Faced with shortages, neighbourhood stores downing shutters

Abhishek Law Kolkata | Updated on April 08, 2020 Published on April 08, 2020

Mom-and-pop stores are downing their shutters as stocks run out   -  REUTERS

Kirana and neighbourhood stores are facing a supply shortage even as FMCG biggies are struggling to restore distribution chains. The virus-induced lockdown has also led to a cut-off in an important link for general trade – the wholesaler or local area distributor.

The result is that mom-and-pop stores are downing their shutters as stocks run out and there is no way to replenish them at the moment.

Some, however, are striving to make own arrangements that include getting vehicles to go to the nearest wholesaler for supplies.

According to Adarsh Sharma, Executive Director – Sales, Dabur India was in constant touch with stockists. “We have also established a direct contact with retailers and are trying to service demand, wherever possible. However, this remains a challenging scenario,” he told BusinessLine.

Distribution chains

Products go from manufacturing facilities to their distribution centres, on to clearing and forwarding agents (C&FAs) in each State, then to the distributors at the State level, and finally to retailers. This continues to be the practice with 90 per cent of retail being dominated by mom-and-pop outlets, kiranas and neighbourhood stores.

Over the last few years, manufacturers began exploring the direct distribution model where they try to reduce some of the channel participants.

In most cases, distributors and wholesalers generally have an area representative/area distributor who makes the rounds of mom-and-pop stores, assesses the demand on ground and alerts the distributor or wholesaler. In some cases, the general trade calls up the area distributor directly for replenishing stocks.

However, with lockdown in force, the area representatives have stopped making rounds. Wholesalers do not have the wherewithal to reach out to the kirana stores with supplies. In fact, general trade has been told to arrange its own transport and manpower.

Kirana store owners say such an arrangement is not viable.

Generally, LUPs (low unit price packs) and mid-sized packs of select brands are stocked by sourcing them through multiple distributors. So store owners have to do the rounds of multiple distributors and make upfront payments for buying these items. Transport arrangement at this point, when vehicles are few and costly, also pushes up costs.

Alternative arrangements

FMCG companies admit to absence of manpower (because of reverse migration) and disruptions in supply chain (slower than expected truck movement and vehicle availability) being a problem, at the moment.

These smaller stores may even find it difficult to replenish stocks immediately, say market sources, if the current scenario continues.

Godrej Consumer Products said some of its C&FAs have also received permission to distribute goods.

Companies are making their own arrangements too. Kartik Johari, Vice-President, Nobel Hygiene – makers of Friends adult diapers – said the company has arranged for “local pick-up” of stocks by customers at the distributor’s point.

Published on April 08, 2020

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