FMCG distributors raise concerns over rapid growth of fast-trading platforms, call for controls

NEW DELHI, August 24: Distributors of fast-moving consumer goods have raised concerns over the “rapid and unregulated growth” of fast-trading platforms, saying the situation requires immediate control.

In a letter to commerce and industry minister Piyush Goyal, the AICPDF said this uncontrolled expansion of fast-trading platforms, which typically deliver goods within 10-30 minutes, is creating an “unlevel playing field”, threatening the livelihoods of millions of small retailers and distributors who have been the backbone of the Indian retail sector for decades.

The All India Consumer Products Distributors Federation (AICPDF) has also suspected potential violations of foreign direct investment (FDI) regulations by these fast-trading companies and demanded an immediate inquiry into the operating models of these platforms.

The rapid growth of fast-paced commerce platforms such as Blinkit, Zepto and Instamart has posed significant challenges to the traditional retail sector and the established fast-moving consumer goods (FMCG) distribution network.

“We are witnessing an erosion of small mom-and-pop stores and a shift in the distribution landscape for fast-moving consumer goods (FMCG) as these platforms are increasingly being appointed as direct distributors by large FMCG companies, sidelining traditional distributors,” the AICPDF said in a letter.

The report highlighted concerns about compliance with foreign direct investment (FDI) regulations by short-term trading platforms, while stating that the AICPDF suspects that these platforms blur the lines between the market-based and inventory-based models.

“Foreign Direct Investment (FDI) regulations specifically prohibit e-commerce marketplaces from holding inventory or exercising control over inventory sold on their platforms.

“However, it appears that these fast-trading platforms may be engaging in practices that blur the lines between a marketplace and an inventory-based model, potentially violating foreign direct investment norms,” it noted.

It also asked the government to “launch a thorough investigation into the operating models of these fast-trading platforms to ensure compliance with foreign direct investment regulations” and to “implement safeguards for small retailers and traditional distributors to safeguard their interests and prevent monopolistic practices.”

The AICPDF has called on the government to facilitate dialogue among all stakeholders, including the retail sector, fast-moving consumer goods (FMCG) companies and express trading platforms, to establish fair and equitable business practices.

He also appreciated Goyal’s recent statements in which he came down heavily on e-commerce companies, questioning their business model that negatively impacts small retailers in the country.

Earlier this week, the commerce and industry minister questioned Amazon’s claim of a $1 billion investment in India, saying the US retailer was not doing any great favour to the Indian economy and was merely compensating for the losses it incurred in the country.

He said their huge losses in India “smack of predatory pricing” which is not good for the country as it hits millions of small retailers.

The Indian express trading market is currently estimated to be worth around $5 billion.

Several fast-moving consumer goods (FMCG) companies reported high double-digit growth in their latest June quarter results, driven by fast online sales.

In the QSR space, companies like Blinkit, Zepto and Swiggy’s Instamart have established a strong presence. Recently, Ola, one of the leading players in the ride-hailing industry, announced its entry into QSR. (PTI)