As India prepares to enter 2021, there are some good tidings. Going by the latest reports, the economy is in the revival mode. With vaccines to combat COVID-19 a reality – although mass availability is some way off – hope abounds that the pandemic may be brought under control, sooner rather than later.
All of which augurs well for the FMCG segment, which is India’s fourth-largest sector, employing three million-plus people. In the Rs 4.0 lakh crore industry, household and personal care items comprise around 50 percent of FMCG sales. While the urban segment contributes around 55 percent of the total FMCG revenues, the market in rural regions is expected to record faster growth. As semi-urban and rural India grows at a robust pace, FMCG products already account for half of the total spending in rural areas.
Significant Facts and Figures
Despite the pandemic’s impact on consumer spending behaviour in 2020, the situation is expected to turn around in 2021. Currently, most households remain wary about what they purchase and the frequency of purchases. In 2020, lockdowns and other pandemic-related restrictions meant people preferred purchasing essentials online, including FMCG goods, rather than visiting brick-and-mortar stores.
The possibility of vaccines being available in India at some point, however, will lead to increased sales from conventional outlets such as local markets, hypermarkets and kiranas, among others. But digital will continue being a parallel purchase mode because both urban and rural people have developed a degree of comfort regarding online orders.
The biggest benefit of online shopping is that it can be done from the safe confines of homes without worrying about social distancing norms. As per a Nielsen Global Connect report, online shopping has seen an increase of more than 20 percent.
Meanwhile, an intriguing fact – rural markets performed relatively better than urban ones after the coronavirus outbreak. Data analytics firm Nielsen noted that in June 2020, there was a strong bounce-back in sales of FMCG goods across rural and semi-urban markets even as bigger cities saw a decline. In 2021 too, the sales revival in Bharat may continue outpacing that of India.
Partly, this is attributed to the severity of the pandemic in urban zones whereas Bharat faced relatively less stringent lockdowns. Also, the reverse migration of workers to their native places would have increased rural demand. Though most workers are said to have later returned to the cities, some preferred to stay back. These trends could continue to play out in 2021.
Given the pandemic-linked disruptions to supply chains, FMCG players deployed digital technologies in a big way to drive BCPs (business continuity plans). Having learnt the benefits of e-commerce, FMCG entities are expected to maintain their digital presence even after normalcy is restored and COVID-19 comes under control. The shock of the pandemic has made it clear that an omni-channel approach of physical plus digital sales is the best way to drive BCPs in case of any future disruptions.
In 2021, FMCG companies will need to invest in tech tools that enable e-ordering, e-invoicing as well as e-collections via digital payment platforms. Innovations in digital would be the way forward in overcoming sudden disruptions in supply chains. Keeping this in mind, a global food company is aiming to create a mobile application that could serve as a digital sales model. Rather than sending its reps into the market, it is seeking to find solutions allowing retailers to place orders directly via WhatsApp, mobile or an app.
A Deloitte Consumer Tracker survey indicates there is a rising shift towards BOPIS (buy online pickup in-store), besides the growth in pure-play online purchases and deliveries. The main motivators: safetyand the option of browsing through entire product portfolios more efficiently from the comfort and convenience of one’s home.
Moreover, even as most economies continue facing headwinds and muted consumer demand, the FMCG sector will see sustained growth in select segments. For instance, consumers are raising spends on health, hygieneand nutritional products,including packaged goods. As people prefer staying indoors to avoid the risk of infection, e-commerce is their first choice in purchasing products.
The changing consumer patterns are due to mounting awareness about immunity-boosting products and those deemed safe, against the backdrop of coronavirus concerns. Accordingly, companies would need to tweak their product portfolios and distribution strategies.
As we welcome 2021, the focus on consumer data, behaviour trends and digitalisation must continue. In the months ahead, demand-driven supply will count more than supply-side drivers. In the post-COVID era, consumers would undoubtedly continue calling the shots in driving FMCG sales.