Neighbourhood stores that sell us everything from salt to soaps are increasingly partnering with Reliance Industries’ JioMart to procure daily essentials. While orders placed through the JioMart Partner app are delivered quicker than the traditional distributors, shop owners are mainly attracted to its discounts which sometimes go as deep as 20-25 per cent.
With his deep pockets, Mukesh Ambani is bringing his tested blueprint of offering heavy discounts to change the retail distribution landscape in India. Reliance wants to serve India’s 13 million kirana stores that account for 80 per cent of the country’s $900 billion retail market.
Reliance’s aggressive entry into telecom led to a consolidation in the sector. But the company’s strategy to replicate this in B2B retail has already started to face opposition from traditional distributors who have been servicing every nook and corner of the country for several decades now.
Reliance has created antagonist out of lakhs of salesmen in the traditional trade, who are struggling to match prices offered by JioMart. The opposition is being led by The All India Consumer Products Distributors Federation or the AICPDF. It represents 4.5 lakh distributors who serve about five million kirana stores on behalf of FMCG giants like HUL, Reckitt, Nestle and Colgate-Palmolive.
The organisation has approached FMCG companies demanding a level playing field, saying traditional distributors must get products at the same prices as modern ones like JioMart, Udaan and Metro Cash & Carry.
It is not clear if FMCG companies are offering goods to likes of JioMart at differential rates but Dhairyashil Patil believes that the discounts are a function of intense cash burn by modern B2B companies. Last year, Reliance Retail raised $6.4 billion from outside investors.
FMCG firms are being questioned as to why the same flexibility is not being given to their existing authorised channel partners. If its demand for pricing-parity is not met, AICPDF said its members will stop supplying products that are being carried by JioMart and others. Not just this, they have vowed to not support FMCG companies with their new launches after January 1st.
The traditional distributor base is essential for new launches as they take the risk of testing the waters for the product. On their part, FMCG companies are engaging in dialogues with their distributors as upsetting them may not be the best way forward.
Even as Reliance pushes its own private label brands to neighbourhood shops using JioMart, it largely remains a intermediary for consumer goods companies in the B2B space.
Therefore, unlike in the case of Jio, where Reliance was free to set its own rates, here, the pricing power is decided by the likes of HUL and Nestle. Whether or not Reliance can disrupt the B2B grocery space rests on the shoulders of FMCG giants in the face of opposition from the vast traditional distributor-community, whose livelihoods are now being threatened by JioMart.
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