Salesmen, Distributors Revolt Against Reliance For Killing Their Business; JioMart Delivery Vehicles Getting Blocked On Roads
We all know how Mr. Ambani, has disrupted the country’s telecoms industry, with the launch of Reliance Jio. Similar to that the industrialist is trying to shake up retail distribution, by taking on U.S. e-commerce giants like Amazon and Walmart Inc who are expanding fast in India.
Throughout the country, the mom-and-pop stores that account for four-fifths of a near $900 billion retail market are increasingly turning to JioMart to stock up on foreign and domestic brands.
Reliance Disrupting the Supply Chains
India has around 450,000 traditional distributors. 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 with Reliance’s model the mom-and-pop stores, known as ‘kirana stores’, 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.
Tensions are increasing between traditional channels and JioMart
The scale and speed at JioMart Partner is growing, has caused disruption and triggered tensions between traditional distributors and Reliance that have boiled over into physical confrontation in some cases.
Dhairyashil Patil, president of the All India Consumer Products Distributors Federation, which represents 400,000 agents of local and foreign consumer firms, “We will employ guerrilla tactics, we will continue to agitate. We want (consumer goods) companies to realise our value.”
Even with these oppositions, Reliance remains is pushing ahead with Mr. Ambani’s “new commerce” retail venture. Last year it raised funds from marquee investors including Silver Lake Partners and KKR & Co Inc. The company seeks to integrate mom-and-pop stores in what it has touted as a more inclusive approach to digital commerce.
Mr. Ambani in 2018 announced his ambition to connect 30 million small merchants to the Reliance network. So far, it has 300,000 merchant partners in 150 cities who order consumer goods from Reliance, but the transformation will be magnified many times over if it meets a target of adding 10 million partner stores by 2024.
Its all About Pricing
According to a review, Dharavi retailer could bulk buy a two-tube combo of Colgate MaxFresh toothpaste for about 115 rupees ($1.55). The traditional distribution company gets it for 145 rupees, and the last offer distributor can offer to the Dharavi retailer is 154 rupees. This price is still more than a third higher than the Reliance price.
Will the conflict between JioMart and traditional salesman go on increasing or a middle path will be founded, only time will tell.