However, there is the risk that your Indian distributor can use their information advantage to your detriment. You need to make sure they do not set prices in their favour by estimating costs too high – e.g. customs duties, taxes, final prices for labelling; transport and storage.

On top of this dealers are usually trading houses, working for various companies at the same time and keeping multiple products in their portfolio – with their focus on margins and volumes.

Explaining the benefits of imported – and often high-quality – products are not always the top priority for Indian distribution partners, so their sales people may not have the product know-how or be fully able to maximize your market potential. Especially in a price sensitive market like India, however, this is one of the key criteria that determine market success or market failure.

The final problem that we find many clients face is that the scale of India means that most of the most effective distributors focus on a particular region or state.  This means you may have a great distributor in the North East covering Kolkata and surrounding areas, but you need another distributor for the Hindi speaking North, and still others for the South and the West. Building and maintaining relationships with all these takes time and companies often find they need to have a team in place on the ground to manage everything and ensure that everything is above board. Some companies outsource this role to Maier Vidorno Altios’s accounting and logistics teams; while others opt to have dedicated sales people hosted in Maier Vidorno Altios who can oversee the distribution network.  This “business incubation” approach is a great way to get a feel for the market and learn, but if you are successful then sooner or later it makes sense to show your customers you have “skin in the game” – your own subsidiary.

Sales in India – have your own organization as an Indian subsidiary

The advantage of your own Indian subsidiary is that you can attract customers with your long-term India commitment. Your own employees are your biggest asset; you can recruit and instruct them to conduct technical sales and maintain sustainable customer relationships – a key driver to succeed in India’s competitive market. The intensive contact you get with your (potential) customers and the long-term personal relationships allow you a better understanding of the needs and willingness of customers in India. Being close to the Indian market means that you will also be better informed about the latest market trends and new opportunities for sales in India, and you can adapt your India market-entry strategy – not least your price policy – quickly to market conditions.

The experiences that you have at the beginning of active market development can then be used to gradually develop your own distribution system. You can often learn a lot from the well-functioning distribution systems of your competition.

However, direct investment and setting up your own distribution network in India also carries risks. Many companies make the mistake of underestimating the time and energy needed to set up your Indian organization – whether you set up from scratch, buy a company or set up a joint venture.

The distribution requirements, the countless compliances and bureaucratic pitfalls and the initial inexperience of managing your own Indian team can leave you too preoccupied to focus on the actual sale of your products. It is not uncommon that companies need around two to three years for their own structures and business processes to begin operating satisfactorily.

When you add the relatively high initial investment in infrastructure, human resources, transport and logistics as well as the ongoing investment in the construction or rationalisation of a nationwide distribution network, it is quite possible that your sales office takes longer to reach profitability than originally planned. Therefore it is important to have a really good view on your expected revenue and do your research to anticipate the financial and organizational effort you will need before you commit. A strong Market Entry Strategy is the only way to enter India with your eyes wide open.

Building your own sales organization is the most effective way to successfully establish yourself and your products in the Indian market, but you need to “take a long breath” to be successful.

Maier Vidorno Altios can help you to choose the appropriate model for your business in India – and to overcome the bureaucratic hurdles. To succeed in India, you need a clear market entry strategy and there are several key factors that you need to analyse before making your investment. Our Consulting team helps companies with all aspects of entering the market while our operational teams bring years of experience dealing with the everyday issues that international companies face.