Q-com's growth disrupting retail, say distributors

Fast-moving consumer goods (FMCG) distributors' association has written to the Ministry of Commerce and Industry, expressing its apprehensions that the “unchecked expansion” of quick commerce platforms was leading to severe disruptions in the retail ecosystem.

India Consumer Products Distributors Federation on Thursday shot an email to the government, saying that significant challenges were posed by the rapid growth of quick commerce platforms such as Blinkit, Zepto and Instamart to the traditional retail sector and the FMCG distribution network in the country.

"While we acknowledge the role of innovation and technology in shaping the future of commerce, the unchecked expansion of these quick commerce platforms is leading to severe disruptions in the retail ecosystem,” the letter said India's Foreign Direct Investment (FDI) regulations.

The FDI rules clearly prohibit e-commerce entities operating under the marketplace model from holding inventory or exercising control over inventory sold on their platforms.

"However, it appears that these quick commerce platforms may be engaging in practices that blur the lines between a marketplace and an inventory-based model, potentially violating FDI norms,” it said.

It added that it is not only creating an uneven playing field but also threatening the livelihoods of millions of small retailers and distributors who have been the backbone of India’s retail sector.

The FMCG distributors’ association asked the government to initiate an investigation into the operational models of these quick commerce platforms so that they ensure compliance with FDI norms, implement measures for small retailers and traditional distributors to safeguard their interests and prevent monopolistic practices and facilitate a dialogue between all stakeholders from the retail sector, FMCG companies and quick commerce platforms.

It comes days after the Union Commerce and Industry Minister Piyush Goyal said the e-commerce sector’s rapid growth is a “cause for concern” and not pride, warning that it could lead to job losses in traditional retail.

He argued that e-commerce platforms are taking business away from small retailers by offering high-margin products, such as consumer electronics and apparel, at discounted rates.

While acknowledging the importance of e-commerce, Goyal stressed the need to “carefully consider” its role in a more organised manner, weighing both its benefits and potential drawbacks.

The minister later softened his stance, clarifying the government is not opposed to e-commerce but is focused on ensuring fair competition between online and offline businesses.