E-commerce may become a major growth driver for FMCG in 2021

E-commerce penetration is expected to cross 10 per cent in the coming five years.

NEW DELHI: If there is one business which has distinctly gained during the unprecedented Covid2019 pandemic, it is e-commerce. And this gain has occurred across product categories and sectors. Building on this advantage, there would be only more traction for e-commerce in the coming year. What will particularly be more noticeable is the entry of a whole lot of new players, both big and small, democratising the e-retail marketplace. However, this expanded and democratised e-commerce marketplace would co-exist with the physical brick-and-mortar retail spaces. These kirana stores significantly enough would forge partnerships with online delivery services while also digitally upgrading themselves with the help of the latter. Therefore, apart from the regular retail formats, there would be more tie-ups with different brands on e-comm platforms.

The extraordinary growth of e-commerce

In a report, the Indian e-commerce industry has been projected to grow by 40 per cent in 2020 as compared to 23 per cent in 2019. In fact, it has even been reported elsewhere how during the Covid2019 months, a decade of growth has been registered within just a few months this year. And in terms of cross border growth, the country’s e-commerce sector has been ranked ninth globally. Around the festival season in the second half of the year, major players such as Amazon, Flipkart, Myntra, and Snapdeal made sales worth $3.1 billion in the first four to five days of the festive season sale. And this growth has not remained confined to metros and big cities. An online player reported that 70 per cent of its orders were received from tier-2 and tier-3 towns during Diwali. Once we have seen the last of Covid2019 which is expected in 2021, these figures would grow to become even more impressive. In fact, the e-commerce penetration in the country is expected to cross 10 per cent in the coming five years from the current four to five percent.

Emerging new players are intensifying competition

While Covid2019 did pose a stupendous challenge to many small players in the early phases, several of those same affected players soon enough turned this adversity into an opportunity by upgrading themselves digitally and even recasting their product portfolios. While staying at home, a new generation of entrepreneurs called ‘homepreneurs’ has emerged, offering competition to existing players. This will only get bigger and a more competitive retail marketplace including both online and offline will emerge in the coming year.

Kirana stores taking the digital leap

At the same time, demonstrating massive momentum on the b2b front, several new players as well as existing players reinvented their business processes by forging links with other players and bigger and stable e-commerce businesses. Many new e-commerce start-ups have come up helping kirana stores or mom-and-pop stores digitize and expand their operational footprints. A cash and carry store had offered digitisation services to kirana stores promising complete digitisation in a span of 24 hours. So a vigorous drive for development of e-commerce platforms for local retailers and grocery stores underpinned by digital payment mechanisms has been underway. This trend is expected to continue in the present year democratising the marketplace further.

Contactless delivery of ready-to-eat and packaged food to acquire permanence

During Covid months, the trend towards partnerships between online delivery behemoths and FMCG companies including food brands has been a notable phenomenon. Also, the tie-ups between local food businesses and local e-commerce startups for final delivery of products have been equally noteworthy. In light of Covid-dictated explosion of cloud kitchens and food delivery apps, the near-institutionalization of highly-sanitised kitchen environment, double-layer packaging of food products, deployment of all-round safety gear equipped-delivery personnel, and contact-less delivery services would acquire a more permanent feature. The ripple effect of this new delivery culture would be seen even for the delivery of packaged food for final consumers.

Trends in shopping spend across categories

According to market research, in terms of average spend by online shoppers, electronics and accessories (39 per cent) had emerged as the largest product category followed by mobile and accessories (12 per cent); fashion, including apparel, footwear, and accessories (10 per cent); and appliances such as TV, washing machines, refrigerators (nine per cent) in the aftermath of Covid2019 outbreak. However, a management consultancy white paper has revealed that food, grocery, consumer electronics and apparel will be the top e-commerce product categories contributing to sales in the coming five years. Then based on a report by Goldman Sachs, online grocery and fashion/apparels are set to be the biggest drivers of incremental growth in e-commerce in the country.

M&As and investments to impact domestic e-commerce space

The last few months have seen considerable investment by foreign social media behemoths such as Facebook into domestic giants such as Reliance Industries which could allow the latter to play a bigger role in the e-commerce market. Then Reliance retail buying out Future Group has been another significant development.  

Therefore, while 2020 was a year of crisis-driven instant improvisations and restructuring in a broadly subdued business environment, the coming year would see more stability and consolidation of the e-market space. Essentially, 2021 will see businesses adopting more of an omni-channel approach.

(The author is director, Bikano. The views expressed here are his own and may not subscribe to them.)

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