Surviving in today´s market is not that difficult if dealers come together and stay united. A systematic approach will help dealers tide over the tough time, says Rajkumar Modi, Proprietor, Vishesh Enterprises. Excerpts from the interview.
Do you consider yourself a dealer or a stockist?
In the Mumbai region, there are no stockists as such. A stockist is the one who has warehouse and cement stocks. In Mumbai, the cost of real estate is so high that it is not viable to have a warehouse here. Instead, we take order from the contractor, book the cement quantities with the company and have it delivered to the consumer directly. We are more like sales promoters or distributors.
Where all do you supply cement?
We supply in the Mumbai region covering the entire city including Karjat, Kasara, Dahanu, Raigarh, etc. We sell cement to dealers, contractors, builders, big infrastructure projects, in both the trade and non-trade mode.
How much cement is dispatched by you and how much is traded in Mumbai?
We dispatch around 2500 MT of cement while in Mumbai, approximately 7 lakh MT of cement would be traded in a month.
What limits your distribution network to the Mumbai region?
We can sell only in the Mumbai region. If we have to sell outside Mumbai, let`s say Pune, then we can`t bill the client directly. So we have to send the material on the company bill. This is called non-trade dealing. In this non-trade mode, we can sell cement to large projects, to major contractors and builders, etc, outside Mumbai.
Is there a difference in the cost of trade and non-trade cement? How much is it?
Yes, there is difference in the two rates and there is lot of discussion in the market about it. The cost difference varies from brand to brand and also on market conditions. The difference in top brands of cement will be around Rs 25, while other local brands may have a gap of around Rs 40 – 50 in their trade and non-trade price. Even the excise duty on the trade and non-trade cement varies, which adds to the cost difference.
How is the cement market doing?
Markets are definitely on a downtrend and there are several reasons for it. One is that several projects are held up due to lack of clearances from the environment ministry. The clearance procedure is slow and cumbersome. A major issue facing us is shortage of sand. Sand supply is extremely low compared to its demand. How can any infrastructure growth or construction activity happen without sand? This is slowing down the projects drastically. Using crushed sand from mines too, is not a good option. One is that crushed sand does not meet the quality standards in most cases, also obtaining crushed sand from mines has a negative impact on the environment.
The government has introduced several checks and regulatory obstacles in the project clearance process. This is slowing down things as a huge amount of paperwork is required. Fund inflow too, is low. Builders had raised the cost of real estate so high that it went completely out of range for middle class consumers. The buyers have withdrawn and are now waiting for prices to come down. As a result, investors are reluctant to put up new projects. They are worried about finishing the ones that were initiated.
How can one survive in this tough market? Is expanding the product portfolio to include other construction material a good option?
No, adding new products to the construction sector will not help at all. If they can`t pay for the cement, then how will they pay for the steel and other products? The consumers, the network are the same. If we have to diversify , we should think of a different area altogether. This takes time and long- term planning. Instead, if we focus on our core business and do it systematically, we can survive in this market. We must adopt the cash and carry policy. If we are strict about our system and do not give material on credit, we will be able to come out of this. But for this, all dealers must come together and follow this strictly. Unfortunately, despite several attempts, we are not able to achieve strong unity amongst ourselves. This has to change. Apart from this, one must also be careful about giving too much material on credit which can be detrimental to the business in today`s market.
How do you select which brand to take distributorship of?
We look at the market demand for the brand and its monthly sale volumes, segment it caters to, the customer profile in terms of size and requirement Another important factor is the supply of the material. The company should be able to supply in all kinds of market conditions. Then, the reputation of the brand and the customer feedback matters the most.
Several projects are held up due to lack of clearances from the environment ministry. The clearance procedure is slow and cumbersome.
