How big FMCG brands cheat New distributors

FMCG (Fast-Moving Consumer Goods) brands frequently have strict terms and conditions for their distribution channels. While many operate fairly, some may take advantage of unskilled distributors, particularly newcomers, who may not fully comprehend the complexities of distributorship agreements. Here's how certain FMCG brands may exploit freshers:

1. Imposing unfavorable payment terms.

Advance Payments: Requiring large initial investments or security deposits without clear criteria for returns or refunds if the distributorship fails.
Delayed Payment Settlements: Brands may delay paying commissions or rebates, hurting a distributor's cash flow.

2. High inventory requirements.

Forcing distributors to keep extra inventory, especially slow-moving or nearly-expired products, which may be difficult to sell, resulting in losses.
Imposing penalties for failing to fulfill unrealistic stock or sales targets.

3. Non-exclusive Territories

Allocating overlapping regions to many distributors leads to internal competition and lower profits.
Promised exclusivity verbally but failed to formalize it in the agreement.

4. Hidden Clauses

Contracts have complex or ambiguous provisions, such as termination conditions, security deposit refunds, or sales targets, that are difficult to meet or understand.
Imposing severe fines for small contractual violations.

5. Poor marketing and support.

Providing little or no marketing assistance, forcing freshers to incur promotional costs despite claims of brand support.
Failing to meet training or logistical support commitments.

6. Skewed Sales Targets

Setting unrealistic sales expectations that new hires cannot fulfill, resulting in the termination of the agreement and forfeiture of security deposits.
Linking refunds or perks to unrealistic goals.

7. Dumping Near-Expiry Products

Offloading soon-to-expire or unsellable products to new distributors, which undermines their confidence with merchants and customers.
Refusing to accept returns or exchanges on defective or unsold items.

8. Unilateral Price Changes

Frequently adjusting product pricing or providing direct discounts to retailers, which reduces the distributor's profitability.
Providing bulk discounts directly to large merchants, skipping wholesalers completely.

9. Lack of transparency

Not providing accurate information about competitors, market potential, or sales history, leaving distributors unprepared for market issues.
Withholding information about retailer relationships or ongoing problems in the territory.

10. Termination without cause.

Terminating agreements abruptly, especially after distributors have made significant investments in the brand, claiming ambiguous reasons such as non-performance or "strategic realignment."
Using such strategies to switch distributors after receiving a return on their initial investment.

Beware and invest wisely! We strongly recommend working with an expert. Visit Takedistributorship.com. They have been helping Distributors, Super stockists, and C&F agents find genuine and profitable Business Opportunities since 2017.