Home ›› 23 Nov 2021 ›› World Biz
For eight straight days, household goods salesman Vipresh Shah has failed to sell a single pack of Dettol soap to the storekeepers who have been buying from him ever since he took over his family business as a teenager, 14 years ago.
Shah is an official distributor for Britain’s Reckitt Benckiser in Vita, near Sangli city, around 200 miles south of Mumbai. But he said once-loyal customers now point to an app - JioMart Partner - on their smartphones showing prices up to 15% lower, instead of placing orders.
“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!’”
The 31-year-old said he lost $2,000 of his own money as he discounted products to match prices on JioMart, the app rolled out by Reliance Industries billionaire Mukesh Ambani in his drive to revolutionise retail distribution in India.
Up and down India in places like small town Vita, the mom-and-pop stores that account for four-fifths of a near-$900 billion retail market - more than $700 billion - are increasingly turning to JioMart to stock up on foreign and domestic brands.
Just as Ambani, India’s richest man, has disrupted the country’s telecoms industry, the tycoon is intent on shaking up retail distribution, taking on U.S. e-commerce giants like Amazon (AMZN.O) and Walmart Inc (WMT.N), expanding fast in India.
The country has around 450,000 traditional distributors, who have legions of salespeople to service every corner of the vast nation, including 600,000 villages. They typically earn a margin of 3-5% on product prices and mostly take orders physically once a week, making deliveries to retailers within a couple of days.
But Reliance’s model throws a wrench in that supply chain: the mom-and-pop stores, known as ‘kiranas’, can order goods on JioMart Partner with deliveries promised within 24 hours. Reliance also offers training on ordering, credit facilities and free product samples for affiliated kiranas’ customers.
That means hundreds of thousands of salesmen representing consumer giants like Reckitt, Unilever (ULVR.L) and Colgate-Palmolive (CL.N), face an existential threat to their business, according to interviews with salespeople, 20 distributors and a trader group with members across India.
Many of the distributors contacted by Reuters said they have slashed their workforce or vehicle fleet, seeing their sales from door-to-door agents drop 20-25% in the last year as shopkeepers partner with Reliance.
In Vita, salesman Shah said he has had to lay off half of his staff of four. He fears the 50-year-old family firm might not last beyond the next six months.
‘Guerrilla tactics’
The scale and speed of the disruption have triggered tensions between traditional distributors and Reliance that have boiled over into physical confrontation in some cases.
In Maharashtra state in the west - home to Vita - and Tamil Nadu in south, traditional salesmen have organised blockades of some JioMart delivery vehicles.
“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.”
Reliance remains undeterred in pushing ahead with Ambani’s “new commerce” retail venture, first announced in 2018.
Last year it raised funds from marquee investors including Silver Lake Partners and KKR & Co Inc (KKR.N) as it seeks to integrate mom-and-pop stores in what it has touted as a more inclusive approach to digital commerce. That push is widely seen countering the likes of Amazon, which have for years faced - and denied - claims in India of favouring select big sellers at the expense of smaller retailers.
A source close to Reliance said the company was determined to keep expanding its business for mom-and-pop stores. It believes its model can co-exist alongside the traditional approach in one of the world’s biggest retail markets, the person said, declining to be identified because of lack of authority to disclose company plans.
