While modern retail still continuous to be a small chunk of FMCG sales, a joint effort between retailers and suppliers is expected to take the industry to the next level, believes Aalok Wadhwa, Head, Madhur Sugar.
What initiatives are required to be taken from retailers and FMCG companies to create a win-win situation for all stakeholders?
FMCG players should extend better margins, product exchange (unsold / expired), regular servicing by sales staff, timely delivery of the orders and well defined credit period policy. As for retailers, being loyal to the brand and propagating it to the end consumers are the key things.
What are the challenges that have been faced by FMCG players in the modern retail environment?
Retailers expect suppliers to take care of their operating cost starting from cost of inventory, rent and display, etc. The challenge is that with increasing competition, the margins have come down drastically resulting in pressure on cost benefits. In case of multiple brands and limited shelf space, retailers only choose to keep products that maximise their profits and thus creating challenges for FMCG players, especially the new entrants.
How relevant is modern trade in your retail strategy?
Modern trade offers a range of products, extensive shelf display and evaluation power to the consumer. Besides, it is an effective channel to generate trials and establish connect with customers. Hence, is an important part of our sales and distribution strategy.
What percentage of your FMCG sale comes from organised retail?
We generate 20 per cent sales from modern retail. With increasing investment in this format by domestic and international players and increasing demand for one-stop-shops, sales from this format should grow both in value and volume.
How does your retail strategy differ for modern retailers and kirana stores in terms of products, credit period and service teams etc.?
While traditional trade is selling more of smaller SKUs, modern trade is placing large SKUs to maximise sales.
Credit period largely varies from one company to the other and is dependent on their distribution network. Currently the sales to distributors are against an advance, and they normally extend a credit of 7 days to their retailers. And we extend a credit of 7-10 days to modern retailers.
Service teams are not quite required at modern trade in our case. One dedicated employee keeping a check on orders and stock positions is sufficient for our brand. Service teams in traditional trade are a must to ensure penetration in newer outlets, merchandising across all outlets, attending to visibility needs from time to time.