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> "As Reckitt's distributor, I used to be like a prince in the market," said Shah. "Now the buyer tells me, 'See how much you've been ripping us off!'" > "We w

by Andrex 5y ago

> "As Reckitt's distributor, I used to be like a prince in the market," said Shah. "Now the buyer tells me, 'See how much you've been ripping us off!'" > "We will employ guerrilla tactics," said Dhairyashil Patil, president of the All India Consumer Products Distributors Federation, which represents 400,000 agents of local and foreign consumer firms. "We will continue to agitate," he told Reuters, "we want (consumer goods) companies to realise our value." > Back in Sangli, traditional distributors said they have at times chased down Reliance vehicles and confronted drivers, alleging unauthorised deliveries. It's difficult to have sympathy for the middle-men skimming 5-10% in this story, especially with excerpts like these.

crooked-v 5y ago
The article talks a lot about Reliance specifically, but the events described just sound like modern ordering and distribution methods coming into the picture. Of course door-to-door salesmen are going to be displaced by efficient direct ordering, the same way as has happened literally everywhere else as technology has advanced.
blackoil 5y ago
Distributors don't have such high margin on FMCG, maybe the whole chain has between company and retailer. I would not be surprised if Reliance is dumping by treating all logistics cost as 0 to get marketshare.
shubb 5y ago
It is difficult to understand the value added by these 'sales' distributors, but I am not sure excessive profits explain the 5-10% price difference, because the article also says these middle men make 2-3% - that's an unexplained 12%. The price difference may be explained by different prices at the manufacturer due to different market power - supermarkets have forced the prices they pay down everywhere by being 'bigger than the manufacturer'. But it may also be Reliance cross subsidizing from its retail business - selling at a loss in order to force rivals out of the market. That would be an amazing play because they can destroy the existing distribution channel, then replace the small shops at the end of it in a few years by rolling out their own small stores with very low prices and while increasing the wholesale price they now control so the family owned small stores can't compete. This is a big 'problem' in the west too, where venture funded 'startups' can often out compete small scale traditional rivals in price temporarily by providing goods to the market at much less than cost, burning investor money until the rival way of doing things is broken, then jack the prices back up and reap the profits as a local monopoly. I say problem because I'm not sure if in the end it is good or bad. Bigger market players have options to destroy smaller players is a tale as old as time. Local monopolies are bad though, and I think government needs to take a stronger role in regulating these like they would a larger scale monopoly.
- AvocadoPanic 5y ago
  In the end it's very generic. All the retail and dining options begin to look the same everywhere. There's very little actual expertise or knowledge left as everything comes down from corporate and there's no no sign of knowledge or expertise there. Much of the food isn't cooked as often as it's reheated and assembled. Also the local mercantile class gets hollowed out.
  - lotsofpulp 5y ago
    > Much of the food isn't cooked as often as it's reheated and assembled. Why would this be a function of large business versus small businesses? It seems like a function of the food’s sale price.
- pkphilip 5y ago
  A typical retail store - especially a mom and pop store, will only be able to buy limited quantities of products. For instance, 50 packs of biscuits etc.. these sorts of volumes are too small for a manufacturer to ship directly to retail establishments because transport logistics will add a huge cost to each such shipment. Consider, for example, that a shop in Bangalore needs to buy 50 packets of biscuits for sale each week from a manufacturer in Pune. Each such shipment will cost at least a few 100 rupees for transport from Pune to Bangalore once a week. This will push up prices a LOT. The way around is for the manufacturer to have a relationship with a distributor in Bangalore and they will ship several tonnes of biscuit packets (1000s of packets) once every couple of weeks from Pune to Bangalore. This is much cheaper from a logistics standpoint. So having distributors reduces the cost overall and distributors also take back expired products, handle returns etc.
  - froh 5y ago
    In some countries retailer's cooperatives are the backbones of many mom and pop stores. They are large towards the manufacturer and are de facto non profits for the co-owner-shareholder co-op member shops, large and small. EDEKA is a large German one. https://en.m.wikipedia.org/wiki/Retailers%27_cooperative https://en.m.wikipedia.org/wiki/Retailers%27_cooperative
pkphilip 5y ago
The problem is not with these salesmen. With Reliance becoming the single point aggregator for all products sold from these 450,000+ stores, Reliance also becomes the single point of contact for any manufacturer wanting to distribute their products via these stores. If not a single point, it will at least bring down the number of institutional distributors to just 2 or 3 major distributors. That presents huge leverage for Reliance and they will be able to dictate purchase prices from manufacturers and also pricing/credit terms which will be extremely one-sided in favour of Reliance. This will be extremely anti-competitive and will be a death knell to many companies. This is similar to Amazon/Apple getting monopoly on music/books/video etc.
- jeswin 5y ago
  It's good for the 12 million kirana stores in India, who are concerned about Amazon, Walmart's FlipKart, BigBasket, Dunzo et al eating their business - which is happening already in metros. Reliance is bringing these stores into the game (in which, so far they've had no say) by working with them for order fulfilment. > This will be extremely anti-competitive and will be a death knell to many companies. How is it anti-competitive? A more efficient process might well be the death knell for many companies, but that doesn't mean it's anti-competitive. Add: I think you meant Reliance is going to squeeze the manufacturers - which puts them out of business. What would Reliance gain from it? If they want to be a successful middleman, their best bet is to make both sides happy.
  - kamaal 5y ago
    >>by working with them for order fulfilment. Actually most people's time is cheap, so eventually people won't be ok with paying delivery fees, but just walking up to the local super market and buying things from there, so the real fear here the Kiranas will be out of business soon. >>How is it anti-competitive? A more efficient process might well be the death knell for many companies, but that doesn't mean it's anti-competitive. I think it means they are worried it will disrupt the status quo in a way they don't like, that's it.
    - 5y ago
kamaal 5y ago
>>It's difficult to have sympathy for the middle-men skimming 5-10% in this story, especially with excerpts like these. The middle men nexus is so deep in the Indian society it can be hard for westerners to even conceive just how bad it is. There is a super market near my home called DMart, the local retailers just buy from there and sell things for 30% profit in their shops, of course the local residents eventually realize they are being ripped off, and start buying from the super market. So the local retailers bribe the managers in the super market to ensure the managers stand at the checkout registers and ensure people don't buy more than a few things(like soaps, flour etc) this creates a situation where, while the public can buy a few things from the super market they can never get enough, so eventually they are forced to go to the local retailers and buy for 30% extra. Want to rent your home? or are you looking for a rented flat? all the best approaching the land lord directly. If you do some how skip the local 'brokers'(slang for middle men), the very next day they arrive with the local mafia and extort at-least a month of rent from you. This middle men nexus extends for everything, everything from driving licenses, to property registration to passports. Though passports are little bit less of a trouble these days. Earlier the only way to get a passport application form was a middle man, they quite literally controlled who could get a passport, imagine that!! The all pervasive middle men stubbornly refuse to go. On of the big things preventing India from taking the next step is the endless middle-men/reseller attitude. The way India makes its gdp is by selling a bag of chips through 10 middle men, each takes some percentage in cut. So while the gdp numbers look attractive, things only keep getting worse on the ground. It also prevents the country from moving to the next logical step in the growth chain- Being a Makers economy.
- maven29 5y ago
  Talking in general, It's just that people value walkability and just a couple of loss leaders in a distant supermarket may not be sufficient incentive to get there by larger vehicles. Two-wheelers don't make sense here. You really need to weigh up the travel and opportinuty costs. Super markets might work in dense urbanized areas, but not everywhere. Certainly not when you consider the cost in absolute terms against the income levels. Maybe you'd call it a debt-trap or even stockholm syndrome but these folks will sell to you on credit and even deliver to you. This is the hub-and-spoke that actually works. These are not your faceless cashiers pointing you at a shelf. The logistics is also a real value-add and people actually take this into account, it is not something they do out of ignorance.
Aeolun 5y ago
Why would you not have sympathy? Nobody was hurt by this. Consumers still paid the same prices. Now more of the money goes to the shopkeepers (and presumably reliance, which absolutely doesn’t need it).
- lotsofpulp 5y ago
  > Consumers still paid the same prices. Source? In the US, retail businesses compete heavily on price. If one shopkeeper pays too much for their supply, then their competitor will price lower and sell more. There is a reason why all big retail companies have tiny low single digit profit margins in the US. If they don not keep up with advancements in the marketplace and offer competitive pricing, they go out of business. I do not see why the same would not happen in India.

by Andrex 5y ago

crooked-v 5y ago

The article talks a lot about Reliance specifically, but the events described just sound like modern ordering and distribution methods coming into the picture. Of course door-to-door salesmen are going to be displaced by efficient direct ordering, the same way as has happened literally everywhere else as technology has advanced.

blackoil 5y ago

Distributors don't have such high margin on FMCG, maybe the whole chain has between company and retailer. I would not be surprised if Reliance is dumping by treating all logistics cost as 0 to get marketshare.

shubb 5y ago

It is difficult to understand the value added by these 'sales' distributors, but I am not sure excessive profits explain the 5-10% price difference, because the article also says these middle men make 2-3% - that's an unexplained 12%. The price difference may be explained by different prices at the manufacturer due to different market power - supermarkets have forced the prices they pay down everywhere by being 'bigger than the manufacturer'. But it may also be Reliance cross subsidizing from its retail business - selling at a loss in order to force rivals out of the market. That would be an amazing play because they can destroy the existing distribution channel, then replace the small shops at the end of it in a few years by rolling out their own small stores with very low prices and while increasing the wholesale price they now control so the family owned small stores can't compete. This is a big 'problem' in the west too, where venture funded 'startups' can often out compete small scale traditional rivals in price temporarily by providing goods to the market at much less than cost, burning investor money until the rival way of doing things is broken, then jack the prices back up and reap the profits as a local monopoly. I say problem because I'm not sure if in the end it is good or bad. Bigger market players have options to destroy smaller players is a tale as old as time. Local monopolies are bad though, and I think government needs to take a stronger role in regulating these like they would a larger scale monopoly.

AvocadoPanic 5y ago
In the end it's very generic. All the retail and dining options begin to look the same everywhere. There's very little actual expertise or knowledge left as everything comes down from corporate and there's no no sign of knowledge or expertise there. Much of the food isn't cooked as often as it's reheated and assembled. Also the local mercantile class gets hollowed out.
- lotsofpulp 5y ago
  > Much of the food isn't cooked as often as it's reheated and assembled. Why would this be a function of large business versus small businesses? It seems like a function of the food’s sale price.
pkphilip 5y ago
A typical retail store - especially a mom and pop store, will only be able to buy limited quantities of products. For instance, 50 packs of biscuits etc.. these sorts of volumes are too small for a manufacturer to ship directly to retail establishments because transport logistics will add a huge cost to each such shipment. Consider, for example, that a shop in Bangalore needs to buy 50 packets of biscuits for sale each week from a manufacturer in Pune. Each such shipment will cost at least a few 100 rupees for transport from Pune to Bangalore once a week. This will push up prices a LOT. The way around is for the manufacturer to have a relationship with a distributor in Bangalore and they will ship several tonnes of biscuit packets (1000s of packets) once every couple of weeks from Pune to Bangalore. This is much cheaper from a logistics standpoint. So having distributors reduces the cost overall and distributors also take back expired products, handle returns etc.
- froh 5y ago
  In some countries retailer's cooperatives are the backbones of many mom and pop stores. They are large towards the manufacturer and are de facto non profits for the co-owner-shareholder co-op member shops, large and small. EDEKA is a large German one. https://en.m.wikipedia.org/wiki/Retailers%27_cooperative https://en.m.wikipedia.org/wiki/Retailers%27_cooperative

pkphilip 5y ago

The problem is not with these salesmen. With Reliance becoming the single point aggregator for all products sold from these 450,000+ stores, Reliance also becomes the single point of contact for any manufacturer wanting to distribute their products via these stores. If not a single point, it will at least bring down the number of institutional distributors to just 2 or 3 major distributors. That presents huge leverage for Reliance and they will be able to dictate purchase prices from manufacturers and also pricing/credit terms which will be extremely one-sided in favour of Reliance. This will be extremely anti-competitive and will be a death knell to many companies. This is similar to Amazon/Apple getting monopoly on music/books/video etc.

jeswin 5y ago
It's good for the 12 million kirana stores in India, who are concerned about Amazon, Walmart's FlipKart, BigBasket, Dunzo et al eating their business - which is happening already in metros. Reliance is bringing these stores into the game (in which, so far they've had no say) by working with them for order fulfilment. > This will be extremely anti-competitive and will be a death knell to many companies. How is it anti-competitive? A more efficient process might well be the death knell for many companies, but that doesn't mean it's anti-competitive. Add: I think you meant Reliance is going to squeeze the manufacturers - which puts them out of business. What would Reliance gain from it? If they want to be a successful middleman, their best bet is to make both sides happy.
- kamaal 5y ago
  >>by working with them for order fulfilment. Actually most people's time is cheap, so eventually people won't be ok with paying delivery fees, but just walking up to the local super market and buying things from there, so the real fear here the Kiranas will be out of business soon. >>How is it anti-competitive? A more efficient process might well be the death knell for many companies, but that doesn't mean it's anti-competitive. I think it means they are worried it will disrupt the status quo in a way they don't like, that's it.
  - 5y ago

kamaal 5y ago

>>It's difficult to have sympathy for the middle-men skimming 5-10% in this story, especially with excerpts like these. The middle men nexus is so deep in the Indian society it can be hard for westerners to even conceive just how bad it is. There is a super market near my home called DMart, the local retailers just buy from there and sell things for 30% profit in their shops, of course the local residents eventually realize they are being ripped off, and start buying from the super market. So the local retailers bribe the managers in the super market to ensure the managers stand at the checkout registers and ensure people don't buy more than a few things(like soaps, flour etc) this creates a situation where, while the public can buy a few things from the super market they can never get enough, so eventually they are forced to go to the local retailers and buy for 30% extra. Want to rent your home? or are you looking for a rented flat? all the best approaching the land lord directly. If you do some how skip the local 'brokers'(slang for middle men), the very next day they arrive with the local mafia and extort at-least a month of rent from you. This middle men nexus extends for everything, everything from driving licenses, to property registration to passports. Though passports are little bit less of a trouble these days. Earlier the only way to get a passport application form was a middle man, they quite literally controlled who could get a passport, imagine that!! The all pervasive middle men stubbornly refuse to go. On of the big things preventing India from taking the next step is the endless middle-men/reseller attitude. The way India makes its gdp is by selling a bag of chips through 10 middle men, each takes some percentage in cut. So while the gdp numbers look attractive, things only keep getting worse on the ground. It also prevents the country from moving to the next logical step in the growth chain- Being a Makers economy.

maven29 5y ago
Talking in general, It's just that people value walkability and just a couple of loss leaders in a distant supermarket may not be sufficient incentive to get there by larger vehicles. Two-wheelers don't make sense here. You really need to weigh up the travel and opportinuty costs. Super markets might work in dense urbanized areas, but not everywhere. Certainly not when you consider the cost in absolute terms against the income levels. Maybe you'd call it a debt-trap or even stockholm syndrome but these folks will sell to you on credit and even deliver to you. This is the hub-and-spoke that actually works. These are not your faceless cashiers pointing you at a shelf. The logistics is also a real value-add and people actually take this into account, it is not something they do out of ignorance.

Aeolun 5y ago

Why would you not have sympathy? Nobody was hurt by this. Consumers still paid the same prices. Now more of the money goes to the shopkeepers (and presumably reliance, which absolutely doesn’t need it).

lotsofpulp 5y ago
> Consumers still paid the same prices. Source? In the US, retail businesses compete heavily on price. If one shopkeeper pays too much for their supply, then their competitor will price lower and sell more. There is a reason why all big retail companies have tiny low single digit profit margins in the US. If they don not keep up with advancements in the marketplace and offer competitive pricing, they go out of business. I do not see why the same would not happen in India.