Aditya Kalra and Abhirup Roy

SANGLI (Reuters) – Vipresh Shah, a household goods seller, has not sold a single Dettol soap pack to Indian storekeepers for eight consecutive days. He bought the business from his parents as a teenager and it was 14 years later.

Shah is a Reckitt Benckiser official distributor in Vita (near Sangli), around 200 mi south of Mumbai. He said that once loyal customers point to JioMart Partner, an app on smartphones which shows prices as low as 15% instead of ordering.

Shah stated, “As Reckitt’s Distributor, I used be like a Prince in the Market.” “Now the buyer informs me that you have been cheating us!”

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 https://reut.rs/3olTzsa 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 https://reut.rs/2OYLmMV – more than $700 billion – are increasingly turning to JioMart to stock up on foreign and domestic brands.

The tycoon, Ambani (India’s richest man), has made India’s telecoms sector unreliable. He is now determined to shake up Indian retail distribution and take on U.S. ecommerce giants such as Walmart (NYSE:) Inc).

Around 450,000 of these traditional distributors are in country. They have thousands of salespeople who can service all corners of the huge nation. They generally earn 3-5% margin on product prices, and usually take orders in person once a week. Deliveries to retailers are made within days.

Reliance’s business model puts a wrench into the supply chain. Mom-and-pop shops, also known as “kiranas”, can place orders on JioMart Partner and receive deliveries within 24 hours. Reliance provides training and credit facility for its customers. They also offer free product samples to their customers.

This means that thousands upon millions of Indian salesmen, representing giants such as Reckitt, Unilever (NYSE :), and Colgate-Palmolive, face an existential threat. According to interviews with representatives, 20 distributors, and a trader organization with members all over India,

Many distributors contacted Reuters reported that they’ve cut their workforce and reduced their vehicle fleet. This has resulted in a drop of 20 to 25% in door-todoor agent sales.

Vita’s salesman Shah claimed that he was forced to lay off 50% of the four employees he employs. The 50-year-old family company may be unable to survive beyond six months.

‘GUERRILLA TACTICS’

Reliance has been experiencing tensions with traditional distributors due to the disruptive scale. These tensions can sometimes escalate into physical conflict.

Traditional salesmen in Maharashtra, west of Vita and Tamil Nadu in the south have organized blockades against JioMart delivery trucks.

Dhairyashil patil, the president of All India Consumer Products Distributors Federation which represents 400,000 consumer agents from both India and abroad, stated that “we will use guerrilla tactics.” He said that he will “continue to agitate” and added, “We want (consumer products) companies realise our value.”

Reliance continues to be unaffected by Ambani’s “new commerce” retail venture. It was first revealed in 2018.

Last year it raised funds from marquee investors including Silver Lake Partners and KKR & Co (NYSE:) Inc as it seeks to integrate mom-and-pop stores in what it has touted as a more inclusive approach to digital commerce. It is being widely criticized for its opposition to Amazon. Amazon has long been accused in India of favoring large-scale sellers at the expense or small retailers.

Reliance was told by a source that the company is determined to continue expanding its retail business in mom-and-pop shops. The company believes that its model is compatible with the existing approach in the largest retail markets around the globe, according to a source. However, this person declined to identify themselves as they are not authorized to reveal plans.

Ambani said in 2018 that 30 million small merchants would eventually be connected to Reliance. It currently has 300,000. Merchant partners in 150 cities that order consumer products from Reliance. But, the transformation will continue if they reach a goal of 10,000,000 partner stores by 2024.

Reliance has not responded to comment requests regarding this article.

Colgate refused to comment. Reckitt stated that its distributors and customers are an important part of the company’s business, but did not provide details. Unilever India’s arm Hindustan Unilever did not reply to our request for comment.

WHERE CHANNEL?

Industry watchers believe that traditional distribution channels are still important for consumer goods manufacturers, despite disruption.

Himanshu Bajaj was a former Asia consumer leader and head of retail at Kearney. He said that he had met CEOs of other consumer businesses in September to raise concerns about Reliance’s disruption of the traditional distribution channel.

“The distributors are not being killed by the companies.” He said that the worry was real.

Sunil D’Souza CEO, India’s Tata consumer products, said last month to Reuters that Reliance’s distribution model is not viable and asked about distributor concerns. Tata, however, stated in an interview last month that the company “can’t afford” to ignore major distribution channels.

In March, Jefferies (NYSE 🙂 estimated that kiranas would “steadily increase procurement” from Reliance at “the cost of traditional distributors”. Jefferies predicts that Reliance sales will rise to $10.4billion by 2025 from only $200m in 2021-22.

An executive working for another competitor to Reliance stated that Ambani was “expanding his wings very quickly” in serving kiranas. He also has an advantage on pricing because of long-standing relationships and consumer goods makers who have, for many years, considered Reliance with its 1,100 supermarkets a major client.

Ambani has added another major vertical to its kirana partner network. The executive said that brands cannot afford to ignore Reliance because of their purchasing power. He declined to identify himself as he was not authorized to talk with the media.

All you need to know about pricing

Kiranas can be described as cramped stores in old buildings where brands are displayed on wooden shelves. Small sachets hang from the ceiling. Reliance has been adopted by these retailers as a way to improve profit margins.

Reuters accompanied Anuruddh Mishri, a Colgate agent on a field trip to Mumbai’s Dharavi. However, he was unable to persuade Shivkumar Singh (50-year-old) to purchase the store. Dharavi has 1,000,000 inhabitants and is one of the most crowded slums on earth.

Singh opened the JioMart App and displayed much more affordable prices. How can I place an order with traditional distributors? He said. He said, “The price difference is enormous. Reliance is my main source of orders.

A Reuters review showed that the JioMart Partner app allowed the Dharavi retailer to bulk purchase a Colgate MaxFresh toothpaste tube combo. It cost about 115 rupees (about $1.55). Mishra sells it through his distribution company for 145 rupees. His last offer to Dharavi’s retailer was 154 rupees. That is more than one third of the Reliance price.

Traditional distributors in Sangli claimed that they had confronted Reliance drivers and chased them down, claiming unauthorised deliveries.

Sunil Pujari works as a JioMart delivery driver in the area. He said that he was warned by his supervisors not to panic if distributors stop vehicles.

Business is still strong.

He stated, “Prices offered JioMart can’t be matched” and made another delivery to a busy market.