FMCGs in E-Commerce – Where are they today?

Published by MBA Skool Team, Published on December 02, 2015

In the past few years, the proliferation of mobile phones and internet have led to the creation of E-Commerce sector, which carved a space for itself in an already competitive landscapes of India. A recent report by Internet & Mobile Association of India (IAMAI) and KPMG found that, as of June 2015, internet users in India stood at over 350 million. With internet penetration still at 19 per cent, which is only one-third of that in other BRIC nations, it is expected to grow at a CAGR of 61.3 per cent from 2013 – 17. India’s internet growth story is strongly driven by the rapid growth of rural mobile internet users, which grew from 0.4 per cent in 2012 to 4.4 per cent today. Metros and Tier- 1 cities although not saturated yet are also growing at a tremendous pace.

Powered by this rapid growth of internet reach, the Ecommerce companies are aggressively out to seek funding by Angel Investors and Private Equity partners. Ecommerce companies, including start-ups and industry leaders such as Flipkart and Snapdeal have received a whopping $3454 million in 2014 alone! The E-retail or eTail, (online retail and online marketplaces) which is pegged at $6 billion in 2015, emerged as the fastest growing segment in the industry with a CAGR of around 56% in the period of 2009 – 2014. In 2014, online retail had a miniscule share of 0.4 per cent in Indian Retail and is expected to take a share of 3 per cent by 2020.

Image: pixabay

Consumers in action

This incredible development is brought about by online customers, specifically women, Generation Z and rural customers who have an ever-increasing access to the internet through various media. A survey conducted by the consulting firm Bain together with Google, in 2015 have highlighted the following trends:

• Women who are significant contributors to the offline FMCG purchases in India, are still underrepresented with only 15 per cent women shopping online, as against 24 per cent of the entire population. Working women, are found to spend twice as much the time and 1.5 times more likely to buy FMCG products online, creating huge scope for apparel and beauty products market.

• Generation Z, people born after 1995 in India, are essentially brought up in the digital-era and will be major consumers of this channel when they become financially independent in the coming years.

• The rapid rural and Tier-2 cities’ internet penetration and the convenience of shipping provided by the eTailers have led to a major growth in this segment of population, contributing to over 70 per cent sales of FMCG products during the Grand Diwali Mela 2014. With the increasing disposable income, this segment is set to witness massive growth.

FMCGs join the bandwagon

With this huge potential unlocked by the spur in internet, traditional FMCG companies which have long ignored the competition from Ecommerce players, realised the palpable threat and are devising strategies to compete and thrive in the industry. These companies are experimenting with various models to test the waters and gain from building online selling platforms.

• Dabur India has reportedly launched four portals and is also selling its products through arrangements on Flipkart and Amazon India.

• Godrej Consumer Products have adopted a wait-and-watch policy, currently selling their products on Snapdeal, and announced that “will soon lookout for partner with e-commerce marketplaces, rather than launch our own portal.”4

• ITC Foods, currently sells food products like Masala mixes, chutneys, and other Ready to Dine products through their website:

• Marico is also reported to be working on their plans for the future, with sales of 7 – 8 per cent for their niche brands such as Livon hair gain, by selling through Flipkart and Snapdeal in 2014.

• Hindustan Unilever Network (HULN), also currently selling its products through Flipkart and Snapdeal is reported to be working on plans to launch its own Ecommerce channel in India. 4

Barriers to overcome

Although online market presents a lucrative prospect for FMCG companies, there are challenges that need to be dealt with to attain success.

• Distribution and logistics is perhaps the most important concern which the companies face. Experts studies have suggested that delivery costs under Rs. 70 is required to make the economics of Ecommerce sustainable3

• Lack of legacy data from the point-of-sale, limits the analysis of data to design predictive models which would improve forecasting thus hinder the design of distribution networks

• Customers’ reluctance in purchase for categories such as beverages, confectionery and other impulse purchase products may not generate economically viable options and would need consumer incentives.

Areas to focus

With the opportunities presented and challenges to face, the industry presents different segments which can offer a profitable and positive profit proposition.

• Products with cyclical buying patterns present a reasonably predictable demand for online selling. Goods such as groceries, and infant care can be attractive segments, which can be coupled with Analytics to predict buying incidences to provide convenience of delivery. Infant care category is expected to grow at a rate of 25 – 30 per cent by 2020, according to the Bain report.3

• Segments such as hair and skin care, largely swayed by fashion are influenced by the digital media campaigns. If done right, these can enhance the sales in both online and offline channels. Beauty products category is expected to grow at a rate of 8 – 10 per cent by 2020.3

Future clearly present rich opportunities, which will play in the favour of the players who understand the changing landscape and adopt the online-mantra. FMCG companies need to set their priorities right, and enter the fray to claim their share of the increasing Ecommerce pie. Smart selection of categories to compete, coupled with efficient marketing and distribution strategies to thwart the barriers would ensure companies to deliver value to customers and sustain in the online ecosystem.

This article has been authored by Rohith Ambati from IIM Trichy


• Report published by The Internet and Mobile Association of India [IAMAI] on Jul 20, 2015. Website:

• Report published by Inc42 in “2014 In Review: The Indian Tech Startup Funding Report”. Website:

• Report published by Bain & Company and Google India, “Adding to Cart: Digital’s Impact on Consumer Goods in India”. Website:

• News article in Financial Express, “FMCG players not keen on starting e-commerce portals”, on June 24, 2015. Website:

• News article in Indian Express, “ITC, Dabur, Marico, Bisleri board e-commerce bus to augment sales”, on Jun 28, 2015. Website:

• News article in The Hindu, “FMCG cos trying out own e-commerce sites”, on Feb 23, 2015. Website:

The articles in this section have been submitted by our Authors. They have been reviewed & uploaded by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

If you are interested in writing articles for us, Submit Here

Share this Page on:
Facebook ShareTweetShare on Linkedin