Why FMCG Retailers are Rethinking about Assortment Play?

The FMCG retailers are rethinking their assortment play as the supply chain dynamics have been impacted after the second wave of the pandemic.

The fast-moving consumer goods (FMCG) retailers are realigning assortment either by having fewer stock-keeping units (SKUs) per category or stocking a lesser number of units for each SKU they are dealing in, said data analytics firm Nielsen.

They are doing so without putting any extra burden in terms of stocking space or capital requirements, said Nielsen in its FMCG Snapshot for Q1 2021.

"As the pandemic has impacted supply chain dynamics, there are two opposing trends around realigning assortment by retailers - while retailers are willing to deal with a larger set of categories, they are doing so without putting any extra burden in terms of stocking space or capital requirements," it said.

This phenomenon would have substantial implications for FMCG manufacturers in terms of which SKUs to push for and finding the optimum frequency for servicing stores, it added.

In the January-March 2021 period, FMCG sales growth from the traditional trade channels jumped to double digits, while growth in e-commerce normalized down to single digits in the January-March quarter.

"Now, that lockdowns have resurfaced, and with last-mile delivery boost up, the e-commerce channel will continue to be dynamic," it added.

In the quarter, traditional trade channels (TT) continued their growth momentum.

"Among the organized channels, sequential (quarter-on-quarter) recovery was witnessed in the modern trade. However, it still is in a negative growth zone because of a higher base of 2020," it said.

Sameer Shukla, South Asia Customer Success Leader, NielsenIQ said traditional trade channels have consolidated share in the pie in recent months, while the organized channels big box modern trade stores and e-commerce, tapered down.

"Now, with the second wave of lockdowns spreading across the country, it will be critical for the manufacturers, retailers, and planners to gauge the interplay of channels, especially in the metropolitan cities, and plan with agility," he said.

The FMCG Snapshot for the first quarter of 2021, released by NielsenIQ's Retail Intelligence team on Wednesday, said the Indian FMCG industry has recorded a growth of 9.4 percent in the January-March quarter of 2021. It was helped by a consumption-led growth and value growth by increased prices of products, especially of staples.