Distribution Management Relaxo Footwear

Orissa

Submitted by:

Nitin Kumar

Amit Kumar

Suraj Nandakumar

Table of Content

Chapter Page No

Introduction Relaxo Footwear 2

Distribution Network 3

Research Methodology 5

Analytical Framework 6

Data Analysis 7

Statistical Tools 10

Limitation of Research 13

Findings 14

Recommendation 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 2009-

10. What’s 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 company’s 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 Relaxo’s 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 Relaxo’s 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 Relaxo’s 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 competitor’s 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. That’s 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 χ2 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

of

Article

on

time

Supply

of

Article

as

Promised

Promotional

Material

Supplied

Problems

Solved

in time

Availability

of Various

Article

Pricing

of

Article

Behaviour

of

Distributor

Total

Relaxo 191 169 120 146 125 144 165 1060

Paragon 204 208 235 195 217 198 208 1465

Total 395 377 355 341 342 342 372 2525

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

of

Article

on

time

Supply

of

Article

as

Promised

Promotional

Material

Supplied

Problems

Solved

in time

Availability

of Various

Article

Pricing

of

Article

Behaviour

of

Distributor

Relaxo 165.82 158.27 149.03 143.15 143.57 143.57 156.59

Paragon 229.18 218.73 205.97 197.85 198.43 198.43 216.41

0.16 0.15 0.14 0.14 0.14 0.14 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 chi-

square 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.

From the above graph it is clear that Chi-Square value is greater than theoretical Chi-

Square 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. Retailers are not fully satisfied with the distribution network.

II. The promotional scheme of Relaxo Footwear is almost zero.

III. We can hardly find posters and glow sign board of Relaxo at Retailers shop

IV. Due to less advertisement of schemes, the retailers and the customers generally do not

get aware of the new scheme of Relaxo on time.

V. Distributors of Relaxo do not provide any discounts and add-ons to the retailers on the

purchase.

VI. Two or more distributors are working in the same area.

VII. Incremental Pricing Policy was not in favour of Retailers that’s why they were not

able to push the product.

VIII. Packaging Problem : Different Sizes were in the same box

IX. 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)

Strongly Agree

Agree Neutral Disagree Strongly Disagree

Difficulty to Get

Low Margin

Inadequate Incentive

Supply of article on time

Availability of all varieties of articles

3. Rate Relaxo’s distributor viz-a-viz competitor’s 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)

Company Supply of articles in time

Supply of articles as promised

Promotional materials supplied

Problem solved in time

Problem with availability of various articles

Pricing of articles

Behaviour of distributor

Relaxo

Action

Paragon

Lancer

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

Good Average Bad

1. Relaxo vs. Competitors

Qualitative Feedack. Availability Townwise, Districtwise and Statewise

Strongest? Weakest? Which Product? Where? Number of Outlet

2. Flite, Sparx and Hawaii

Top Selling Article (Competitors also)

3. Frequency o Orders

4. Late Deliveries (Specific Location and Outlet Names) and Concerned Distributors

5. Visual Merchandising (How was the product displayed)

6. Pricing/Margin

7. Advertising Response

8. Supply Issues (location Specific)

9. New Prospective Distributor

10. Miscellaneous Remarks