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What is the story about?
The Federation of All India Distributors Associations (FAIDA), representing more than five lakh distributors catering to three crore retailers across India, has raised a red flag over what it terms “serious risks” to the survival of the country’s century-old distribution system.
In a strongly worded communication addressed to the directors and sales leadership of FMCG, food and beverages, telecom, and mobile companies on Saturday, September 27, FAIDA highlighted a series of structural challenges and business practices that it says are undermining the fraternity’s role in India’s consumer ecosystem.
D2C push sparks alarm
The association’s first major concern relates to the direct-to-consumer (D2C) strategies being aggressively pursued by companies. While firms continue to depend on distributors for last-mile reach, FAIDA argues that parallel D2C channels are effectively pitting principals against their own partners.
“This dual approach creates conflict and insecurity, leaving distributors without stability in the partnership,” the body said.
Margins stagnant, costs rising
Another sticking point is the stagnation in distributor margins, which FAIDA says have remained unchanged for over 20 years, even as operational costs have multiplied three to five times.
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With infrastructure, logistics, and compliance costs rising sharply, the association believes the current ROI structure is unsustainable.
Lack of respect and formality
FAIDA also pointed to a growing lack of recognition, saying distributors — despite decades of investment in market building — are often treated as unpaid employees by junior staff.
Adding to this, most companies operate without formal business agreements. The absence of written commitments, minimum continuity guarantees, or proper exit clauses leaves distributors exposed to sudden disruptions, it warned.
Unequal playing field
Distributors allege that the benefits of their work are increasingly being diverted to modern trade, corporate retail, e-commerce, and quick-commerce platforms, which receive preferential pricing and incentives. This imbalance not only erodes distributor profitability but also, in FAIDA’s words, causes “deep humiliation” to the traditional network that has historically powered India’s retail sector.
Data misuse and banking risks
A particularly sharp objection has been raised against the use of retail billing software, which FAIDA claims is being misused to harvest distributor data for direct marketing without consent. The practice of creating dummy outlets and forcing billing under such names amounts to pushing distributors into illegal activities, it said.
The association also cautioned against the misuse of banking instruments such as the National Automated Clearing House (NACH) and advance signed cheques. Unilateral booking of sales without consent, leading to dishonour at banks, would not only harm reputations but also violate trust, FAIDA warned.
Read more: GE Aerospace bets big on AI; great success in finding talent in India: CTO Alok Nanda
Call for corrective action
FAIDA has outlined clear expectations:
The association also disclosed that it has already held consultations with the Commerce & Industry Minister and the Law Minister, and an interim report with specific case examples is being finalised.
United front and the bigger picture
FAIDA underscored that the distribution community will act collectively if corrective steps are not taken. “On certain issues, there can be no competition — no individual thoughts among us. We will stand united and fight collectively for justice,” the communication said.
The debate strikes at the heart of India’s $110-billion FMCG industry, where traditional distributors have historically been indispensable in ensuring last-mile delivery across urban and rural markets.
However, with the rise of e-commerce, quick commerce, and direct digital channels, companies are reimagining their go-to-market strategies. For distributors, the fear is that without formal protections and fair returns, their century-old role could be relegated to the sidelines. For companies, balancing the efficiencies of modern channels with the reach and resilience of the traditional network will likely define the next phase of growth.
Read more: British govt guarantees £1.5 billion loan to Jaguar Land Rover following cyberattack
In a strongly worded communication addressed to the directors and sales leadership of FMCG, food and beverages, telecom, and mobile companies on Saturday, September 27, FAIDA highlighted a series of structural challenges and business practices that it says are undermining the fraternity’s role in India’s consumer ecosystem.
D2C push sparks alarm
The association’s first major concern relates to the direct-to-consumer (D2C) strategies being aggressively pursued by companies. While firms continue to depend on distributors for last-mile reach, FAIDA argues that parallel D2C channels are effectively pitting principals against their own partners.
“This dual approach creates conflict and insecurity, leaving distributors without stability in the partnership,” the body said.
Margins stagnant, costs rising
Another sticking point is the stagnation in distributor margins, which FAIDA says have remained unchanged for over 20 years, even as operational costs have multiplied three to five times.
Read more: HDFC Bank barred by Dubai Financial Services Authority from onboarding new clients or undertaking fresh biz
With infrastructure, logistics, and compliance costs rising sharply, the association believes the current ROI structure is unsustainable.
Lack of respect and formality
FAIDA also pointed to a growing lack of recognition, saying distributors — despite decades of investment in market building — are often treated as unpaid employees by junior staff.
Adding to this, most companies operate without formal business agreements. The absence of written commitments, minimum continuity guarantees, or proper exit clauses leaves distributors exposed to sudden disruptions, it warned.
Unequal playing field
Distributors allege that the benefits of their work are increasingly being diverted to modern trade, corporate retail, e-commerce, and quick-commerce platforms, which receive preferential pricing and incentives. This imbalance not only erodes distributor profitability but also, in FAIDA’s words, causes “deep humiliation” to the traditional network that has historically powered India’s retail sector.
Data misuse and banking risks
A particularly sharp objection has been raised against the use of retail billing software, which FAIDA claims is being misused to harvest distributor data for direct marketing without consent. The practice of creating dummy outlets and forcing billing under such names amounts to pushing distributors into illegal activities, it said.
The association also cautioned against the misuse of banking instruments such as the National Automated Clearing House (NACH) and advance signed cheques. Unilateral booking of sales without consent, leading to dishonour at banks, would not only harm reputations but also violate trust, FAIDA warned.
Read more: GE Aerospace bets big on AI; great success in finding talent in India: CTO Alok Nanda
Call for corrective action
FAIDA has outlined clear expectations:
- Formal business agreements with mutual terms
- Minimum guarantees of business continuity
- ROI protection for distributors
- Written commitments in place of oral assurances
- Proper notice periods before termination of business
The association also disclosed that it has already held consultations with the Commerce & Industry Minister and the Law Minister, and an interim report with specific case examples is being finalised.
United front and the bigger picture
FAIDA underscored that the distribution community will act collectively if corrective steps are not taken. “On certain issues, there can be no competition — no individual thoughts among us. We will stand united and fight collectively for justice,” the communication said.
The debate strikes at the heart of India’s $110-billion FMCG industry, where traditional distributors have historically been indispensable in ensuring last-mile delivery across urban and rural markets.
However, with the rise of e-commerce, quick commerce, and direct digital channels, companies are reimagining their go-to-market strategies. For distributors, the fear is that without formal protections and fair returns, their century-old role could be relegated to the sidelines. For companies, balancing the efficiencies of modern channels with the reach and resilience of the traditional network will likely define the next phase of growth.
Read more: British govt guarantees £1.5 billion loan to Jaguar Land Rover following cyberattack
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