FMCGs Entry into E-Commerce

Posted in Operations & IT Articles, Total Reads: 890 , Published on 05 May 2015

Kodak in 1975 had 1000 million to lose. They invented a camera that would make their most profitable product, the film-roll, a surplus, a digital camera. They ducked under this possibly revolutionary invention, smirked at it and let it go to its competitors. Exactly 28 years after that, they filed for bankruptcy. They went downhill from the very moment they decided to reject a new, disruptive change.

History is wrought with examples of firms such as Kodak which failed to board the bandwagon of change and endured the painful leash of fate. A more relatable example of not having accepted technology and having to have paid a price is that of Hindustan Motors, erstwhile manufacturer of the famous Ambassador cars. HM, a risk-averse pre-1990 style company perished under its own weight.

Image Courtesy:, stockimages

The only thing permanent is change. As a marketer, you’d never know what hits you unless you are prudent and accepting of change. There can be no doubt about the fact that the biggest change one can witness in the Indian consumer market, be it FMCG or FMCD, is that of e-commerce.

According to a recent Ernst and Young report, the e-commerce sector has grown by almost 35% CAGR from 3.8 billion USD in 2009 to an estimated 12.6 billion USD in 2013. And this is when the internet penetration rate in India hovers around a miserly 8%. That tipped to grow two folds in the next five years, it would indeed be foolhardy for anyone, let alone adaptive companies like Unilever, P&G, Pepsi and the likes, to ignore a gold mine fuming to burst open. (Source)

Products such as shampoos, deodorants, and makeup along with other health and hygiene products are leading the growth of FMCG products online. The E-commerce model is especially useful for companies which do not possess vast distribution to match the might of FMCG bigwigs like HUL or ITC, which is the reason why smaller brands like Khadi, Vini, Patanjali etc. have been quick to adapt the E-commerce opportunity.

You don’t realize what disruptive is until your already behind the wave. Five years back, the idea of buying a soda can or a pack of regular cookies online would have been laughed off. Today, increased disposable income and convenience has made it an automatic choice for many. Moreover, it’s safe to assume the same for millions of people around the globe.

What opportunities arrive bereft of challenges? There are issues, which pertain to increasing trust, increasing service agility, weak logistics infrastructure etc. The issue that stands out is the delivery time.

It is true that currently, small volume retailing, something prevalent in developing economies is not profitable for FMCG companies. But every other day we see a Coke trying to upstage the market with its glittery ( and BTW successful) Coke zero launches, a TATA opening up dedicated to e-tailing sites, an Amazon promising to deliver at your doorsteps within hours. And things are only going uphill from here.

Calling ecommerce ‘a latent phenomenon’ is borderline obtuse. I wouldn’t claim that all of the above stated and others would be taken care of merely by time. Bright minds, fierce competition and increased ambition can be the drivers of growth in this direction. It’ll take a leap of faith by both consumers and producers. As for FMCG companies, they know that in a fiercely competitive, often sluggish market, E-commerce opens the black box of opportunities.

Well, It is as they say, you snooze, you lose. There is indeed a lot to gain but also insane amount to lose if one lets the ecommerce opportunity go. If not the former, the latter would ensure that FMCG companies, sooner or later, become a pillion in ecommerce’s juggernaut.

This article has been authored by Rakshit Verma from FMS Delhi


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