In the era of digitalization, companies that work "the old way", with notebooks and minimal accounting, are at risk of losing their competitiveness. Nikolai Doroshchuk, an expert in distribution, notes: such companies do not have system data and automation, which limits their growth and calls into question their future for the next five years. In his latest interview, he talked about how the market is changing and what distributors should prepare for.
Wholesale model: the past of distribution?
Companies working through wholesalers are faced with limited margins and lack of flexibility. Unlike distribution, where you can accurately assess sales and analyze points of sale, wholesale transactions end with a simple calculation, after which control is lost. According to my forecasts, wholesale sales may decline significantly in the next two to four years, since manufacturers will see the advantage of distribution, where direct contact with the client can provide 40% of sales versus 5% through a wholesaler. Why manufacturers choose distribution
Distribution offers not only high margins in categories A and B, but also control over the process. When working with wholesalers, manufacturers are highly dependent on external factors and have no guarantees of long-term stability. Distribution allows for a deeper analysis of the market, understanding the needs of points of sale and setting up a strategy, as well as implementing automation, simplifying analysis and planning.
When you go to a distributor, it’s already a new thing. You analyze each outlet, and the planogram, and prices, and representation, etc. That’s why automation is needed there. Therefore, if you sell an IT product, but don’t go to wholesalers or to those who work with wholesalers, they won’t understand it. But as soon as we are ready to change the strategy, it means that they understand the future of distribution.
Is the Uzbek market ready for change?
Uzbek entrepreneurs are still inclined to stick to the traditional model, which is considered stable. In rural areas, wholesale outlets often meet demand through bulk sales. However, as they become aware of the distribution potential, entrepreneurs may begin to actively move to linear retail, especially with the growth of marginal channels.
The bazaar will remain the same as long as it was. For now, this is the strategy. We live here and now. There is a wholesaler in the villages and people come, buy a bag directly - 50 kg, they bought for a month, stocked up on what they need and that's it! For now, they think that this situation cannot be changed. As soon as they get the idea to work ahead of the curve and occupy marginal channels - this is not a wholesaler, this is linear retail. As soon as they understand this, then there will be movement!
Wholesale model: the past of distribution?
Companies working through wholesalers are faced with limited margins and lack of flexibility. Unlike distribution, where you can accurately assess sales and analyze points of sale, wholesale transactions end with a simple calculation, after which control is lost. According to my forecasts, wholesale sales may decline significantly in the next two to four years, since manufacturers will see the advantage of distribution, where direct contact with the client can provide 40% of sales versus 5% through a wholesaler. Why manufacturers choose distribution
Distribution offers not only high margins in categories A and B, but also control over the process. When working with wholesalers, manufacturers are highly dependent on external factors and have no guarantees of long-term stability. Distribution allows for a deeper analysis of the market, understanding the needs of points of sale and setting up a strategy, as well as implementing automation, simplifying analysis and planning.
When you go to a distributor, it’s already a new thing. You analyze each outlet, and the planogram, and prices, and representation, etc. That’s why automation is needed there. Therefore, if you sell an IT product, but don’t go to wholesalers or to those who work with wholesalers, they won’t understand it. But as soon as we are ready to change the strategy, it means that they understand the future of distribution.
Is the Uzbek market ready for change?
Uzbek entrepreneurs are still inclined to stick to the traditional model, which is considered stable. In rural areas, wholesale outlets often meet demand through bulk sales. However, as they become aware of the distribution potential, entrepreneurs may begin to actively move to linear retail, especially with the growth of marginal channels.
The bazaar will remain the same as long as it was. For now, this is the strategy. We live here and now. There is a wholesaler in the villages and people come, buy a bag directly - 50 kg, they bought for a month, stocked up on what they need and that's it! For now, they think that this situation cannot be changed. As soon as they get the idea to work ahead of the curve and occupy marginal channels - this is not a wholesaler, this is linear retail. As soon as they understand this, then there will be movement!
What will happen to traditional retail
In the coming years, the Uzbek market is expecting important changes, and the main question is where the focus will shift: to retail or to B-C channels. Traditional retail and categories B and C retain their relevance and marginality, while retail attracts volumes, but remains low-profitable. The wholesale segment is gradually losing share, giving way to new formats. The greatest profit is provided by channels B-C, and this is where the main flow of sales will probably go.
For the future, I want to say - Retail will still remain an unprofitable channel! It will be volume-generating, but it will not seem profitable! I worked with many companies in the CIS. Companies that work with retail, where the share of sales can reach 70% - they say clearly, we have volume, but we have very low profitability! We left B-C because we thought it would die - it is not dying! There is a margin! There is fat! And when companies understand that it is very important to hold on to both retail and traditional retail, then they will have a future.
Where is the Uzbek market heading? It will change! But I don’t know where it will transform. Will it go to retail, will it go to the B-C channel? It is very important to look at where the marginality goes, not where the volumes go.
Development of retail and online trade
In Uzbekistan, unlike Europe, where the share of retail chains reaches 80%, traditional retail and bazaars occupy leading positions. Although retail and online channels will grow, high marginality will remain in traditional channels, such as linear retail. Despite the sharp growth of online trade in other countries, its share in FMCG remains insignificant and barely reaches 1%.
The question arises: is 1% growth growing? If it grows to 30%, then you can work! Therefore, I would not worry too much about online trade from the FMCG point of view. It is not for this channel.
The choice between stability and prospects
Distribution as a model offers more flexibility and control, which will be the determining factor for successful development in the coming years. Changes in the market are inevitable, and only those companies that are ready to move from old methods to automated distribution will be able to stay on the wave of growth and ensure long-term sustainability of the business.
Smartup is a tool that gives distributors not only control, but also the flexibility needed to succeed in today's conditions. Implementing this system allows you to focus on business development without losing efficiency at each stage of growth.
Thank you for your time and interesting conversation!
In the coming years, the Uzbek market is expecting important changes, and the main question is where the focus will shift: to retail or to B-C channels. Traditional retail and categories B and C retain their relevance and marginality, while retail attracts volumes, but remains low-profitable. The wholesale segment is gradually losing share, giving way to new formats. The greatest profit is provided by channels B-C, and this is where the main flow of sales will probably go.
For the future, I want to say - Retail will still remain an unprofitable channel! It will be volume-generating, but it will not seem profitable! I worked with many companies in the CIS. Companies that work with retail, where the share of sales can reach 70% - they say clearly, we have volume, but we have very low profitability! We left B-C because we thought it would die - it is not dying! There is a margin! There is fat! And when companies understand that it is very important to hold on to both retail and traditional retail, then they will have a future.
Where is the Uzbek market heading? It will change! But I don’t know where it will transform. Will it go to retail, will it go to the B-C channel? It is very important to look at where the marginality goes, not where the volumes go.
Development of retail and online trade
In Uzbekistan, unlike Europe, where the share of retail chains reaches 80%, traditional retail and bazaars occupy leading positions. Although retail and online channels will grow, high marginality will remain in traditional channels, such as linear retail. Despite the sharp growth of online trade in other countries, its share in FMCG remains insignificant and barely reaches 1%.
The question arises: is 1% growth growing? If it grows to 30%, then you can work! Therefore, I would not worry too much about online trade from the FMCG point of view. It is not for this channel.
The choice between stability and prospects
Distribution as a model offers more flexibility and control, which will be the determining factor for successful development in the coming years. Changes in the market are inevitable, and only those companies that are ready to move from old methods to automated distribution will be able to stay on the wave of growth and ensure long-term sustainability of the business.
Smartup is a tool that gives distributors not only control, but also the flexibility needed to succeed in today's conditions. Implementing this system allows you to focus on business development without losing efficiency at each stage of growth.
Thank you for your time and interesting conversation!
