Mumbai (IANS) A report on consumer goods distribution channels has revealed that while modern trade and e-commerce have gained significant revenue share after the "twin shock" to the economy, demonetization and Goods and Services Tax (GST), traditional wholesale has lost half its revenue share.
"In rural towns or villages, wholesale accounts for 60-70 per cent of sales. However, demonetization and GST compliance nearly crippled this channel, which is still reeling from it," said the report by financial services group Centrum.
Post the twin shocks to the economy, Centrum said, the traditional wholesale channel was reeling under pressure as they operated on a pure cash basis.
Wholesale accounts declined from 135,000 before GST to 66,000 now, as per the estimates built on various interactions, Centrum said. This has led to loss of sales of 8-10 per cent and inventory correction in these outlets.
"Thus, companies which were highly reliant on the wholesale channel saw their revenue decline, forcing them to rebuild distribution," the report said.
The report further stressed that organized wholesale and cash-and-carry are replacing traditional wholesale providing GST compliance and no credit. In the past three years, they have doubled their store count to 100.
Centrum said its top picks in such a scenario are Britannia (has low wholesale dependence and focus on central India belt) and Dabur (uses a cluster-based distribution strategy in rural areas and on focus-on-power brands strategy).
"We feel the most impacted would be Colgate (weak wholesale channel and yet to build full direct distribution)," it said.