Role of Bitcoin in the FMCG Industry – FMCG industry is the largest and most profitable industry in India. It stands for 61% of the Indian market with around Rs. Eighty thousand crores (around $150 billion) may grow at a 15-20% CAGR. So you can expect that it will reach around Rs. 150000-200000 crores (around $30-$40 billion) in the next 4–5 years.
FMCG is heavily dependent on its commission agents, distributors, and retailers for its growth. Unfortunately, these are primarily informal channels with very little transparency and no proper document flow system (in most cases).
Many products are also sold unofficially, which hampers the growth for the industry that creates jobs and provides products to consumers at low prices.
There are around 10 million retail outlets in India with a very fragmented structure of distribution channels. There is considerable scope for improvement on these fronts as there is a lack of uniformity in pricing, and there is no transparency in the distribution system.
So, it can be said that to bring transparency and better distribution structure in this industry, a well-working digital mode of payment is needed. And this is where Bitcoin has its place:
1) No transaction or business charges:
Bitcoin transactions are P2P (peer to peer). This means that no third party or intermediary is required to handle the transaction. It’s a straightforward process of transferring money from one wallet to another. Hence, all the transactional and business expenses are removed for an entrepreneur, which leads to a higher return on investment and more profit. How?
Suppose that there is a company that sells shampoos to retailers. And suppose the product price is Rs.100 (one hundred) for one unit of shampoo, and they want to earn 30% profits on it as an SME or Micro level entrepreneur, which is very much possible if their business is well established. However, if they use traditional payment methods like NEFT, IMPS, RTGS, or card network, they might be paying 2–5% transaction fees on each purchase which sometimes can go up to Rs. 9 (nine) for one unit of shampoo, costing Rs. 100 (one hundred).
To make this process more understandable, it can be assumed the same company and the same transaction of Rs. 9 (nine) for one unit is based on traditional payment methods.
In this case, if they are getting a 30% profit margin from their sales, then their profit will be Rs. 6 (six) only in that transaction. Which is very much less when compared to the Net loss of Rs. 3(three) that they have to bear in the same transaction using Bitcoin or any other digital mode of payment which is also very much possible with Bitcoin.
There are no records for the transactions made with traditional payment methods except a few papers on an entrepreneur’s bank statements or card statements. But with bitcoin, there will be a complete record of all transactions made. Moreover, the copies of those records can also be sent to tax authorities for proper documentation of audits or investigations.
It’s impossible to have such transparent records in any traditional payment method. This is one of the most fundamental reasons entrepreneurs prefer Bitcoin over any other digital mode of payment.
3) Instantaneous Transfer:
Transaction confirmation is very much faster with Bitcoin. It’s not possible with traditional payment methods like NEFT, RTGS, IMPS, which take at least 1–2 hours to confirm the transaction. Bitcoin takes only 10 minutes or sometimes seconds, also depending upon the blockchain network.
Hence, it’s a desirable option to use Bitcoin among entrepreneurs as they can utilize it for other business activities, and there is no charge involved in this process. 4) Global availability:
Bitcoin provides global acceptance. It means that you can send or receive bitcoins from any part of the world. So whether you are in India or Africa, the USA or Europe, Bitcoin is accepted globally, which is not possible with any traditional payment mode. Here you can check Bitcoin’s benefits to eCommerce . Hence, entrepreneurs can reduce their international transaction charges by using bitcoins for business purposes. Winding Up:
To conclude, though there is hype and craze about bitcoins in the media, the benefits of using them for business over traditional payment modes are visible.
It’s a digital mode of payment that provides transparency, faster transaction confirmation time, and global acceptance with low-cost transactions. All this makes bitcoin an attractive option for entrepreneurs to use for their business. Hence, it’s not only the entrepreneurs, but all small and medium scale business units can also use bitcoins to expand their business with lower costs involved in transactions.
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Review Role of Bitcoin in the FMCG Industry.