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Group 7
Table of Contents
ACKNOWLEDGEMENT 3
ABSTRACT 3
INTRODUCTION 4
Sales and Distribution: L’Oréal Group 7
Project Objective 4
Executive Summary 5
Methodology 5
About L'Oréal 5
L’Oreal India 7
Sales & Distribution Management 8
Product portfolio 8
Distribution channel of L’oreal in Ranchi 10
Sources of Conflict in Distribution Channel: 11
SalesForce Management 12
SalesForce Organization 12
Organizational Structure of L’Oréal 14
Selection of Salesforce 15
Training & Motivation of the SalesForce 16
Performance evaluation of sales personnel 18
Designing Sales Territories 19
Summary of Primary Research 20
ANALYSIS OF INDIAN MARKET 20
Visit from Area Sales Manager: 21
L’Oréal Invoice 22
Sales Target of L’Oréal 22
Sales Target & Inventory decisions 23
Investment & Profit Analysis 24
Recommendations 27
Conclusion 27
Appendix 28
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Sales and Distribution: L’Oréal Group 7
ACKNOWLEDGEMENT
With a deep sense of gratitude, we expressed our sincere thanks to our esteemed faculty,
Professor Shibashish Chakraborty, for this valuable opportunity undertake this project under his
effective supervision, encouragement, enlightenment, and cooperation. We are also grateful to Mr.
Rahul Kedia (dealer, Kamal, and Company) for his valuable inputs into this project and their constant
encouragement that was of great performance in completion of this project work. We highly
appreciate the time they could spare for us from their hectic schedule.
We are also thankful to all the faculty and staff members of IIM Ranchi for their full cooperation and
help during the project.
Our greatest thanks are to all who wished us success especially our parents and friends whose
support and care make us stay on the ground.
Group 7
ABSTRACT
Sales and Distribution form the core component for a company to earn revenue by means of selling
through various distribution channel before it finally reaches the customer. The main purpose of
this project is to understand the practical aspects of Sales and Distribution of one of the renowned
cosmetic brand, L’Oreal, in the city of Ranchi.
We have analyzed the global and national presence of L’Oreal to trace its expected market
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Sales and Distribution: L’Oréal Group 7
coverage in the city of Ranchi. The Salesforce Management of L’Oreal has been studied to
understand the Selection, Training and Performance Evaluation process of the company along with
the Distribution channel to find out how L’Oreal has established an uninterrupted and a stable
delivery channel of its products to the consumers in the city of Ranchi.
To understand better about the distributor channel of L’Oréal, we have met and analyzed the
distributor as well as the redistributor stockiest of L’Oréal who acts as a bridge between the
company and the market in making the products available to the customers and how they stand to
benefit from this distribution channel and their operational routes and also their profit
percentages.
INTRODUCTION
Project Objective
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Sales and Distribution: L’Oréal Group 7
Executive Summary
Background:
In this project, the sales and distribution network of L’Oreal products has been examined in
Ranchi. The flow of distribution network begins from the C & F Agent to distributors/wholesalers
and finally to the retailers. The distributors vary in a business where some serve to other wholesalers
(semi-wholesalers) particularly and some deal directly with the retailers. Taking an example of a
particular dealer Mr. Rahul Kedia of kamal & Company running a business in Upper Bazaar Ranchi
deals with around 40 active wholesalers in Ranchi area and Yash enterprises which serves 15
retailers directly in Ranchi area.
In this report, we have studied the structure of the sales force organization, territorial layouts and
the distributor business overall.
Methodology
In order to understand the product portfolio of L’Oréal, we visited modern trade stores like
Reliance Smart, Big Bazaar and also small retail stores in Main Road. L’Oréal has its own
professional salon in Ranchi called L’Oréal - The Shahi Empire. With the help of Salon owner,
we could contact Miss Nidhi who is responsible for the distribution of L’Oréal products in
Ranchi area. We interviewed Ms. Nidhi about the distribution network of Loreal products. Our
primary data was based on the information from Ms. Nidhi and secondary data was from
L’Oréal, India website, reports, and articles
About L'Oréal
L’Oréal established in 1994 is now in its 25th year of operations in India. It has 4 regional
offices in Mumbai, Delhi, Bangalore, and Kolkata respectively. It has 23 distribution centers
in India and products produced in the plant in Pune and Baddi is exported to countries like
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Sales and Distribution: L’Oréal Group 7
Bangladesh, Sri Lanka, and Nepal. It has its products available at point of sale in 750,000+
stores in India. Loreal has categorized its brands in four division; Consumer Products Division
which has mass consumer brands, Professional Products Division for salons, Active
Cosmetics for pharmacy and Loreal Luxe Division which has luxury products.
Their focus is on the production of products in hair care, skincare, hair color makeup and
perfume. The plant in Pune and Baddi is responsible for producing 85% of products for Indian
markets and remaining for exports. It has set up a research and innovation center in Mumbai
where it studies the skin types of Asian people and formulates the different type of cosmetics
suitable for different skin types. Loreal takes its corporate social responsibility very seriously
and thrives to make a contribution towards the society. They have launched many social
initiatives in India, one of them being Beautiful Beginnings program for training underprivileged
women in hairdressing and beauty care, Care project which focussed on safety, the
environment, child education, and health & hygiene, sustainable development in their
production plant in Pune and Baddi, etc.
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Sales and Distribution: L’Oréal Group 7
L’Oreal India
L’Oréal has been present in India since 1994 as a wholly-owned subsidiary of L’Oréal S.A.
For the sake of optimal catering to this market, the cosmetics Group has launched several brands
covering various product categories. In India, they are present in all distribution channels with 15
brands
Mass consumer brands: Garnier, L’Oréal Paris, and Maybelline New York
Luxury brands: Lancôme, Yves Saint Laurent, Kiehl’s, Ralph Lauren, Giorgio Armani, and Diesel
Professional brands: L’Oréal Professionnel, Matrix, Kérastase and Kéraskin Esthetics for salons
Pharmacy brands: Vichy and La Roche-Posay
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Sales and Distribution: L’Oréal Group 7
Out of the four divisions, the most profitable is Consumer Products division followed by
Professional Products Division. The channels where Loreal products are sold are general
stores, chemists, modern trade and cosmetics counter. Products like shampoos, hair color
and skincare products are mostly sold in general stores and chemists whereas makeup
products are mostly sold at cosmetic counters. Most of the consumer division products are
sold at general stores and it generates around 82% of Loreal’s revenue as compared to
modern trade stores. This is because the products are available at MRP at the general stores,
the customers have a personal relationship with store owners, these stores are at a short
distance from their homes and they can purchase the product over credit and pay later. More
than 50% of the consumption of any type of product produced by Loreal like hair care, hair
color, makeup, etc. is in urban areas and it's growing in rural areas. They have been able to
hold low prices with respect to their cosmetics division due to local production and raw
materials supply from the Pune plant that supplies the subcontinent with nearly 85% of its
needs.
Product portfolio
Loreal has a portfolio of 14 brands that are sold in Indian markets. The distribution of products
depends upon the type of stores and the product. The company has positioned itself as a
transformative beauty leader that upgrades the consumers’ beauty regimes with more
sophisticated, safe, qualitative and efficacious innovations.
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Sales and Distribution: L’Oréal Group 7
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Sales and Distribution: L’Oréal Group 7
The typical distribution network of Loreal in Ranchi that operates includes both C&F
agents (carrying and forwarding agent) and distributors as well.
This C&F agent is fully responsible for the safe handling, carrying and storage of the
goods and are engaged in the collection of payment cheques from the distributors.
L'Oréal brands are Carried and Forwarded by C&F agent, Vinaika warehouse campus
located in Sidroli, Jharkhand. The C&F agent forwards the brands to various distributors
in Ranchi.
There are two distributors of L’Oréal in Ranchi: 1. Kamal and Company
2. Yash Enterprises
1 Kamal and Company Near Upper Bazar, JJ Rd, Upper Bazar, Ranchi,
Jharkhand
2 Yash enterprises Shradhanand Rd, Deputy Para, Upper Bazar, Ranchi,
Jharkhand
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Sales and Distribution: L’Oréal Group 7
The distributors are distributing products to specific areas. They categorized Ranchi city
to Ranchi-1 and Ranchi-2 areas. Bijaya enterprises are catering to the area under Ranchi-
2 which covers Harmu, HSC, Hinoo, etc. It caters to an area with pin code 834002.
Yash enterprises and Kamal & Company catering to the area under Ranchi-1 in which it
covers Kantatoli to Mainroad, cater to an area with Pincode 834001 and Kanke road. In
Ranchi, around 15 L’Oréal Professional Salons, i.e. these professionals use the L'Oréal
brands officially in their salon can be found as well.
Logistics Involved:
Along with international logistics and industrial logistics teams, the sales logistics teams
manage demand, develop services for the group’s commercial partners and supply the
retail outlets.
The sales logistics team does research work for digital consumers, supply chain sensing,
demand shaping, and revenue management, market-driven networks, accelerating
innovation through open design networks, the evolution of predictive analytics, emerging
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Sales and Distribution: L’Oréal Group 7
business intelligence solutions, and technologies to improve safe and secure product
delivery.
Listed below are the key priorities of supply chain management:
SalesForce Management
SalesForce Organization
The right sales force structure that will align the sales with the company’s objectives is
very important for any organization. The first step of creating a sales force organization
starts with allocating the resources among the sales force and managing them efficiently
to meet sales and marketing goals. An effective sales force organization will be able to
provide not only account and geographic coverage but will also help in minimizing the
wastage of resources and time which will eventually lead to a greater probability of
attaining sales quotas.
L’Oréal has salesforce organization which is driven by its product category division. A
separate distribution channel and a dedicated sales force are established for each
product category division. A cross-functional sales force structure encompassing its
various brands for each product category division.
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Sales and Distribution: L’Oréal Group 7
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Sales and Distribution: L’Oréal Group 7
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Sales and Distribution: L’Oréal Group 7
Regional Sales
Manager
Area Sales
Manager
Indirect
Wholesalers Direct Retailers
Retailers
Selection of Salesforce
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Sales and Distribution: L’Oréal Group 7
1. Product Knowledge
2. Customer Knowledge
3. Competitive Knowledge
4. Selling Skills
5. Company Knowledge
After the training needs are identified, the next thing is to design and then execute a
training program. ACMEE framework used for training of the salesforce is represented as
below:
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Sales and Distribution: L’Oréal Group 7
Execution
Aims Content Methods
(Who, When, Where, Evaluation
(Why?) (What?) (How?)
What?)
Aims (Why is the training needed?) – The objective of the training is the first decision
to be made.
Content (What should be the content of the training?) – The content of the training
program will vary for new trainees from those of experienced salespersons.
Methods (How will the sales training conducted?) – There are numerous methods
that are usually adopted by L’Oréal such as classroom training, web-based training or on-
the-job training.
Execution – In this phase, the following decisions are taken: When to conduct the
training? Where to conduct the training? Who will conduct the training? Who will be the
trainees? What should be the budget for the training?
Evaluation – In the last phase involves measuring the effectiveness of the training
program. The actual outcomes of the training are measured against the expected
outcomes to evaluate whether the investment made in training was worthwhile or not.
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Sales and Distribution: L’Oréal Group 7
In order to incentivize the salesforce for their performance and motivate them by
rewarding their good performance, frequent performance evaluation of sales personnel
is important. It also helps in identifying the training needs of the sales force. It is also a
way to identify and weed out unproductive resources. Usually, the performance
evaluation is tied to sales quotas of individuals and they are incentivized based on the
targets achieved by them. Most salespersons’ performance evaluations are conducted
by the field sales manager who supervises the salespersons.
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Sales and Distribution: L’Oréal Group 7
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Sales and Distribution: L’Oréal Group 7
L’Oréal’s success in the cosmetic industry is due not only to their high quality but also to the
corporation’s marketing efforts to make sure their various brands have a strong market
presence. To make its presence feel in different parts of the India L’Oréal has established an
efficient distribution network that caters to the customers as per the need and demand which
also depends on the customer segmentation depending upon the purchasing behavior and
power. As we know the brand loyalty of L’Oréal is very high and hence L’Oréal follows a pull
strategy. Customers of L’Oréal goes directly to the outlets and buy the products.
Garnier being an important brand of L’Oréal in both hair care and skincare is available all-
round the globe easily. In the Indian market, the hair care products of Garnier like “Garnier
Fructis”, “ultra doux” etc. are available in both organized and unorganized retail shops in
India. The high-end skincare products like “Nutrition site” are available only in selected retail
outlets in the country. In India Garnier manufactures its products in Pune whereas it’s
registered office is in Mumbai. To popularize its product line L’Oréal has occupied brand
corners in many big malls and retail outlets in which Garnier products get a major chunk.
L’Oréal has tie-ups with many big beauty salons and parlors who can promote and sell its
products. Money-spinning mass-market brands such as Garnier are being pushed hard in
India, where the company estimates there is a market of 50 million. Garnier products are
easily available for sale on many websites in India.
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Sales and Distribution: L’Oréal Group 7
Agenda: Knowledge about existing products, introducing new products, understanding the
demand and feedback of products in the market
Performance Parameter:
Growth in sales over the past period, increase in no. of retailers keeping the SKUs
Coverage:
Wholesalers
Redistributors
Types of products:
Make-up
Skin Care
Hair Care
Main Competitors:
Haircare –
Tresemme and Dove by Unilever, Head & Shoulders and Pantene by P & G
Make-up –
Skin Care –
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Sales and Distribution: L’Oréal Group 7
L’Oréal Invoice
L’Oréal is a very responsible brand which beliefs in maintaining the highest accounting
standards and hence provides invoices to all the suppliers that have registered with them,
they also ensure that their distributors follow the same standards and provide well-detailed
invoices to their customers. My Invoice Portal is required to be updated on a monthly basis.
The sales target given by L’Oréal to its distributors is Rs. 60,00,000 per month which has
increased over the years as a result of the increased penetration of L’Oréal in Tier 2 and Tier
3 cities. L’Oréal has enlarged the market coverage of each distributor in order to meet the
demand.
Stock Inventory
The stock inventory is replenished every 6 days.
Credit Period
The credit period provided is 12 days which is twice the time provided for managing the
inventories.
Margin
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Sales and Distribution: L’Oréal Group 7
The margin varies according to the product but on average, it is 3% on the products delivered
for distribution.
Savings
The savings (ROI) for a distributor ranges between 2.5-3.5% on the goods sold, hence selling
more volume is the aim of each distributor since higher volumes would lead to higher profits.
Loan
No loan has been taken as a result no interest is paid on the business operations of the firm.
Expenses
The sales plan is different depending on the products sold, the target market which is the
potential market of the distributor where the sales would be made and the past performance,
if a distributor performed very well in the last year then the target is increased and better
inventory terms are negotiated in such cases.
Trade promotions including discounts, contests, sweepstakes, and coupons run round the year.
Incentives are provided to the salespersons based on the sales targets.
Competitions are organized for the distributors wherein the top performers are awarded and are
recognized for their efforts.
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Sales and Distribution: L’Oréal Group 7
Targets given
Targets Cost (Rs.)
Sales Target (year) 72000000
Sales target (month) 60,00,000
Inventory period (in days) 6
Credit period (in days) 12
Working capital bloc (in days) 18
Inventory terms
Particulars Cost (Rs.)
target for a month 60,00,000
1 day 200000
6 days 1200000
Inventory holding 1200000
Credit terms
Particulars Cost (Rs.)
Market credit period (days) 12
Credit holding 2400000
Desired investment by L’Oréal 3600000
based on the credit & inventory holding
Owner's initial investment 20000000
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Sales and Distribution: L’Oréal Group 7
Operating Expenses
Labour expenses:
5 salesperson 25000 1500000
1 manager 50000 600000
1 computer operator 20000 240000
1 shop floor representative 30000 360000
2700000
EBIT 3060000
PAT 2203200
PAT Margin 3.06%
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Sales and Distribution: L’Oréal Group 7
Ratios
Particulars Rs.
Initial Investment 20000000
ROE 11.02%
ROI 31.47%
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Sales and Distribution: L’Oréal Group 7
Recommendations
L’Oréal does not extend a credit line to the distributors whereas the distributors are
providing credit to the retailers which creates stress for the distributors, therefore we
recommend for L’Oréal to extend credit to their distributors.
L’Oréal should do not have a reward or incentive scheme for sales achievement if
provided would motivate the sales force to attain more sales thus increasing revenue
for the company
The sales margin passed on to the distributors and retailers is very less as of now and
the distributors feel if there is an increase in this margin there might be an increase in
sales volume.
Conclusion
Conquering new markets is at the heart of L’Oréal’s expansion strategy and to achieve this they
require a strong Sales & Distribution channel. In the City of Ranchi, the number of distributors is
pretty less, having said that these distributors cater to the needs of most of the retailers and
there is no channel conflict as such between these distributors. The Distribution channels are very
well coordinated and the penetration level in Ranchi seems to be decently achieved however
there can be more distributors in order to increase the sales volume.
Overall, L’Oréal’s Sales & Distribution in Ranchi seems to be well established. The training and
selection of Salesforce is very well regulated by the distributors business practices and are
already trained owing to the long time in this business, citing which L’Oreal should adopt more
training and selection methods for its Salesforce in future if it decides to increase the number of
distributors and expand their business in Jharkhand with the state propelled to accommodate
more sales opportunities in future.
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Sales and Distribution: L’Oréal Group 7
Appendix
5. What are your turnovers and how many you order it on a monthly basis? Who
bears the cost of transportation to your godown?
7. What is your credit policy? How much your total turnover stock turnovers have
is in credit?
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Sales and Distribution: L’Oréal Group 7
Current credit policy is 12 days. But for some retailer, it is customized on the basis of
past performance and business relations.
8. Does the company has laid any terms and conditions for being a distributor (any
security)? Any guarantee on returns in terms of profit?
No, the company has not laid any terms and conditions for being a distributor. No, we
are not responsible for providing any guarantee on returns in terms of profit.
9. What is the safety stock which you carry? How many days do goods to travel to
your warehouse from the day you order?
Safety stock is 5 days volume of the monthly turnover.
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Sales and Distribution: L’Oréal Group 7
13. How frequently does the ASM visit your warehouse? How many sales officer
visits?
ASM visits once in a month to my office whereas the Sales Officer visit once in a week
to my offices.
14. What all are the performance parameters for training and evaluating you and
your sales team?
Currently, the performance parameters are only sales and efficiency to do the given
job. For sales boys it's the number of outlets covered and volume sold.
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