Princes to paupers: India’s salesmen face ruin as Ambani targets mom-and-pop stores

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For eight days, home furnishings salesman Vipresh Shah was unable to sell a single packet of Dettol soap to shopkeepers who had bought from him since he took over the family business as a teenager 14 years ago.

Shah is the official distributor of British Reckitt Benckiser in Withe, near the town of Sangli, about 200 miles south of Mumbai. But he said that once-loyal customers are now pointing to an app – JioMart Partner – on their smartphones that shows prices up to 15% lower, rather than placing orders.

A worker inspects boxes of Reckitt’s Dettol hand detergent at a distributor’s warehouse before loading them onto a truck for delivery to retailers in Mumbai, India on September 17, 2021 (Reuters)

“As a distributor of Reckitt, I was like a prince in the market,” Shah said. “Now the buyer says to me:“ Look how much you ripped us off! “”

The 31-year-old said he lost $ 2,000 of his own money as he cut grocery prices to match those of JioMart, an app released by Reliance Industries billionaire Mukesh Ambani in his quest to revolutionize retail in India.

Up and down India, in places like the small town of Vita, family stores – which account for four-fifths of the $ 900 billion retail market – over $ 700 billion – are increasingly turning to JioMart to stock up on foreign and domestic goods. brands.

Just as Ambani, India’s richest man, disrupted the country’s telecommunications industry, the tycoon is set to shake up the retail industry by battling US e-commerce giants Amazon (AMZN.O) and Walmart Inc (WMT.N) while expanding rapidly. in India.

The country has about 450,000 traditional distributors with legions of merchants who serve every corner of the vast country, including 600,000 villages. They usually earn 3-5% of grocery prices and usually take orders physically once a week, delivering them to retailers within a few days.

But Reliance’s model is changing that supply chain: family-owned stores known as kirana can order items through JioMart Partner with the promised delivery within 24 hours. Reliance also offers ordering training, loans and free product samples for kiranas affiliate customers.

A consumer goods store owner displays the Reliance JioMart Partner app on his mobile phone, which he uses to order supplies for his store in Sangli, western Maharashtra state, India, October 21, 2021 (Reuters)

This means that, according to interviews with sellers, 20 distributors and a group of traders with members all over India.

Many of the distributors contacted by Reuters said they had cut their headcount or vehicle fleet as their sales from delivery agents fell 20-25% over the past year as store owners became partners with Reliance.

At Vita, salesman Shah said he had to lay off half of his four employees. He fears that the 50-year-old family business will not last longer than the next six months.

‘Guerrilla tactics’

The scale and speed of the destruction caused tensions between the traditional distributors and Reliance, which in some cases escalated into physical confrontation.

A man speaks on his cell phone as he sits on bags of consumer goods inside a JioMart merchandise truck for retailers at a crowded market in Sangli, western Maharashtra state, India, October 22, 2021 (Reuters)

In the state of Maharashtra in the west, where Vita is located, and in Tamil Nadu in the south, traditional vendors have organized a blockade of some of JioMart’s delivery vehicles.

“We will use guerrilla tactics,” said Dhairyashil Patil, president of the All India Federation of Consumer Products Distributors, which represents 400,000 agents of local and foreign consumer firms. “We will continue to campaign,” he told Reuters. “We want consumer goods companies to recognize our value.”

Reliance still doesn’t stop at promoting its new Ambani retailer, which was first announced in 2018.

He raised funds last year from major investors including Silver Lake Partners and KKR & Co Inc (KKR.N) as he seeks to integrate family-owned stores into what he touts as a more inclusive approach to digital commerce. The push is widely seen as a counter to companies like Amazon, which for years have clashed – and denied – claims in India of favoring select big sellers over smaller retailers.

A source close to Reliance said the company intends to continue expanding its business with family-owned stores. He believes his model can coexist with the traditional approach in one of the world’s largest retail markets, the man said, declining to give his name for lack of authority to disclose the company’s plans.

A consumer goods store owner demonstrates a Reliance JioMart cash register that he uses to order supplies for his store in Sangli, western Maharashtra state, India, October 21, 2021 (Reuters)

In 2018, Ambani stated that he ultimately wants to connect 30 million small merchants to the Reliance network. It currently has 300,000 channel partners in 150 cities ordering consumer goods from Reliance, but the transformation will be amplified many times over if the goal of adding 10 million partner stores is met by 2024.

Reliance did not respond to requests for comment on this article.

Colgate declined to comment, while Reckitt said its customers and distributors are an integral part of its business, but would not comment on its relationship with them. Unilever’s Indian subsidiary, Hindustan Unilever, (HLL.NS) did not respond to a request for comment.

Channel which?

According to industry experts, traditional distribution methods remain important for consumer goods manufacturers even in the face of volatility.

Himanshu Bajaj, former head of consumer and retail consultancy firm Kearney in Asia, said executives from consumer firms he met in September expressed concern about Reliance’s strategy disrupting the traditional distribution chain.

“Companies don’t want to kill their own distributors. The worry is real, ”he said.

Asked about the Reliance model and distributor concerns, Sunil D’Souza, CEO of India’s Tata Consumer Products (TACN.NS), told Reuters in an interview last month that he “cannot afford to sit back and ignore” any major channel. distribution. but Tata tried to minimize conflict and find a balance.

Jefferies calculated in March that kiranas will “steadily increase purchasing share” from Reliance “at the expense of traditional distributors.” Jefferies estimates that such Reliance sales could grow to $ 10.4 billion by 2025 from $ 200 million in 2021-22.

One executive who works for rival Reliance said Ambani “spread his wings very quickly” in serving the kiran and already has an edge in price negotiations thanks to long-standing relationships with consumer goods manufacturers who, for years, viewed Reliance and its 1,100 supermarkets as large client.

With Kiran partners, Ambani adds another important vertical. “Brands can’t afford to restrict Reliance, it’s just their purchasing power,” said the executive, who declined to be named because he is not authorized to communicate with the media.

All about prices

Many kirans are cramped stalls in aging buildings, with branded goods lined up on wooden shelves and small bags hanging from the ceiling. These retailers use Reliance as a means of increasing profits.

Shivkumar Singh, a consumer goods store owner, serves a shopper at his store in Dharavi, Mumbai, in the western state of Maharashtra, India, November 18, 2021 (Reuters)

When Reuters accompanied Anuruddha Mishra, a Colgate sales agent, on a production trip to the Dharavi district of Mumbai, he struggled to convince Shivkumar Singh, a 50-year-old owner of a decrepit store, to go shopping. Dharavi is home to 1 million people and is considered one of the largest slums in the world.

Singh opened his JioMart app and showed much lower prices. “How can I order from traditional distributors?” he said. “The price difference is huge. Now I order mostly from Reliance. “

A Reuters survey of purchase transactions on the JioMart Partner app found that a retailer in Dharavi can wholesale a two-tube combination of Colgate MaxFresh toothpaste for about Rs 115 ($ 1.55). Seller Mishra’s distribution company gets it for Rs 145, and his last offer to a retailer in Dharavi was Rs 154 – still more than a third higher than Reliance’s price.

Back in Sangli, traditional distributors said they had occasionally chased Reliance vehicles and confronted drivers, reporting unauthorized shipments.

Sunil Pujari, who works in the city for one delivery agent JioMart, said his supervisors had warned him to alert them immediately if angry distributors stopped vehicles.

But things are going briskly.

“The prices offered by JioMart cannot be matched by anyone,” he said, making another delivery in a crowded market.



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