Digital Connectivity & FMCG, Strings Attached

The post-pandemic online panic shopping, leading to a surge in the online FMGC sector, does not come as a surprise. Over the past two years, the FMCG sector has witnessed a massive transformation due to the changing behaviour of customers. The Indian Brand Equity Foundation estimates that the online market will reach USD 200 billion in 2026. In 2017, the number of online buyers stood at USD 38.5 billion.

Ashish Khandelwal, Managing Director, BL Agro, says, "May it be due to the D2C or the digital connectivity, the sales of our brand have doubled."

A report by Jefferies states that e-commerce has become a channel of choice in terms of product innovation, testing new concepts, and a faster route to market. 

"Quick commerce is growing more than 25 per cent year on year. They are also building infrastructure to deliver the products within 20–25 minutes, leading to an increase in supply and fulfilment of demand. Being a D2C brand first, we can observe the increase in the share of commerce in overall growth," Vikas Nahar, the Founder and CEO of Happilo.

"Indian consumers (72 per cent) opt for local online shopping for luxury products. By 2030, the total share of FMCG sales will increase by 11 per cent," the report said.

Providing a Plethora of Choices & Increasing Sales

Just by swiping left and right or scrolling up and down, the customer gets a host of choices. Experts told BW Businessworld that most of the new competitors are entering the online FMCG space. 

"Customers in Tier I and II cities will be hooked to online shopping. E-commerce platforms like Meesho and other online apps are helping to proliferate sales," experts note.

Amarnath Halember, Executive Director and CEO, NextG Apex India, says that digitalisation not only creates convenience but also helps consumers to explore a variety of assortments and gain a better understanding of product information and price benchmarks with the ease of digital connectivity. 

On keeping sales intact in a competitive environment, Halember states that e-commerce channels provide consumers with many options in one go, without the necessity of leaving one's couch. But the best way to combat ongoing inflation is to understand consumers' purchasing habits and provide them with value-based products at an affordable range. 

In times of inflation, marketing and pricing strategies, lowering supply chain risk, and labour market risk are factors that play a crucial role in how brands can preserve their sales and bottom line. Grammage reduction was also amply used by brands to hold on to sacred price points while keeping the sales rolling. 

To increase their sales, the brands' marketing communications also revolve around the festivals, making the campaigns very engaging on digital platforms. 

Still a Soft Corner for Offline Shopping?

Though e-commerce is the talk of the town, an omnichannel strategy is the need of the hour for FMCG brands. "Providing customers with a personalised experience is essential. Buying FMCG products in the offline market is a form of outing also. More than 80 per cent will continue to buy FMCG products offline," says Sunil Agarwal, Chairman of RSH Global. As per reports, 80-85 per cent of the market is occupied by the offline market. 

Compared to the previous two fiscal years, market research firm PGA Labs report predicts that e-commerce shipments will grow at a rate of 20 per cent, which is less than the last two financial years. 

Is there any chance that the online market could take over the offline market? Experts firmly believe that Indians prefer the traditional way of shopping—by visiting retail outlets and making purchases in person, and this habit is unlikely to go away soon. 

It is forecasted that in the process of digitisation, offline retailers will learn the use of technology, enabling them to reach consumers and continue to be preferred choices due to reach and long-term loyalty.