This refers to the ongoing tussle taking place between organised retail chains and FMCG firms (“FMCG firms have the edge in battle with retailers”, December 21) over margins. It is not surprising that organised retailers are not getting the lower prices they are fighting for. They comprise just 6-8 per cent of total sales and so, if FMCG firms are to give them better margins than they do to other outlets, these will rise in revolt. So, why will FMCG firms jeopardise 92 per cent of their sales in order to give a better deal to firms which sell just 8 per cent of their produce?
A similar issue came up many years ago during the e-commerce boom. Customers came to e-commerce sites looking for fantastic deals — the e-commerce firms, they reckoned, didn’t have costly rentals and sales staff to pay and so should have vastly lower prices. When they found the sites offered prices that were not lower than those offered by the bricks-and-mortar shops, they quickly went back to the bricks-and-mortar ones. The reason for this was that durables’ producers couldn’t afford to offer better margins to e-commerce firms since the traditional outlets threatened to desert them if they did so.
The only way in which organised retail chains will get better prices is they develop store brands of their own.
Sujit Gupta, New Delhi