The Next Horizon For FMCG Industry: Ecommerce Takes A Hold

The catalysing factors of increase in consumer demand for convenience, better technology, coupled with emerging technologies and macroeconomic conditions have accelerated the evolution of ecommerce at the market level

The ecommerce industry is on the edge of transformation with five years of equivalent growth occurring within five months. This pandemic infused acceleration of ecommerce has been phenomenal, with online sales contributing to a huge chunk of FMCG revenues in India. Going by numbers, as per a report by ICICI Securities, top FMCG firms in India had ecommerce contributions ranging between 5-8% in Q1 FY21.

The catalysing factors of increase in consumer demand for convenience, better technology, coupled with emerging technologies and macroeconomic conditions have accelerated the evolution of ecommerce at the market level. Our consumers are demonstrating different preferences and with time, there is a shift that reflects continued maturity in their approach on how they use digital platforms for online shopping. Let's take a quick look at the gradual movement of ecommerce for FMCG in India that gives an idea of the potential trends that will shape its future.

Focus on healthier products

Snackers are looking for ‘clean’ food snacks and there is a clear shift observed for mindful eating. According to a report by Neilsen, sales of snack food in the Asia-Pacific region have been soaring over the past 3-4 years. The current trend of health-based foods continues to grow, owing to the greater understanding and awareness of well-being by consumers post pandemic.

Behaviour and preferences by Millennials

Millennials are on a lookout for newer brands that they perceive as innovative product-lines, and seek trendy health foods that have their own distinct demands. They are well researched in terms of product information and rely heavily on peer recommendation and experience over a brand’s claim of genuinity. It is also observed that they tend to spend more on online purchases, rather than making grocery market trips. This popularity of ecommerce amongst millennials has pushed several brands and digital platforms to collaborate in order to retain millennial consumers.

A large challenge: Sustainability

Sustainability is slowly taking a more central role within the FMCG industry. People are increasingly becoming more aware of the environmental issues and are interested in how brands are plugging the sustainability angle to products across the whole supply chain, from the sourcing of ingredients to the packaging. Consumer trust is an indispensable parameter for ecommerce success. So we need to think as they do since they are influenced by green, environmental factors as well as the concept of responsibility and accountability.

Technology and Potential

Whether budding or already developed, online growth potential exists in nearly all markets. For FMCG ecommerce to thrive, a market must have foundational infrastructures like high penetration levels for bank accounts, mobile payments, internet access and smartphone uptake. For the past some years, India has been making efforts to scale internet proliferation along with bank account linking for easier access to digital payments. And this has opened doorways for consumers to access information.

Advice for retailers and manufacturers

As we move towards a more digital world, FMCG online growth will continue to outpace offline growth, and most retailers and manufacturers will need omnichannel strategies to keep up with the evolving consumption patterns.

Today, retailers and manufacturers who are yet to explore the ecommerce route must define their plans immediately. It is clear that for FMCG companies, the choice of ‘bricks versus clicks' are no longer valid. Instead, developing an omnichannel strategy with a mix of physical and online presence is defining the winning formula.

*The author is Krishnarao Buddha, Senior Category Head at Parle Products

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