relaxo in comparison to its competitor in Orissa To find out the area of improvement for Relaxo

Primary Data
Interview with Retailers Questionnaire Sampling Sample Units Retailers Sampling Technique Simple Random Sampling Sample Size 50 Sample areas Sundergarh, Jharsuguda, Sambalpur, Bergar, Sonepur, Bolangir Scale of Measurement Used Likert Scale

Analytical Framework
We tried to analyze Relaxos distribution network in the light of 6 most significant variables that affect the distribution part of channel management for any organization in the business of marketing & selling of goods. The analysis of the first stage of the research is primarily done using various statistical tools. One of them is chi-square test. The scale chosen is five point scales, since the major

reason is to identify only those factors due to which there is maximum dissatisfaction. The second stage is primarily qualitative analysis and is analysed on the basis of graphs and pie charts. After thorough research and talking

with retailers we have taken 7 factors which will motivate them to keep or sell the products of a particular company. The analysis is done by keeping in mind that what are all the problems faced by retailers with respect to the company and the distributor. These factors give the overall perspective of distribution system of company and the behaviour of distributor towards retailers. The list of factors is as given below. The variables, their explanations and their impact on the Relaxos distribution network are given below: Difficulty to Get the Product Low Margin Inadequate Incentive Supply of Article on Time Availability of All Variety of Article

Furthermore, we have also analyzed the competitors distribution network with Relaxo Footwear on 7 Parameters: Supply of Article on Time Supply of Article as Promised Promotional Material Supplied Problem Solved in time Availability of Various Article

Pricing of Article Behaviour of Distributor

Data Analysis
Research in distribution system is very essential, as distribution management is core element for the company; where the company first interact with its customer. So, the company needs to understand the distribution system requirement before redesigning its processes for enhancing business and many more. Since customer interaction takes place at the store and near store, there is a big opportunity to gather first hand information and feedback from customers through research and survey. Research is carried out at the retail level for concept testing, business feasibility analysis, identification of the right product mix, target customer and market potential. The major objectives of analysis of data are: To evaluate and enhance data quality Describe the study population and its relationship Examine effects of other relevant factors Seek further insight into the relationship observed or not observed Evaluate impact and importance

Problems in Selling Relaxo Products

It can be clearly seen from the bar chart that 68% of the retailers says that relaxo is providing inadequate incentives when compared to competitors, which is the major motivational factor for the retailers to sell the respective companies product. In this area Relaxo lacks when compared to the competitors. Considering other factor that is Margin 54% of retailers say that reloxo is providing lower margins when compared to competitors. 64% of the retailers say that they are not able to get all variety of relaxo products, hence they are not able to fulfil the demand of diverse customer groups which leads to loss of perspective customer and it also leads to opportunity cost to the company. One major factor was in favour of Relaxo was supply of article on time. 76% retailers said that supply of article was on time this helped retailers to save on inventory cost and also reduced lead time. In this area relaxo have competitive advantage over other competitors in the industry. Furthermore, only 30% retailers said that they did not find the Relaxo Product easily.

Comparison of Relaxo Distribution Network with Competitors

As we have already discussed that for comparative analysis, seven parameters have been taken. Furthermore, it was a clear fact that major competitor of Relaxo is Paragon. So, our main focus was between Relaxo and Paragon. As far as Supply of Article on Time is concerned there is tough competition between both of these companies. But Relaxo is lagging behind somewhere when Supply of Article as Promised is not fulfilled. Now, the major area of problem is Supply of Promotional Material, where Relaxo is nowhere near the Paragon. Thats why retailers find it more convenient to sell Paragon Products. At this point Relaxo is even competing with Action and Lancer. A large number of retailers were surprised when we asked them about the promotional material. Retailers were annoyed with problem solving attitude of Relaxo. Whenever they went to distributor regarding their problems of some of the products, distributor told them that its not in the company policy to look after their problems. Paragon also provides various article in each category and fix the price acoordingly(Price is one of the major issue). It also motivates retailers to sell Paragon products. And, finally the behaviour of Distributor; where Paragon is ahead of all the competitor. It has also been discussed above.

Statistical Tools
We have applied chi-square test to analyze the effectiveness of distribution system of Relaxo as well as comparative analysis with Competitors Distribution System. Chi-Square Test: A chi-square test (also chi squared test or 2 test) is any statistical hypothesis test in which the sampling distribution of the test statistic is a chi-square distribution when the null hypothesis is true, or any in which this is asymptotically true, meaning that the sampling distribution (if the null hypothesis is true) can be made to approximate a chi-square distribution as closely as desired by making the sample size large enough. Chi-Square test has two hypothesis to be proved those two hypothesis are Null Hypothesis (Ho) : Distribution System of Relaxo is Better than Paragon Alternate Hypothesis (H1) : Distribution System of Paragon is Better than Relaxo This analysis is done in order to prove the hypothesis. Hypothesis is made in order to compare the distribution system of paragon and relaxo. The Null Hypothesis (H0) states the distribution system of relaxo is better than paragon alternate hypothesis (H1) states the distribution system of paragon is better than relaxo.

The table below details the comparision between relaxo and paragon based on their distribution system. Supply Supply of on Relaxo time 191 of as Promised 169 120 208 377 235 355 146 195 341 125 217 342 144 198 342 165 208 372 1060 1465 2525 Article Article Promotional Problems Availability Pricing Behaviour Material Supplied Solved in time of Various of Article Article of Distributor Total

Paragon 204 Total 395

Expected Frequency
An expected frequency is a theoretical predicted frequency obtained from an experiment presumed to be true until statistical evidence in the form of a hypothesis test indicates otherwise. An observed frequency, on the other hand, is the actual frequency that is obtained from the experiment. The events being predicted must be mutually exclusive. Chi-Square is calculated by the below formula Chi Square = (Fo -Fe)^2 / Fe where: Fo = an observed frequency Fe = an expected (theoretical) frequency, asserted by the null hypothesis

Supply Supply of on Relaxo of as Article Article

Promotional Problems Availability Pricing Material Supplied Solved in time of Various of Article Article

Behaviour of Distributor

time Promised 165.82 158.27 149.03 205.97 0.14

143.15 197.85 0.14

143.57 198.43 0.14

143.57 198.43 0.14

156.59 216.41 0.15

Paragon 229.18 218.73 0.16 0.15

After calculation we have got the chi-square value as 22.61 with the degree of freedom as 6, but the theoretical value i.e theoretical Chi-Square at 6 degree of freedom from the chisquare table is 12.592. Since the value of Chi-Square is greater than Theoretical Chi-square the null hypothesis (H0) is rejected and the alternate hypothesis (H1) is accepted. So the final result is the alternate hypothesis (H1) that is Paragon distribution system is better than the Relaxo distribution system.

The test statistic

2 is 2 = 22 .61 , U w ith

6 d.f. =12.592

From the above graph it is clear that Chi-Square value is greater than theoretical ChiSquare value. The value lies outside the theoretical chi-squre value. So the null hypothesis is rejected.

Limitations
There was certain limitation while conducting the survey and during the analysis of data. Some of the limitation is as given below:

Type I error Type II error Human error Retailers hesitation in answering Error of interpretations Statistical compilation fault Lack of time Influence of other people while filling of the questionnaire Use of isolated incidents as examples for assessing.

Findings
I. II. Retailers are not fully satisfied with the distribution network. The promotional scheme of Relaxo Footwear is almost zero.

III. IV. V. VI. VII. VIII. IX.

We can hardly find posters and glow sign board of Relaxo at Retailers shop Due to less advertisement of schemes, the retailers and the customers generally do not get aware of the new scheme of Relaxo on time. Distributors of Relaxo do not provide any discounts and add-ons to the retailers on the purchase. Two or more distributors are working in the same area. Incremental Pricing Policy was not in favour of Retailers thats why they were not able to push the product. Packaging Problem : Different Sizes were in the same box There is no any special plan in Relaxo.

Recommendation
First of all Relaxo must improve the efficiency of the network to cater the customer base.

 Relaxo and its Distributors should advertise the running schemes. Relaxo should properly provide the promotional material to the retailers on time. Relaxo should focus on providing the attractive and competitive plans.

Distributors should provide discount and add-ons to the retailers on the bulk purchase so that retailers can be motivated to sell. There should not be area conflict among the distributors. Enhance the relationship between Retailers & Distributor in area to gain the retailers confidence.
Distributors should take care that the field boys cover all shops (including new shops)

in the market

1.

Are you a retailer of Relaxo? (Please tick the appropriate option) Yes No

2.

Problems in selling Relaxo Products (Please tick the right option)

Strongl y Agree Difficulty Get to

Agree

Neutral

Disagre e

Strongly Disagree

Low Margin Inadequate Incentive Supply article time of on

Availability of all varieties of articles

Rate Relaxos distributor viz-a-viz competitors distributor on the scale of 1 to 5 based on relationship with distributor. (1 being the least score and 5 being the highest score, please write the appropriate number)
3. Compan Supply y of

articles in time

Supply of articles as promise d

Promotion al materials supplied

Problem solved in time

Problem with Pricing availability of of various articles articles

Behaviou r of distributo r

Relaxo Action Parago n Lancer

How would rate the distributor of Relaxo responding to your problems (tick the appropriate option)
4.

Good
1.
Relaxo vs. Competitors

Average

Bad

Qualitative Feedack. Availability Townwise, Districtwise and Statewise Strongest? Weakest? Which Product? Where? Number of Outlet

2. 3. 4. 5. 6. 7. 8. 9.

Flite, Sparx and Hawaii Top Selling Article (Competitors also) Frequency o Orders Late Deliveries (Specific Location and Outlet Names) and Concerned Distributors Visual Merchandising (How was the product displayed) Pricing/Margin Advertising Response Supply Issues (location Specific) New Prospective Distributor

10. Miscellaneous Remarks