← Business Metric: Operational (all topics)
Distributor margin & channel conflict
What it is
FMCG distributors typically earn 3.5-5% on the goods they move, funding stock, credit to retailers and delivery from that spread. Quick-commerce platforms buying direct from companies bypass them, and some have been appointed as direct distributors themselves
Distributor bodies have threatened collective action over margins
Impact on industries
- A thin margin cannot absorb the volume loss as quick commerce and modern trade take share from the general trade the distributor serves
- Appointing platforms as direct distributors puts the company's own channel partner in competition with a better-capitalised buyer of the same goods
- Retailer credit cycles have stretched, so distributors fund receivables on a 3.5-5% spread - a working capital burden disproportionate to the margin
- Kirana route density is hard to replicate outside metros, so general trade retains relevance - but the conflict is a channel transition, not a rate dispute