Even as the Indian FMCG industry is witnessing a cautious recovery, the e-commerce channel with a small base (3 percent of total FMCG sales) has shown resilience in tough times.
Keeping this in mind, most FMCG companies will be working towards strengthening their online presence after customers turned to online buying due to the pandemic.
As per the survey of over 14 corporate leaders by FMCG research firm Nielsen India, all leaders said that in the next six months their focus will be to ramp up their e-commerce platform presence, particularly after the trend showed that customers are comfortable shopping online rather than going to stores.
Nielsen India data indicated that the average number of items purchased during the lockdown shot up by 23 percent. On an average, if the customer bought three items in December (2019), January and February, the same rose to four items on the e-commerce platform since the lockdown began in March until July.
Not only did average purchases rise, but average spend per customer has risen by 17 percent. For instance, if a customer was spending Rs 1,008 pre-COVID for buying products online, it rose to Rs 1,184 during the lockdown, Nielsen data revealed.
Interestingly, the frequency of purchases remained unchanged at 1.6 both pre COVID-19 and in the lockdown phase.
“There is a steady adoption for FMCG online with first-time shoppers increasing month-on-month to 36 percent. Consumer spends and basket sizes are continuing to expand online,” said Diptanshu Ray, Lead, Retail Intelligence, South Asia, Nielsen Global Connect, at a virtual event, titled: 'Evolving Consumer Trends-5 during COVID-19'.
“We definitely see the share of FMCG companies rising if CXOs will increase focus on e-commerce. Barriers to entry on e-commerce are very low in terms of distribution,” Ray said, adding that the share of e-commerce may even surpass traditional channels.
India had one of the longest and strictest lockdowns in the world, which started from March 25. Most key macro indicators were in the red through the early days of the lockdown. Post-June, unemployment levels and ‘number of closure days in a month’ for FMCG outlets returned back to pre-COVID times.
However, underemployment rates are reported to have fallen, with the hardest hit jobs being that of professionals like engineers, accountants and teachers.Affordability
With job losses and salary cuts, consumers sought value. “There is a visible sign of consumers either downgrading to more affordable mass and popular offerings or shifting towards value for money large packs,” said Sameer Shukla, Executive Director, Retail Intelligence, South Asia, Nielsen Global Connect.
Private label shares in modern trade (brick & mortar channel) rose, with regional players performing better than national players during the COVID period, which hints at affordability reset in the play, Shukla added.
“When we consider India within this framework, we see clear evidence of the basket reset, weighted by the affordability reset. The tension in the consumer basket is that they are trying to reconcile the old needs with the new ones; with health/hygiene and product value proposition competing with each other,” Ray said.Innovation
Focussed innovation is another trend in sight. Nielsen India said a slew of players have entered the health and hygiene segment, with categories such as hand sanitisers, hand washes and antiseptic liquids.
Similarly, the home cooking basket (ketchups, jams, cheese, milk powders, etc) is gaining prominence and witnessing increased innovation in the market.
Contrary to this, the home consumption categories (salty snacks and chocolates) and beauty basket (skin care, lipstick, and fragrances) have had fewer new players entering the market in the last few months.Outlook
With the economy unlocking, some of the big challenges worrying the leaders are limited opening hours of outlets in a day and decline in consumer demand.
Majority of the corporate leaders are now optimistic of an improved business environment, with two-thirds anticipating a positive impact on their businesses over the next four months. This period also coincides with the festival season in India, Shukla said.
In this constantly evolving situation, new consumer needs have emerged and businesses are continuously working to address the same.
Some of these emerging consumer trends are increased adoption of e-commerce and seeking products delivering protection for self and family from germs/bacteria. Apart from these, consumers are actively looking out for safety and hygiene practices at various consumer touchpoints.