Wholesalers object to direct selling, B2B by organised retail

With organised retailers opting for a B2C business model and direct selling bypassing retail channels, distributors of Fast Moving Consumer Goods (FMCG) are trying to salvage their business. Organised retailers, on one hand, have started selling products directly to end users; while on the other hand, they have started buying directly from manufacturers, bypassing distributors.

They said that this will put investment worth thousands of crores in limbo and close to 50,000 jobs will be at stake only in the state. They are planning to raise awareness about their problems in different cities and involve policy-makers in their revival. Recently, they wrote a letter to players in organised retail, requesting them to stay away from the B2B segment and not buy directly from the manufacturers, for their sake.

Shriram Baxi, president of Federation of Gujarat FMCG Distributors Association (FGDA) said that, till about two years ago, almost all retailers used to source goods from them. Of late, a significant number of retailers have started sourcing goods from players in organised retail. This has made a severe dent into their business. "For past two years, there is no growth in our turnover. In fact there is a de-growth," pointed out Baxi.

He said that there are around 5,000 distributors-wholesalers in the state, too small a population to form a critical mass that can influence policy-makers. "However, our contribution in investment and job creation is disproportionate to our numbers. Our investment is estimated at Rs 12,500 crore and we employ about five lakh people, especially those in the low-skill category. Any adverse impact on our fraternity would sound the death knell on investment and lead to loss of jobs," said Baxi.

Arun Parikh, chairman of the federation said that organised retailers have started buying directly from manufacturers. Their arm-twisting techniques have resulted in enabling organised retail to get better margins from manufacturers. "They are getting 21-22 per cent margin, while that of distributors is 4 per cent and that of retailers is 9 per cent. This is how they are trying to sell at cheaper rates," said Parikh.

WHAT’S AT STAKE

• This will put investment worth thousands of crores in limbo and close to 50,000 jobs will be at stake only in the state 
   
• The traditional retail sector is the fourth largest employment generator in the country and so any disturbance would have severe financial and social implications, claim wholesalers