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FMCG brands jump on the e-commerce bandwagon

The rapid growth in e-commerce has probably spurred on traditional players to relook their strategy.

FMCG firms, which have historically relied on modern and general trade for retailing in the country, have been bitten by the e-commerce bug and are now introducing products that are either exclusive to e-commerce or are online-first. Dabur, for example, introduced its Amla Kids range, which includes shampoo and hair oil, exclusively on Flipkart earlier in the year and is now expanding it to other marketplaces. RB, formerly known as Reckitt Benckiser, has an online-only range of products that includes car fresheners, liquid laundry detergent and water softeners. Marico, on the other hand, has a slew of digital-first products — True Roots botanical hair tonic, Saffola FITTIFY Gourmet range, Coco Soul cold-pressed virgin coconut oil, Parachute Advansed Coconut Crème range and Set Wet Global Edition perfume sprays, among others.

“A lot of consumers, particularly millennials, are shopping for premium products exclusively on e-commerce or digital platforms. Therefore, there is a need for us to be present in this space with a range of products catering to their needs and aspirations,” says Lalit Malik, chief financial officer, Dabur India.

The rapid growth in e-commerce has probably spurred on traditional players to relook their strategy. Though e-commerce’s contribution to overall FMCG sales in the country stands at 2% currently, according to Nielsen, it is expected to increase to 5% ($4 billion) by 2022. Food (44%) is the highest contributor to FMCG sales on e-commerce, followed by personal care (40%) and household care (13%).

Nielsen data also shows that metros contribute to the highest share of FMCG sales through e-commerce. Malik says in FY19, e-commerce contributed to 1.4% of Dabur’s sales and they hope to end the current year at 2%. According to a Marico spokesperson, the company’s e-commerce business has quadrupled in the last one year and contributes 5% to the overall India business.

Most products being introduced to e-commerce are priced in the premium range and are being promoted through digital media — social media, banner ads on marketplaces — by these companies.

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FMCG, FMCG brand, e commerce, bandwagon, industry news, Dabur, True Roots botanical hair tonic, Saffola FITTIFY, Gourmet range, Coco Soul, coconut oil, Parachute Advanced Coconut Crème range, Set Wet Global Edition perfume sprays, 

Experts say online-exclusive product ranges are also a measure taken by FMCG players to counter the economic slowdown in the country.
“The slowdown has been experienced more in rural areas and wholesale channels. E-commerce, which is mostly urban-centric, is still witnessing growth and hence companies are focused on it. While e-commerce forms a small part of their portfolio, at this point, growth from any avenue is welcome,” says Abheek Singhi, senior partner and MD, Boston Consulting Group. The FMCG industry has been particularly hit by consumption slowdown in the country and according to industry watchers, saw a 7% sub-optimal growth during the first three quarters of CY 2019.

For some companies, e-commerce also presents an opportunity to test market their new products before they introduce it to offline channels.

Amul, for example, launched its lactose-free milk and camel milk initially on online marketplaces and then later, to modern and general trade.

“We have seen that for niche products that have a very scattered demand, we cannot reach out to consumers through our regular distribution. Therefore, we introduce them to e-commerce and as demand starts coming in, we make them available in modern trade,” says RS Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation.

But as these companies gear up to tap the opportunities presented by e-commerce, they should also be prepared by the challenges presented by the new channel. “For a lot of these companies, e-commerce is quite new so discounts, schemes, returns, etc, become a little difficult for them to fathom,” says Ankur Pahwa, e-commerce lead at EY. Singhi of BCG says these companies at times treat e-commerce as another modern trade medium but there is a need to understand that a customer’s journey on e-commerce is very different. “Having the best website and interface in the place is not enough. If the supply chain logistics is not geared to deliver it at the right cost and the right time, then repeat purchases don’t happen,” he adds.

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Source: Financial Express