Rather than showing schadenfreude about greedy middlemen being taken out of business I think it is worthwhile to contemplate what allowed these middle men to exist before and what all has changed besides the influx of a large investment by a major player.
Sales people fill a role: They first and foremost know the customer. They inform the customer and they file orders. They may act as a distributor keeping inventory and handling communication.
It is the ubiquity of digital communication allowing manufacturers and large scale distributors to be reachable. Advertisement allows big players to reach customers. Digital catalogues are generally superior to print and word of mouth. Digital sales processes have come to a level where a lot can be run with little human intervention making it a lean option for a big player. Logistics has improved making delivery possible from centralized locations. Digital payments, integration with sales processing and the ability to take many small risks are in favor of big players.
A lot has changed over the years.
Overall prices will come down. But well paying jobs are gone and small shop keepers will in the future not haggle with a despised middle salesman but have to deal with prices dictated by a giant. Differentiation for shop keepers will become more difficult. The power differential to their supplier has increased and whatever the spoils of the innovation are they are likely to accrue on the bigger players side. Probably a lot more than the bigger players share of the total innovation that enabled this disintermediation.
This is a terrible headline. This sort of nonsense is promoted in India for last many decades. Pizza hut was not allowed in India using similar grounds. Big Bazar, D Mart and many others have succeeded well in the country without ruining smaller stores. And even if they get ruined it is not much of problem as these smaller stores are often dishonest, exploit their own labour and poor illiterate customers, employ child labor and so on.
To your points: I have only seen these small store shopkeepers working really hard and helping out the local folks more than just running a shop.
The local folks also had a collective power over the shop - quality of products, prices, etc.
The customers will be exploited more now. These big chains you mention Big Bazar, D Mart, etc flood their stores with low quality things we don't need.
However - The article is about salesmen who supply these small stores. Your comment is off-topic.
Very simple. Don't buy if you don't need. No one has forced you to buy stuff you don't need but in general these store offer much wider variety of products at very good rates, are better regulated and have better works ethics.
> "As Reckitt's distributor, I used to be like a prince in the market," said Shah. "Now the buyer tells me, 'See how much you've been ripping us off!'"
> "We will employ guerrilla tactics," said Dhairyashil Patil, president of the All India Consumer Products Distributors Federation, which represents 400,000 agents of local and foreign consumer firms. "We will continue to agitate," he told Reuters, "we want (consumer goods) companies to realise our value."
> Back in Sangli, traditional distributors said they have at times chased down Reliance vehicles and confronted drivers, alleging unauthorised deliveries.
It's difficult to have sympathy for the middle-men skimming 5-10% in this story, especially with excerpts like these.
It is difficult to understand the value added by these 'sales' distributors, but I am not sure excessive profits explain the 5-10% price difference, because the article also says these middle men make 2-3% - that's an unexplained 12%.
The price difference may be explained by different prices at the manufacturer due to different market power - supermarkets have forced the prices they pay down everywhere by being 'bigger than the manufacturer'.
But it may also be Reliance cross subsidizing from its retail business - selling at a loss in order to force rivals out of the market.
That would be an amazing play because they can destroy the existing distribution channel, then replace the small shops at the end of it in a few years by rolling out their own small stores with very low prices and while increasing the wholesale price they now control so the family owned small stores can't compete.
This is a big 'problem' in the west too, where venture funded 'startups' can often out compete small scale traditional rivals in price temporarily by providing goods to the market at much less than cost, burning investor money until the rival way of doing things is broken, then jack the prices back up and reap the profits as a local monopoly.
I say problem because I'm not sure if in the end it is good or bad. Bigger market players have options to destroy smaller players is a tale as old as time. Local monopolies are bad though, and I think government needs to take a stronger role in regulating these like they would a larger scale monopoly.
A typical retail store - especially a mom and pop store, will only be able to buy limited quantities of products. For instance, 50 packs of biscuits etc.. these sorts of volumes are too small for a manufacturer to ship directly to retail establishments because transport logistics will add a huge cost to each such shipment.
Consider, for example, that a shop in Bangalore needs to buy 50 packets of biscuits for sale each week from a manufacturer in Pune. Each such shipment will cost at least a few 100 rupees for transport from Pune to Bangalore once a week. This will push up prices a LOT.
The way around is for the manufacturer to have a relationship with a distributor in Bangalore and they will ship several tonnes of biscuit packets (1000s of packets) once every couple of weeks from Pune to Bangalore.
This is much cheaper from a logistics standpoint.
So having distributors reduces the cost overall and distributors also take back expired products, handle returns etc.
In some countries retailer's cooperatives are the backbones of many mom and pop stores. They are large towards the manufacturer and are de facto non profits for the co-owner-shareholder co-op member shops, large and small.
This is also true in the US for independent grocery stores in many regions. They don’t have the capital and buying power of major chains, but are able to exist by teaming up.
Whichever way you do it, the distribution process will add to the final price because someone needs to pay for transport to the city, distribution to the retail stores etc. A non-profit may only charge enough to cover their cost but it is nonetheless an additional step in the supply chain.
However, it would still be cheaper than attempting to send products directly from manufacturers to retail customers in a completely different city.
The app is a very big deal. That never existed before. Real convenience for the shop keeper. At my corner Kirana (easily serving 500+ ppl), there is a non stop stream of sales guys and delivery vans and the shop keeper has two guys full time just to deal with it. They run around with reams of paper the whole day. Now it's all in the app which is a good thing. Buying stuff from 20 different distributors is just asking to be optimized.
I am sure the data they are collecting is also going to produce lot of value.
So, price to consumer may not necessarily the only metric of consumer harm that one must consider.
Another thing that is unique to large corps (Reliance, Amazon) is the network / conglomerate leverage they can bring to bear. Hina Khan's argument against Amazon resonates here too.
To quote from the work [1] that (I think) put her on the tech-regulation radar:
'This Note argues that the current framework in antitrust -specifically its pegging competition to "consumer welfare," defined as short-term price effects -is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon's dominance if we measure competition primarily through price how integration across distinct business lines may prove anticompetitive'
> This is a big 'problem' in the west too, where venture funded 'startups' can often out compete small scale traditional rivals in price temporarily by providing goods to the market at much less than cost, burning investor money until the rival way of doing things is broken, then jack the prices back up and reap the profits as a local monopoly.
I come from a position of extreme scepticism that this strategy can work. In theory I can imagine it, but in practice I haven't seen a follow up like "...as was sen in the case of [practical example".
The companies that try this without network effects seem to get crushed - I like to point at Uber. Their loss-making competition seems to be translating into ongoing losses rather than monopoly.
Companies with network effects - and I'm thinking FANG companies - generally moved in and took out well established players by being substantially better with innovative new business models. In most cases they were profitable most of the way through their journey.
Aside from the fact that you're arguing that "company wipes out competition, raises prices" is some sort of fantasy and not standard business practice: How is Uber not a practical example?
VC-backed startup, out-competed traditional rivals using VC cash to undercut them, jacked prices and dropped quality once they had established dominance.
Uber and Lyft decimated the taxi industry. Taxi drivers lost but so did the public; we ended up with wildly variable rates, extremely discriminatory service (virtually zero handicapped accommodations), uninspected vehicles, background checks that were a joke, no licensing, no government agency responsible for keeping an eye on them, and no accurate metering (any cyclist with a bike computer will tell you that GPS and wheel-measured distance almost never line up.) In my city, you could call up the police department's livery unit and they would investigate reports of illegal driving, unsafe vehicles, lost property, etc.
Companies like FAANG don't move in to a new tech space and succeed because of "substantially better / innovative new business models." They usually have an inferior ripoff but it dominates because they can leverage their existing infrastructure, brand recognition, PR relationships, and giant piles of cash to pump into it until it succeeds.
This Indian entrepreneur is bleeding cash undercutting these local salesmen, and if it takes long enough, someone like Amazon will come in and do the same thing to him. But if he pulls it off, he's going to drop the one-day delivery and 15% price discount like a bad habit, guaranteed.
That is some weird alt-history. In San Francisco, before Uber, this was the situation of the taxi industry:
- It was routinely a 2-3 hour wait to get a cab on Friday or Saturday night
- Rampant discrimination by cabbies who would always ask you where you are going and would refuse to take you if they didn't like the answer. They would frequently refuse to pick up black passengers (pretending they didn't see you on the street). Very few cabs had disability support.
- Cabs were old, in poor condition, sometimes dirty. Sometimes they were also new and nice, but there was no quality control.
- Significant problems with cabbies yelling at passengers, not bathing, smoking in their cabs, and generally being surly.
- Cabbies were under-insured and also poor background checks.
- Side payments to the dispatcher and other bribes were common to get the high paying airport jobs
- cab rides cost about 40% more than now
- The city made hundreds of thousands per medallion as they auctioned off the right to be a cab and artificially restricted supply.
- There was no opportunity for part time cabbies -- you needed to pick a shift and then drive that shift. You could not set your own hours. This created a situation where there weren't enough cars on weekends because the number of medallions were fixed.
- Cab companies earned insane profit margins - 50% margins was not unusual for Yellow.
Basically all of the above issues were substantially improved by Uber and Lyft. You can get a ride anytime with 10 minutes of waiting or less, and you (usually) pay less. Lyft is a bit in between Uber and regular taxis in that it is usually more expensive but does not have the same surge spikes, trading off wait time for prices. The system of rating cabbies gets rid of those who smoke in the cab or don't shower, or don't keep the car clean. Just a massive increase in driver professionalism and politeness.
Uber and Lyft were one of the few ways that blacks and minorities could regularly get rides as the platform did not allow discrimination. The platform also checked the routes to limit the number of riders being ripped off. Uber also has dedicated disability rides that you can select from. And for the drivers, you can now work any hours that you want, you do not need to pay a gate and so risk is reduced.
Just an overwhelmingly positive improvement that significantly increased quality of life for san francisco riders and opened up new income earning opportunities to those who were locked out of the medallion system.
Uber is consistently losing money, as it has been for several years now. It is an example of that strategy failing spectacularly - Uber was able to gain market dominance and has been spectacularly unable to translate that into actual money.
Financially speaking, all they've managed to do so far is give away billions of dollars.
Amazon is a solid example of burning everyone else out of the market with VC funding. Don’t be fooled by their nominal profits, for retail their making money hand over fist and simply use tax avoidance strategies to turn profits into capital.
They burned everyone out of the market with venture capital funding they got between Jul 1994 and May 1997, at which point they went public? The $8M from Kleiner Perkins in 1995 seems like a small amount to have been possible to burn everyone out of the market:
Are Target and Walmart and Home Depot and all other retail stores also hiding profits and choosing to report only 2% to 4% profit margins to avoid paying taxes for the past few decades? Could it not be that the retail business has optimized down to low single digit profit margins?
When a company issues shares to the market, investors who buy those shares are investing in the company, and the company can take that investor money and spend it on equipment, wages, or I guess subsidising goods to undercut the competition.
Many companies buy back shares, returning money to investors and increasing the price of their current shares. There are arguments about whether this is a good thing, but the fact remains that Walmart and Microsoft (comparable companies) have bought half and 1/3rd of their shares - returning large amounts of money to investors.
This is in contrast to Amazon. Amazon have constantly issued new shares. This isn't a company that took some initial VC money and turned it into profits. As a company that has not been making a profit and has constantly been issuing new shares, Amazon has factually been running on investor cash for 20 years.
I'm not saying the investors don't get a good deal. Investors know they are paying for Amazon to build market share by undercutting. I'm just saying what happened.
Here is the graph:
Amazon borrowing from the market to subsidise its loss making business in order to build marketshare:
Also do note that the number of shares issued by amazon per year has remained fairly constant but the value of those shares has increased, so the amount Amazon 'borrows' has increased each year.
You raise the question, long term, will it work?
It is too early to say right? Amazon dominate cloud and are making a profit now in that area, but other companies have been able to cut in on 'their' market. What will happen to elsewhere if amazon stop subsidising and a new investor subsidised company comes for their cheese?
Amazon shares are very high on the the expectation that market share has been permanently bought. How deep is the moat?
> This isn't a company that took some initial VC money and turned it into profits.
If you do not think the $8M VC funding AMZN took in 1995 turned into profit, you are using a different definition of profit than most people.
> As a company that has not been making a profit and has constantly been issuing new shares, Amazon has factually been running on investor cash for 20 years.
Your macro trends link shows profit margins of 4% prior to 2010, and 4% after 2018. Walmart shows 3% or less on many years.
I do not even know what we are talking about anymore, but the numbers show that Amazon is investing into its business. I do not see proof they are undercutting competitors (Walmart/Target/etc).
In fact, Amazon’s retail prices have been consistently higher than their competitors, precisely because retail is a low margin game with little upside. The big money is in digital goods, which can scale easily with extremely high profit margins, such as AWS and Amazon Prime Video/Music.
I would bet Amazon’s retail play is now just a way to get the retail public to sign up for the recurring monthly revenue from video services, and to take the 15% profits off the top from reseller’s sales for being a platform. Amazon ideally does not want to be an actual retailer, that is a 3% profit margin business, as Walmart’s data shows. They want to be a platform, that is a 15%+ profit margin business.
And it is reflected on their website by them not allowing you to restrict searches for items shipped and sold by Amazon, and not competing on price (in my experience). Why would they want that inventory risk and stuff that comes with selling physical goods.
First of all, you probably know a lot more than me about the company, so take this with a pinch of salt.
You said that you are not sure what we are discussing. We may be discussing different things. I'll try to be specific about what I am trying to say.
The assertions that I read into your post which I was replying to were:
1. Walmart is making a 3% profit and
2. Amazon has not taken investor money since 1996, so everything since then must have come from the consumer
In response:
1. I showed that Walmart has bought back half of its shares during that time, so it must have been making a much larger profit than was return in dividends.
2. I showed that Amazon has taken billions in investor money since 1996, and given that it has not been returning significant dividends or accumulating cash, it is true to say that Amazons business since 1996 has been dependent on constant investment.
A post up thread by Roixi questioned whether, in the long term, a business model that depended on continuing incoming investor capital could be flipped to a conventional profit making company - they claimed uber had failed to flip. I was noting that Amazon could not be cited as evidence of a flip that work yet, because the baby milk of [ a huge and constant supply of investor money] was still flowing. It may be that this business model will work, but amazon doesn't prove it... yet
>The assertions that I read into your post which I was replying to were:
1. Walmart is making a 3% profit and
2. Amazon has not taken investor money since 1996, so everything since then must have come from the consumer
No, my intention was to refute Retric's claims that Amazon dumped product at a loss to "burn everyone else out of the market" with VC money, which is obviously disproven by the fact that many competitors exist, and the fact that Amazon took extremely little VC money, and did so 26 years ago.
And also to refute Retric's claims that Amazon's retail operations are "making money hand over fist", which is obviously disproven by the fact that no retail business makes money hand over fist. So unless Amazon was selling goods at a much higher price (which it does not), or it discovered a secret technology that let them vastly reduce their COGS (they have not), then it has similarly low margins.
>It may be that this business model will work, but amazon doesn't prove it... yet
I do not understand how it has not been proven yet? They developed AWS, which ushered in a new paradigm of computing. They are profiting, as shown in their 10-K reports, and have for years. And investors are continuing to bet on Amazon. Investors are not willing to pay as much for Walmart shares because investors do not believe Walmart's team will be able to execute something like Amazon's team.
Walmart buying back its shares rather than investing in the business means they do not think they can do anything better with the money. Amazon bet that they could, by building AWS and more logistics infrastructure and a media business, and they did accomplish that, and now they have a great new revenue stream. This is seen in Amazon's market cap of $1.8T versus Walmart's market cap of $400B. Amazon did something more valuable than Walmart, and hence Amazon's owners were rewarded far more.
Did you? AWS for example was built not just from profits or investor money, they turned operating expenses into long term capital. It’s such a common tac avoidance strategy for them that you can’t look at published profit margins as meaningful.
As to looking at their share of total online sales that’s a serious pivot from their initial approach of reselling selling books online which by itself is a viable business. Look at what happened to Barns and Noble not Walmart. It’s like looking at Apples initial business was in terms of phone sales.
This is such a strange comment to me. Amazon is not even the largest retailer in the US (that’s Walmart). It’s the largest e-commerce retailer, but at 40% share there are plenty of other businesses here. Amazon IPOd in 1997, three years after being founded, when it still only sold books - I’m not aware of any VCs that are in the habit of buying shares in public companies. And finally, it’s really weird to call investment by a business, something that the tax code and public policy explicitly encourages, a “tax avoidance strategy to turn profits into capital”.
Owning all online retail was hardly their initial business. What’s their share of online book sales over time?
They of course continued to sell stock to fund further investments in other business, but they also funneled “operating expenses” into long term capital. AWS is a one such example, which hides actual profit margins via investments in software. The IRS has a clear line in the sand when buying land, but R&D gets tricky.
Established market player can go below cost also. But they choose not to. They have plenty of inefficiency built in due to legacy baggages like less productive older workers or unions. The competition from startups are welcome boon to destroy older players way of doing things. I won't expect the traditional player to die out. In America you can still find mom and pop shops even though 90+% decimated by the big boxes like Walmart or Amazon. NY Yellow bacs still surviving and to large extend has improved significantly their customer services after Uber and Lyft established themselves. Nokia is also a good example where they didn't opt for better UI and OS after decades of dominance though people usually wont recognized Apple as "startup" in mobile market back then.
> They have plenty of inefficiency built in due to legacy baggages like less productive older workers or unions.
"Less productive older workers" deserve jobs, too. And unions are no "legacy baggage", but vital tools to ensure decent workplace conditions and wages (see e.g. Amazon and pee bottles).
> In America you can still find mom and pop shops even though 90+% decimated by the big boxes like Walmart or Amazon.
Ask people in rural areas what they miss most and the answer will almost universally be shopping opportunities, as it is extremely hard to compete against Walmart and shopping malls.
> NY Yellow bacs still surviving and to large extend has improved significantly their customer services after Uber and Lyft established themselves.
> But it may also be Reliance cross subsidizing from its retail business - selling at a loss in order to force rivals out of the market.
> That would be an amazing play because they can destroy the existing distribution channel, then replace the small shops at the end of it in a few years by rolling out their own small stores with very low prices and while increasing the wholesale price they now control so the family owned small stores can't compete.
Wouldn't this be considered anti-competitive behaviour by most antitrust legislation? Price dumping to force competitors out of the market is a big no-no as far as I know but I might be absolutely wrong as a layman.
In the end it's very generic. All the retail and dining options begin to look the same everywhere. There's very little actual expertise or knowledge left as everything comes down from corporate and there's no no sign of knowledge or expertise there. Much of the food isn't cooked as often as it's reheated and assembled.
Also the local mercantile class gets hollowed out.
>>It's difficult to have sympathy for the middle-men skimming 5-10% in this story, especially with excerpts like these.
The middle men nexus is so deep in the Indian society it can be hard for westerners to even conceive just how bad it is.
There is a super market near my home called DMart, the local retailers just buy from there and sell things for 30% profit in their shops, of course the local residents eventually realize they are being ripped off, and start buying from the super market. So the local retailers bribe the managers in the super market to ensure the managers stand at the checkout registers and ensure people don't buy more than a few things(like soaps, flour etc) this creates a situation where, while the public can buy a few things from the super market they can never get enough, so eventually they are forced to go to the local retailers and buy for 30% extra.
Want to rent your home? or are you looking for a rented flat? all the best approaching the land lord directly. If you do some how skip the local 'brokers'(slang for middle men), the very next day they arrive with the local mafia and extort at-least a month of rent from you.
This middle men nexus extends for everything, everything from driving licenses, to property registration to passports. Though passports are little bit less of a trouble these days. Earlier the only way to get a passport application form was a middle man, they quite literally controlled who could get a passport, imagine that!!
The all pervasive middle men stubbornly refuse to go.
On of the big things preventing India from taking the next step is the endless middle-men/reseller attitude. The way India makes its gdp is by selling a bag of chips through 10 middle men, each takes some percentage in cut. So while the gdp numbers look attractive, things only keep getting worse on the ground.
It also prevents the country from moving to the next logical step in the growth chain- Being a Makers economy.
Talking in general, It's just that people value walkability and just a couple of loss leaders in a distant supermarket may not be sufficient incentive to get there by larger vehicles. Two-wheelers don't make sense here. You really need to weigh up the travel and opportinuty costs.
Super markets might work in dense urbanized areas, but not everywhere. Certainly not when you consider the cost in absolute terms against the income levels.
Maybe you'd call it a debt-trap or even stockholm syndrome but these folks will sell to you on credit and even deliver to you. This is the hub-and-spoke that actually works.
These are not your faceless cashiers pointing you at a shelf. The logistics is also a real value-add and people actually take this into account, it is not something they do out of ignorance.
Well fortunately in most cities here in Karnataka, even more so in Bangalore almost every area has these small-medium large buildings where you can set up these stores, and these are reachable through two wheelers.
You need to understand why Kiranas existed at the first place. People buying stuff at Kiranas are generally buying shampoo sachets, and chickpea flour in 250 gm quantities, this was needed because people didn't have the cash liquidity to benefit from buying a 1 litre shampoo bottle for 50% cheaper price than you would have to buy in sachets to make up for a litre of shampoo. Same goes with things like Atta(wheat flour), detergent, soap, biscuits, t-shirts, cheese or whatever. If you have the cash to buy 6 kgs of Surf Excel, DMart bundles another 3 kgs extra for free. If you pick up two bags of Atta, they offer that for you at 50% discount.
The other part one needs to understand, I remember the early days of credit cards in India. Before that there was no way of getting a cheap, low collateral loan. The only way was going to the local marwari sait pawn broker, and pledge your jewellery for a insane interest, and often under shady terms. When the credit cards got hold, the pawn brokers went out of business almost over night. I personally know of a friend whose dad's business went out of business this way, they have a Lassi shop today.
It was a net positive for India. In time people will realize mass retail super markets are a net positive.
Now extend this to the most labor intensive sector of the economy - agriculture. Farm laws that were created to increase competition were rolled back. Every sector of economy in India is rent-seeking controlled by a small politically powerful block whether it is 'farmers' in Punjab, restaurants in your locality or rickshaw unions. Having said that competition and awareness is much better today than 10 years back.
The problem is not with these salesmen. With Reliance becoming the single point aggregator for all products sold from these 450,000+ stores, Reliance also becomes the single point of contact for any manufacturer wanting to distribute their products via these stores.
If not a single point, it will at least bring down the number of institutional distributors to just 2 or 3 major distributors.
That presents huge leverage for Reliance and they will be able to dictate purchase prices from manufacturers and also pricing/credit terms which will be extremely one-sided in favour of Reliance.
This will be extremely anti-competitive and will be a death knell to many companies.
This is similar to Amazon/Apple getting monopoly on music/books/video etc.
It's good for the 12 million kirana stores in India, who are concerned about Amazon, Walmart's FlipKart, BigBasket, Dunzo et al eating their business - which is happening already in metros. Reliance is bringing these stores into the game (in which, so far they've had no say) by working with them for order fulfilment.
> This will be extremely anti-competitive and will be a death knell to many companies.
How is it anti-competitive? A more efficient process might well be the death knell for many companies, but that doesn't mean it's anti-competitive.
Add: I think you meant Reliance is going to squeeze the manufacturers - which puts them out of business. What would Reliance gain from it? If they want to be a successful middleman, their best bet is to make both sides happy.
> What would Reliance gain from it? If they want to be a successful middleman, their best bet is to make both sides happy.
If prices go down, they sell more stuff. Speaking from the Australian perspective we have a couple of large monopsony retailers (Coles, Woolworths) who brutal squeeze a lot of producers and keep prices way down.
It is very funny, you get crowds of grumpy farmers complaining that the price of milk is too low, and lots of politicians wagging their chins at the horror of it all. Then carefully not doing anything because if they manage to drive the price of milk up they will lose a lot of elections. It is great for consumers.
The best example is to see what has happened with music/video/book sales on Apple, Amazon, Netflix etc. These three companies have such a stranglehold on this industry that it is impossible for any artist to have any say on pricing/margins etc. As an artist, if your product doesn't appear on any of these channels, you are basically dead on the water.
Spotify, Google, Tidal, HBO, Disney, Paramount, Comcast, etc. all exist and compete with those 3.
In addition, an artist can create something and sell it on their own website. The artist (or content owner) has never had such an easy time getting access and collecting payment from the world’s population in all of history. Or sell it via Amazon or Apple. I am pretty sure Apple lets content owners set the sale price.
Actually most people's time is cheap, so eventually people won't be ok with paying delivery fees, but just walking up to the local super market and buying things from there, so the real fear here the Kiranas will be out of business soon.
>>How is it anti-competitive? A more efficient process might well be the death knell for many companies, but that doesn't mean it's anti-competitive.
I think it means they are worried it will disrupt the status quo in a way they don't like, that's it.
> Actually most people's time is cheap, so eventually people won't be ok with paying delivery fees
But it would work backwards too. India's able to do super low cost delivery because labor (for delivery) is cheap. A delivery person working for Amazon makes $140 a month - and there's plenty of labor supply. Kirana stores also have delivery, they're paid $100-120 a month. This is not going to change any time soon. They do 30 deliveries a day, so the costs are very minimal.
Depends on the target buyers, if you are a big township/apartment resident, who works a 9 - 9 job, and don't like walking to the nearest kirana for stuff, you will be happy paying for it.
But the vast majority of the buyers, including me(though my time is not cheap), I still prefer spending a weekend afternoon shopping. This includes lots of middle class to lower middle class people whose time is cheap, and its definitely not worth for these people to pay local kiranas for incremental delivery.
As a matter of fact this is precisely the kind of crowd that shops at DMart today. These people don't like paying Flipkart delivery fees for grocery delivery.
>>This is not going to change any time soon.
It will be forced to change, if the masses shop personally and don't like paying delivery fees, the delivery services are just bespoke lifestyle perks for which you pay premium, not saying that won't happen, but eventually its just a thing you are willing to pay for and others aren't.
If you walk into a DMart today, it has all the markings of a standard US county Costco. They have cheap food products(wheat flour, rice, other food stuff at almost 30% discount), they have super cheap clothes, shoes, and other home accessories/appliances and all. When you finish shopping they also sell cheap softy ice cream and pop corn as a cooling off experience.
> It will be forced to change, if the masses shop personally and don't like paying delivery fees
The masses mostly just shop personally; delivery is the new thing (the change). Delivery volumes are small as of now, and can only increase. The problem (according to a lady who helps with our cooking) is not that delivery is expensive, it is that BigBasket prices are higher than local prices. But BigBasket will eventually figure out how to bring prices down.
If you're suggesting that volumes are going to top out soon, I disagree. Smartphones have made it easier for people to order stuff, and hundreds of millions of people from various economic backgrounds are comfortable using them. India's large enough for the trend to continue for a very long time.
> Reliance also becomes the single point of contact for any manufacturer wanting to distribute their products via these stores.
The manufacturers should be able to look up contact details for the shops via the internet. Assuming India does not let Reliance remove those contact details from the internet.
The whole point is that retailers are now refusing to buy from manufacturers and are preferring to go directly through Reliance because Reliance will bring products from different manufacturers and across categories.
Retailers will still not buy directly from manufacturers because they can buy things from multiple manufacturers in a single shipment from Reliance instead of dealing with individual manufacturers and incurring transportation costs per manufacturer.
That apart, Reliance will extend offers to retailers based on the overall value of the order - rather than per manufacturer.
This is the same reason people buy a range of items from sites like Amazon while they could buy individual items directly from some sites which deals with only specific product categories.
So Reliance is providing a valuable service or product? I am failing to see the problem. If the concern is Reliance is the only one, then they might need to be broken up into multiple logistics operations.
But overall, increased in efficiency and communications should result in fewer and fewer middlemen.
Size and access to capital. Reliance has 100s of billions that they can invest into this - and they get this capital at a cost which is below what almost any other company can get it at. Plus they have enormous leverage with the government and also a huge network of stores.
The article talks a lot about Reliance specifically, but the events described just sound like modern ordering and distribution methods coming into the picture. Of course door-to-door salesmen are going to be displaced by efficient direct ordering, the same way as has happened literally everywhere else as technology has advanced.
Distributors don't have such high margin on FMCG, maybe the whole chain has between company and retailer. I would not be surprised if Reliance is dumping by treating all logistics cost as 0 to get marketshare.
Why would you not have sympathy? Nobody was hurt by this. Consumers still paid the same prices. Now more of the money goes to the shopkeepers (and presumably reliance, which absolutely doesn’t need it).
Source? In the US, retail businesses compete heavily on price. If one shopkeeper pays too much for their supply, then their competitor will price lower and sell more.
There is a reason why all big retail companies have tiny low single digit profit margins in the US. If they don not keep up with advancements in the marketplace and offer competitive pricing, they go out of business. I do not see why the same would not happen in India.
Regardless of what you think of this (I tend to agree with the others ITT in that the salesmen here are middlemen just barely above rent seeking), there are two important points:
1. Middlemen form a large part of India's economy, and ripping the band-aid off can send ripples through the rest of the economy (that this will be a negative isn't guaranteed, though.)
2. Continuing from 1, middlemen are also a large bloc, and just like we've seen with the farm laws a strong push from them could lead to new laws to curb Jio's power, despite Ambani's strong links to the ruling party. We've already seen similar pushes against e-com companies leading to some success.
And, if it's anything like the ones around here, by selling worse products and intentionally under-staffing their stores. Everything they sell is pre-packaged and you only interact with a human for 30 seconds at checkout (after having waited 20 minutes in line because there's only one checkout open most od the time).
They have a "cheap and efficient at all costs" attitude, with the costs being: overworked employees, terrible user experience and a whole bunch of unnecessary waste from packaging (especially with their stupid half plastic half paper bread bags that only exist to cust costs, but that a friend in the recycling industry tells me are basically unrecyclable despite both the materials being recyclable on their own).
I find the user experience amazing, it's really efficient to go through an Aldi. Check out is fast, shopping is fast due to standardized layout, not so many similar choices to overwhelm you so you don't have to decide which cherry tomato to buy etc.
Also I'm not sure where you get the unnecessary waste from packaging. They just put everything on the shopping floor as it's shipped to them. That's not extra packaging. Other stores just hide this from you.
On the half plastic half paper bags I agree, but that's the same in the other big chains in Germany, so it's at least not more wasteful than the others.
Also I've been to America, the other stores really had a lot of extra plastic packaging. Like unpeeled fruit. That's horrific.
Funny, it's the exact opposite for me. All our other stores also have their own standardised layouts and I have a far easier time remembering those than Aldi's, even though I've been to Aldis far more times that some of the other ones.
Checkout is immensely infuriating for me because it's clearly focused on getting me out of the way asap. I'll be standing in like for 10 or more minutes, then get rushed through checkout at a ridiculous speed. There's like 10cm of counter space so products start falling if I'm not putting them away fast enough. I have to put everything back in the cart and then sort things into bags to take home at the awkward shelf at the exit. It's efficient for them, but inefficient for me.
And I do actually like some choice - sometimes I want a cheap tomato because it's getting cooked or put in a salad anyways and sometimes I want the better more expensive one because it'll be used "raw" like on a sandwich.
As for packaging, I was talking about retail packaging. Like, in a regular store, even a small one, I can ask for X dag of sliced cheese and I'll get that much in a small light wrapper. In Aldi, it's pre-packaged in hard plastic of an unreasonable size and I just have to buy multiple packs if I need more cheese. Same with everything else, even some vegetables. Even cans are shrink-wrapped together sometimes! I legitimately observed my bins filling up far quicker during the time I used to always shop at Aldi.
// if any of this sounds unfamiliar, I'm not from Germany, so there might be regional differences
Why do you need to be wined and dined when buying groceries? It's the same as RyanAir; I'd be happy to be stacked like a sardine for a three hour flight if it means significant cost savings and I get from point A to point B all the same.
> Why do you need to be wined and dined when buying groceries?
Where did you get that idea? I simply want the experience that used to be the bare minimum just some 10 years ago. Aldi (and other stores with a similar model) fails to deliver that and usually isn't cheaper enough to justify it. If you only care about price and have the time and energy to deal with them, feel free, but for me, unless they have something I need on sale, I see no reason to. Most other stores are faster, less rushed and the quality is better for at most a few % higher price.
>>Reliance will hold down prices only till they receive a huge consolidation of sales and then you can expect the prices to jump.
Luddites have been pushing this narrative for anti-modernism for ages now, but it just doesn't come to pass. It's for a simple reason, capitalism wants you to buy more and therefore has it in its interests to sell you things for cheap.
Its just that the middle men have it easy, there is very little productive effort involved in buying things from X and selling to Y on K% profit, when compared to working in a factory.
5 or 10 years ago, a ton of deals would be at Amazon. Now it has dropped a lot. I have friends buying from Amazon for Black Friday when the deals at other stores are generally better. They are used to Amazon now.
I am not sure what the point is here. Your friends have freedom and ability to choose to buy from multiple retailers, Amazon has freedom to choose its selling price, resellers on Amazon have freedom to choose their price, and competitors to Amazon have the freedom to choose their price.
Amazon has a massive warchest which they used over decades to undercut their competitors.
Just like Uber does to theirs.
Yes, technically nothing apart from Billion dollars is stopping amazon's competition to beat amazon in their own game. You gotta a billion dollars I can borrow?
I don't think people understand the complexity of the supply chain. If it were possible for the manufacturers to directly sell to retail customers, they would be more than happy to cut off distributors and pocket that additional margin for themselves.
For a manufacturer to handle returns, expired products etc from retail customers or even retail outlets while having a manufacturing base in a different city/town is a huge headache. Many products (example: dairy and other perishables) require daily deliveries to retail outlets from manufacturers. Try doing this without a distributor arrangement.
Many Indian billionaires are into rent seeking [0]. Reliance is definitely one of those.
I don't think this will augur well for Indian economy even if the customer can make some savings in short run. After the market consolidation, Reliance can easily raise the rates. The margins that would have gone to N middlemen would now go to a few with Reliance taking the larger share. The Indian economy is not known for creating jobs lately.
> Many Indian billionaires are into rent seeking [0]. Reliance is definitely one of those.
Reliance made most of their money in Petrochemicals. It is India's largest exporter, accounting for 8% of India's total exports. They have other interests too, but I wouldn't classify them as a "rent-seeking" enterprise.
It wasn't affordable earlier. In fact internet/data plans were fairly expensive before the 4G days. It's a lot saner now.
>>Companies collapsed and merged and now the duopoly is jacking up prices so much that poor people have to pay 100rs just to keep card active
Please stop spreading lies, I still freshly remember the earlier days of paying some 500 rupees for a recharge and getting barely 150 minutes of talk time and that too with some 25 days of validity. And yeah the SMS, and other services were charged like 1 rupee per SMS.
One of the big wins Ambani claims to have achieved is how Jio exposed scammy pricing practices were in the telecom sector before.
Lol I have to recharge 260 to 300Rs for 1.5gb dataper day with unlimited calling.both of which I don't use because I do WFH & have to spend 1.5k per month on 100MBPS broadband
I also have to pay 100rs per month to keep my other sim active. Guess what? Before this shit show I barely paid anything as I don't call anyone or use net pack EVER.
But now I have to spend money to keep my number active. And guess what? The cost of doing so keeps on rising.
Probably jio fanbois don't realise this but monopoly doesnt give a crap about you. It's like startups with venture capital.. they give steep discounts to hook you in and then they jack up prices after destroying competition
Sure Jio reduced SMS prices (something nobody really uses anymore). Sure per GB data prices are reduced.. but can you really buy a topup any more only for calling? Nope. They bundle all kinds of crap and sell it for 300rs. How the f** is that cheap? How's that different than the 1re per SMS?
Sto pretending like you're getting a better deal. You're not. Just one year ago we had 45rs recharge to keep phone active now it's gone up to 99Rs starting tomorrow. Stop being an ostrich who hide shis head in the sand because he is too uncomfortable to realise the reality around him
For anyone reading this comment who is outside India. We never had anything called activation charges until very recently. People like the commenter above get a sim and not use it for months without paying anything and the provider had to make sure the number was ON. This became such a plague a provider went down under. Now all the providers came together and decided on a way to stop this from happening. As expected, there is an outrage.
> they give steep discounts to hook you in and then they jack up prices after destroying competition
You bough a Docomo sim. You have a jio sim now too. You don't get to talk about this. Don't be a hypocrite.
> but can you really buy a topup any more only for calling?
Do you see where it says "top up". Click that thingy and follow the instructions.
> Just one year ago we had 45rs recharge to keep phone active now it's gone up to 99Rs starting tomorrow.
If you're the kind of person who'd recharge for 100 rs and keep it for 6 months and expect top notch service, I hope they jack up the prices for activation to 1000 rs so they drive bad consumers like you out of the market so the rest of us can use the services as intended.
The way I see it, the earlier telecom charges were bad foe those who are using lot of data / calls etc. So post Jio it has been made cheaper for the rich folks
Now it has affected the bottom of the pyramid users.
Daily wage labourers don't have 250rs to spend on telecom per month.
I paid a lot of money to telecom and half the times the calls dropped. So stop lecturing me about how good telecom networks in India really are.
And the only reason you're having no issues with this wide open loot is because you're rich. Look at the rest of the population.
P.s. you claim that I have a Jio sim and I'll never have one. I don't have a jio sim. How the heck did you reach to this conclusion??
>Daily wage labourers don't have 250rs to spend on telecom per month.
They don't have to spend that much on telecom per month. Don't know where you get that idea from.
> I paid a lot of money to telecom and half the times the calls dropped. So stop lecturing me about how good telecom networks in India really are.
I pay a moderate amount of money and I've used Airtel and Jio for a very long time in cities and rural areas and I've had calls dropped maybe 5 times in my life. You must be doing something wrong.
> And the only reason you're having no issues with this wide open loot is because you're rich. Look at the rest of the population.
People with very meagre means have plans that they can use for internet. I'm talking about the bottom of the rung folks.
You must be extremely ignorant of how people use telecom providers or incredibly dense. I don't know which is worse but you're so out of touch with the ground reality there's no point in debating this.
How dense are you towards human suffering? Just because you're rich do you think everyone in India works in IT & earns Lakhs per month?
My parents, as kids were dirt poor family. My grandmother had to go hungry multiple times a week so that my father would get enough to eat. She wasn't "dieting", she didn't have enough money to buy enough food. That's what poverty is like.
Have you ever faced that in your life? You think the really poor people who don't know from where the next meal is coming from have 99rs to keep a number active?
But thank God you have to spend a little less out of the Lakhs you earn in a month on data packs, the data which you use to lecture people whose previous generations have been dirt poor about how 99rs per month isn't that costly. Geez.
This is like the Indian version of "if they're too poor for bread let them eat cake"
Ironically, it feels like Walmart's tactics are used here: I do think it's market manipulation if Jio cannot prove that it's still selling above wholesale prices, which if true they should be able to prove to the detriment of the distributors. Even if it is above the wholesale price, I get giddy in general when the reason for lower prices is due to low-paid gig workers.
It is consolidation of small time middlemen with a mega-corp. Some people do not have a dog in this fight, but Reliance is already so big in India, I do not see it as positive in long run but the infusion of technology and just in time supplies would change the retail landscape.
> "We will employ guerrilla tactics," said Dhairyashil Patil, president of the All India Consumer Products Distributors Federation, which represents 400,000 agents of local and foreign consumer firms. "We will continue to agitate," he told Reuters, "we want (consumer goods) companies to realise our value."
This sounds a lot like the farmers protests: a segment of workers who are not keeping up with an increasingly competitive world are demanding to continue to be paid at an unreasonable (above market) rate for the services they provide, effectively asking for protection from competition at the cost of everyone else. And since their chosen line of business is not working out, they are resorting to illegal tactics and “agitating”, which is code for protesting/rioting or other illegal tactics (like blocking delivery vehicles).
With the farm laws repeal, it has essentially been proven that you can now stifle the population and infrastructure and get your way. So I won't be surprised if this ends up working, unless the government grows a spine.
It is a mixed back. Crooks and angels are both in big and small business. Some examples
1) During Covid Amazon seller doubled the price of oximeter and artificially created shortages. Besides classifying non delivery as customer return. Complained in writing but AMZN took no action. Amazon is just learning the patterns and using proxies to kill mom and pop shops as recent Reuters revelations have shown.
2) Ambani is no different using subsidized Jio phone, forcibly turning on location tracking and breaching SSL connection to locate/learn consumer activity pattern.
3) Some local businesses are stellar and consumer oriented. But others sell faulty Chinese oximeters for nearly 100 dollars and charge double price for a local wine bottle.
This is an amazingly welcome move and it will benefit everyone except the ones who're crying about this. I've dealt with these middlemen and if you think Reliance is gonna have a monopoly and raise the prices, you should see what these folks do now. I have no sympathy for anyone here.
It's an old boys club and anytime someone disrupts they suddenly go the "we're the good guys, the newcomers are the bad ones" route.
From the numbers in the article it seems like the main issue isn’t the cut that the traditional salesmen get, but rather the price that their distributors get compared to Reliance. Seems like there needs to be antitrust action to make sure Reliance isn’t able to negotiate lower prices than other distributers, and to make sure they aren’t killing off the competition by operating at a loss.
Is there any good reason for Reliance not to skip more of the chain? If Reliance is set up to deliver in a day after a mom-and-pop store orders through their app, it is not much of a leap for Reliance to expand to deliver straight to consumers.
The big online retailers like Amazon are probably going to greatly diminish mom-and-pop stores anyway, so I'd expect Reliance to be aiming at being another Amazon rather than being the company that owned distribution to mom-and-pop stores as those died off.
Hardly ruin, this is what happened in the UK when corner shops were replaced by big stores. The corner shops still exist but in lesser numbers and the stores still need staff!! So they just work elsewhere now
Kind of their fault for not doing anything when they saw this coming, no? Some people just don’t have what it takes to run a business, what can you do?
It’s not like any of these things happen suddenly, the warning signs show up years ahead.
Good riddance. During the covid lockdown last year, CAIT and friends petitioned the government hard to prevent home delivery of “non-essential goods” because they didn’t want Amazon taking business while stores couldn’t open to customers. Indian population suffered even harder because government was trying so hard to appease mom and pop stores. Like people couldn’t even get laptops for working remotely because of that nonsense.
Ambani’s other projects like Jio have been a huge service to India too by providing affordable data to many and bringing the country online.
Thank you for proving my point. Airtel 1GB data, just "data" used to be 198 rs before jio was introduced. Now you can get 1GB everyday close to that price, thanks to Jio.
Docomo was a classic "unreal cheap prices to pull in customers and we'll get acquired". Comparing it with providers that actually stay in the market is.. weird.
> I used to have balance like 50rs per 6 months.
Lol. You realise you are the exact reason they have activation charges now right? You can't be this clueless.
> Now I gotta pay 100rs per month to keep my secondary sim active and 300 or so per month to have data + unlimited calling
You're either using it all completely wrong or someone else is scamming you. I pay 299 per month for 2gb data everyday plus unlimited calling. I have never heard of this 100rs activation crap for a phone you're actively using. If you are not using the sim why do you need to keep it "activated". I think you need to get a better understanding of how these things work to make your life easier.
If you still can't figure this out and have so many problems why don't you switch to another provider that is better? Oh wait there isn't one. Otherwise you wouldn't have a jio sim in the first place.
I'm gonna file this under a bizarre case of person who has trouble understanding how basic phone recharge works in India and just wants to complain about Jio.
Thank God you feel that my point is bizzare. I guess India no longer gives a flying fuck about poor people. Daily wage labourers now don't have to choose between food and medicine, they now have to choose between food, Medicine and telephone like telephone is a fucking luxury.
I mean you can't be that dense to think that everyone in India works in IT & earns 6 figures per year? We are slipping steadily in hunger index ( translating for your privileged eyes: more and more people are going hungry because they don't have food or money to buy food)
And also in the next five years you're going to be outraged on twitter and dumbbook about "Jio raising prices and making telecom costlier than what it used to be before".
Min recharge needed to keep your phone active has gine from 49 to 99 in two quarters. Guess what'll happen in the next five years?
It seems like you are responding to the the title and not the content of the article. The kira stores that the CAIT ostensibly represntas are not the ones facing ruin here. It's the distributors who sell to the kiranas that are losing out to Jio.
Laptop availability was uneven for large parts of the world at different times last year. Many schools who never had Chromebooks, iPads, or laptops were suddenly issuing one per student. Lots of companies needed equipment for workers who may have previously had only desktops or who shared stations. Other people were buying additional equipment for home as well, in part because we’d be spending more time there.
Sales people fill a role: They first and foremost know the customer. They inform the customer and they file orders. They may act as a distributor keeping inventory and handling communication.
It is the ubiquity of digital communication allowing manufacturers and large scale distributors to be reachable. Advertisement allows big players to reach customers. Digital catalogues are generally superior to print and word of mouth. Digital sales processes have come to a level where a lot can be run with little human intervention making it a lean option for a big player. Logistics has improved making delivery possible from centralized locations. Digital payments, integration with sales processing and the ability to take many small risks are in favor of big players.
A lot has changed over the years.
Overall prices will come down. But well paying jobs are gone and small shop keepers will in the future not haggle with a despised middle salesman but have to deal with prices dictated by a giant. Differentiation for shop keepers will become more difficult. The power differential to their supplier has increased and whatever the spoils of the innovation are they are likely to accrue on the bigger players side. Probably a lot more than the bigger players share of the total innovation that enabled this disintermediation.