Every Salesman A King
Peddling household products door-to door? It's novel in India, and big money for Eureka Forbes.
By Helen Coster
Forbes -Asia
October 3, 2005
IT'S TEN O'CLOCK ON SUNDAY morning in Mumbai, and Suresh Goklaney is embarking on a round of sales calls for the Indian company Eureka Forbes. Wearing the signature red ties of its sales-people, Goklaney and two colleagues brave the monsoon rain to trek up six flights of stairs in a building on Malabar Hill, the city's upmarket residential area. Lugging a 13 -pound water purifier, they knock on each apartment door until they finally get invited inside.
It's an industrious sight, but even more so when you consider that Goklaney, 58, is the company's managing director. A longtime Indian brand manager, Goklaney goes on monthly sales calls in order to stay connected to the company's 5,300-person sales force. He has good reason for doing so. At Eureka Forbes, the salesman is king.
Eureka Forbes (unrelated to this magazine's owners) has an approach to sales that is well-worn in the West but is not so common in India. There ever Procter & Gamble relies on closet-size, mom-and-pop stores to sell its products. Eureka Forbes cuts out the middleman and instead uses a team of young salespeople to give in-house product demonstrations and convince consumers of a need that they didn't know they had. In its early days the company only sold vacuum cleaners. These days it has managed to persuade Indians to stop boiling their otherwise undrinkable tap water and instead use a now-ubiquitous water purifier known as "Aquaguard," which has a 75% market share.
While the new face of Indian capitalism may be Wipro and Infosys, Eureka Forbes has showed steady growth since its inception in 1982. It was a joint venture between Electrolux of Sweden and Forbes Gokak, in which India's giant Tata Group had a stake. Today Eureka Forbes stands out in Asia, an indigenous direct-sales company as $ 122 million in revenues. In 2001 Tata Group sold its share of the company to the Shapoorji Pallonji Group, and in January Electrolux did the same. Shapoorji Pallonji is run by billionaire Pallonji Mistry, India's sixth-richest man.
Within Eureka Forbes' tight culture salespeople (about 60 are women) are known as "Eurochamps." The frontline sales force averages age 26, and many are from poor families. New hires undergo three weeks of training, including sections on grooming, product demonstration and closing a sale. After six months or minimum sales of 60 units salespeople are given motorcycles to use for sales calls. Their salary is 60% commission based, with top talent earning up to 24,000 rupees (US $ 550) per month. Sales overhead may explain the company's modest 7.3% before-tax margin, which Pallonji evidently accepts.
Salespeople are made to feel like superstars. A stature of a salesman greets visitors in the company's Bangalore headquarters. Meetings begin with a singing of the "Euranthem," which sounds like theme song to a television sitcom and includes lyrics such as "We work so hard. We're always on our Aquaguard. Filtering all our worries away as we make our sure and steady way." Every morning employees receive a text message on their cell phone with an inspirational message, quotation or sales talking point.
Sounds hokey? Not to managing director Goklaney, who joined the company in 1987 after stints at Procter & Gamble and Johnson & Johnson, where he helped to bring Band-Aids and Vicks Cough Drops to India. Pallonji sent him to Harvard for an eight-week management program. Goklaney says the company is aiding India by giving struggling recruits a purposeful product line. "It's not about selling," Goklaney says. "We build a sustainable relationship with the customer by satisfying health, hygiene and safety needs."
That relationship may be threatened as multinationals set up shop in India. The Indian government has been loosening its restrictions on global retailers and had said it is likely to open the retail sector in phases. Initially it may allow foreign direct investment of up to 49%, through only in stores located outside of major cities. Later phases could allow foreign investors to have a majority stake and ultimately to be able to open stores anywhere. Fadi Farra, a senior manager in A.T. Kearney's consumer and retail industries practice, notes that neighborhood retailers have been trying to lobby the government to keep the market closed. But so far these efforts have been ineffective. Consequently, says Farra, local companies like Eureka Forbes must position themselves to compete or to be acquired. To compete, they need to be as efficient as possible in order to keep prices down if and when competitors move in. A $175 Aquaguard wouldn't sound so appealing next to a Brita Purifier from Wal-Mart at $30.
Yet expected real GDP per capita growth of 4% annually over the next five years in a country of 1.1 billion means a lot of customers to go around. "Retail is a good market to be in today," Farra says. "The consumer span is shifting from food to nonfood. The number of people buying televisions and vacuum cleaners is increasing".
Goklaney says that Eureka Forbes welcomes the influx of global players. The company is already working with two foreign companies to innovate in water purifiers.
Whether people end up buying Aquaguard from a giant store or a door-to door salesman, Goklaney's crew will stay close. After each sale a Eureka Forbes plumber installs the water purifier. Service technicians conduct periodic maintenance. Customers can get their water tested at 15 "Aquacheck" water labs throughout the country. "Our strongest point is to make and grow relationships," he says, "and that is not a replaceable commodity."
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