Covid-19 impact: Distributors supplying consumer goods to retailers on advance cash instead of credit

Distributors across consumer goods, including fast moving consumer goods, electronics and smartphones have started dealing with local retailers only in cash instead of usual 7-21 days of credit, fearing that smaller retailers may not be able to survive the pandemic or pay back their dues.

This, in turn, has affected sales of several companies since several retailers are not able to pick up stock. Companies said this is more pronounced in categories which are in demand like packaged snacks, edible oil, biscuits, dairy products, sanitiser, room cleaners, feature phones and smartphones in the sub-Rs 15,000 segment where pent-up demand is more.

“The biggest issue is in taking our products to retailers as distributors are reluctant to sell them on credit since they fear smaller retailers may not be able to pay back or worse, wind up completely,” said Angshu Mallick, deputy chief executive of Adani Wilmar, which sells edible oil, atta and rice. “As a result, our products are reaching about 50% of the retail stores.”

India’s largest food company, Parle Products category head B Krishna Rao said several distributors have burnt their finger when the lockdown started with payments stuck from smaller stores. “Hence, they are only doing cash sales and even started to accept digital payments, including credit card,” he said.

In smartphones and electronics, retailers said distributors of brands like Samsung, Xiaomi, Oppo, Voltas and Godrej Appliances amongst others have moved to cash payments.

Neighbourhood cellphone retailers body, All India Mobile Retailers Association president Arvinder Khurana said most brand distributors are offering models on a cash basis or have significantly cut down on credit terms which has hit small mobile retailers badly. “Supplies are almost negligible especially in sub-Rs 15,000 and hence they are further taking advantage,” he said.

Consumer Electronics and Appliances Manufacturers Association president and Godrej Appliances business head Kamal Nandi said everybody is challenged with cash flow and hence cash in hand is becoming the preferred way of business.

Several companies, however, have not changed their business and payment terms.

For instance, Xiaomi India said its policy for credit to distributors has not changed and has in fact extended the period to support their liquidity during the lockdown. “We also announced a working capital loan for all offline retail partners to ensure smooth business continuity,” it said.


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