Consumer goods giants ITC, HUL, Marico, Dabur, Haldiram's, recently met the distributors, assuring them that parity of price, pack size and offers between products being supplied to general trade (kirana stores) and modern day sales channels would soon be brought in.
There is no denying the fact that the rise of e-commerce platforms has affected the business of kirana stores that can be located in almost every Indian lane. New age consumers prefer ordering items from a virtual store from the comfort of their sofas, getting the products at discounted rates, and getting deliveries at their doorsteps. They find it a better option than walking out with a shopping bag to a shop next door to get the same item, while being unsure of the availability of the product at the store. The ease of ordering, availability of choices, discounts and offers, doorstep delivery and the comfort of e-comm is a big lure and speaks volumes about our current lifestyle.
That said, the kirana stores are still a reality and business slowdown is affecting many – from the kirana store owner to the distributors. Reportedly, consumer goods giants ITC, HUL, Marico, Dabur and Haldiram's recently met distributors who had threatened to de-stock FMCG products last month, alleging discrimination by consumer goods companies between general trade and modern trade/e-commerce platforms. The FMCG giants assured them that parity of price, pack size and offers between products being supplied to general trade (kirana stores) and modern day sales channels, such as large departmental store chains and e-commerce would soon be brought in.
This makes us wonder - if discounts disappear, what advantage do e-commerce platforms have when it comes to FMCG products?
Here's what experts think:
Sumit Bedi, vice president, marketing and CX, IndiaMART
Though many FMCG players had introduced products and packs specifically for the e-commerce channel over the last few years, its contribution to the overall volumes is currently just around one to two per cent. Despite the recent assurances to distributors to bring parity in products and offers across channels, I believe e-commerce platforms can still thrive as the ease and convenience provided by them is unparalleled. With free deliveries, they eliminate travel time and cost, offer products 24*7*365 with multiple payment options and provide abundant information about the product that can’t be displayed in a physical store.
Secondly, online players have more relevant consumer data based on past transactions. They can do a better job of engaging with the customers and retaining them for a longer period, thus increasing the CLV. Most of the brick and mortar stores lack this capability and haven't invested in systems to capture customer preferences.
With personalised recommendations and ease of use, e-commerce will continue to grow even without price or product differentiation.
Rajat Girdhar, head of marketing, ShopClues
Channel conflict is across categories, not just in the FMCG sector. As far as companies are concerned, this is a fairly cost effective way to get sales and cash flow. To resolve this channel conflict, there are various strategies companies follow - like, a variation of the product that is available online or different margin structure or not bundling service with the sale. Therefore, companies that form an important channel online will figure out a way. Also, there is the threat from DTC (Direct to Consumer) brands to be considered, as established brands will not like them to grab a share of the demand that exists online.
KV Sridhar aka Pops, founder and chief creative officer at HyperCollective
This war started long before the advent of e-commerce – when organised sale was introduced in the market. In the last three-four years, with the rise of e-commerce and modern trade, discounts became a thing and consumers started moving towards these platforms, given their efficiency and inventory management.
Today, even the unorganised sector and kirana stores are organised. The pressure on these brands to give discounts on products offered even at these stores to maintain the consumer footfall is tremendous as otherwise, the stores will barely survive.
Also, brands today are losing their 'premiumness' - both, price and emotional premiumness. They can be easily replaced, given the abundance of choices. The only way for these brands to survive is through innovation and by holding up their values. E-commerce can add number and volume, but not value to a brand. Selling products on these platforms can add value to the name of the platform but not to the brand. These platforms act as a rock between the brand and the consumer. One way for brands to hold up their equity would be to promote sales on their digital channel/website instead of promoting their goods on these platforms. That way, they won't even lose their consumer insight.