Wholesalers in India..Necessary Evil?

Last few weeks have been busy looking at issues related to distribution channels in India, thought will share something out of that.

The post today talks about a very old intermediary in the distribution channels in India, the wholesaler. In an era of the Big Bazaars, Reliance freshes and Spencers many of us would want to believe that the days of the wholesaler are numbered and end is not very far. But this is far from truth , and the death for the wholesaler as an intermediary has been predicted for a very long time even in developed countries but they continues to thrive....

Wholesaler is an intermediary who buys goods for resale usually from company distributors or stockists. He buys from various companies and stocks all major brands in the category in which he operates. He has the ownership of the goods he sells and the operations are run like a typical store where the resellers (could be retailer's themselves or bulk buying individual customers) who come to him with an elaborate list and buy. To answer the question why he survives as an intermediary, he is willing to provide smaller lots of goods, provide credit if needed and is a one stop shop for all the brands in that category....

Many companies deal with them as a necessary evil, in an ideal situation they would like to avoid them totally , but the fact is that inspite of the negatives like loss of control, and lack of transparency, they have an important role to play in Indian distribution channels. They are the ones who provide substantial reach for various companies (though the degree of dependence wholesale varies across product categories, like very high in FMCG high volume and low value products) especially in rural markets. In my own research I have found that rural retailers more than three-quarters of the time rely on the wholesaler for their purchases.

Though some companies of late have started realizing their importance and started working with them pro-actively to engage with them. Companies like HUL have very specific wholesaler-activation plans to push their products through the wholesale channel. And a recent example shared with me was how some companies have been working with the boys who work at the wholesalers, by providing them with very small incentives like taking them out for a pizza treat and other small incentives and have got positive results out of that....

One could conclude that as much as the unorganized nature of Indian retail is going to part of the reality in marketing in India , so would be the reliance on wholesaler....