FMCG companies are now directly supplying to modern trade giants and online retailers as they buy in large volumes, further eating into offline FMCG distributors' margins and supplier power
“This is my second visit to your shop and you still haven’t got me my facewash!” Sai Krishna, owner of Sri Lakshmi Provision Store on the outskirts of Bengaluru, looked blankly at the lady who was asking for her favorite brand of facewash. He felt helpless as the distributor servicing his area was stockout for the last one week. Sai Krishna, complained “distributors don’t seem to care and most of them don’t even visit here as there aren’t too many shops around.” Reaching such stores and ensuring constant availability of all their products is a problem even the largest companies aren’t able to solve, cost-effectively.
Nuruddin, a kirana (the Indian name for mom and pop stores) store owner explains his dilemma, “the distributor’s sales representatives come only once or twice a month, I may not have enough cash then to purchase stock worth a month. And even if I do, where do I keep it?” Lack of space and liquid money to invest, prevent small retailers from stocking. As a result, store owners are forced to close their store every few days to visit the closest wholesale market to buy what their consumers demand. This results in loss of business, time and money.
[This article has been reproduced with permission from SP Jain Institute of Management & Research, Mumbai. Views expressed by authors are personal.]