The shifting of industrial forces- the coming of the 2nd generation store owners.

The shifting of industrial forces- the coming of the 2nd generation store owners

For us at Centre of Gravity, the sales channel is as critical for strategy development as customers. It short-circuits industry understanding, gives a perspective on brands and importantly the pulse of the market.

In the recent past, we have been picking up a shift among this particular stakeholder (across categories) which has an implication on how companies may need to alter their way of engaging with them.

Typically , in categories that have been around for a long time (30+ years), from the initial 1st generation of businessmen we are witnessing an emergence of segments, which were hitherto not there.

These are the four broad segments that we unearthed in the sales channel:

Two of these segments, accounting for anywhere upwards of 20 percent are potentially rewriting the rules- the inheritors and the opportunists.

In this article, the focus is on the Inheritors — well-educated, well-exposed 2nd generation taking over their father’s business. Unlike the old timers and the aspirers, who have a very emotional connect and blind loyalty with the company they started with, the story with this new segment is different.

  • They are professionalising the business by ushering in transparent practices, streamlining money management (proper books & costing), investments in technology, etc.
  • Have an appetite for discontinuous growth and bigger punts (moving into distant adjacencies, non-related categories, services, etc.)
  • Their loyalties are shifting from the manufacturers to customers:
    – Speak the language of the educated class very well
    – Understand the changing metrics of trust building; unlike the past where trust was based on relationship, their mechanism based on the pillars of professionalism, expertise and transparency.
  • Cognizant of the power shift and therefore playing their cards right. See that companies are eager to reach out to them and unlike their elders, do not look up to authority figures
  • Question the VFM equation very easily for both themselves as well as customers and ensure that the price demanded by the brand is justified. In fact brands have started putting an entire service eco-system to justify the premiums
  • Focus on profitability, margins and ROIs
  • Given their brand agnostic nature are open to experimenting

This shift offers a huge opportunity for challenger brands as well as for incumbents to cement their positions.

What are the ways beyond the normal dealer discounts and trips to bring this version 2.0 of the sales network closer to the company?

By helping them with succession planning, helping them with increasing their profitability and identifying new opportunities and professionalizing further, among others.

This becomes all the more critical with the entry of MNCs and across many categories. Companies that are able to put in place clear strategies around this stakeholder would be at the leading edge of the curve while the rest may just see the ground slipping away under their feet.

Please note: This article is an updated version of an older post.

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