 "How FMCG in India needs to step up its digital game")
India stands on the cusp of dramatic growth in internet and e-commerce activity. With more than 650 million Indians set to be online by 2020, the country is second only to China in projected internet users. And the future will be different. Until now, English-speaking adult males belonging to a higher socio-economic class (SECs) A/B and living in large cities have been the bulk of e-commerce shoppers. However, women, Generation Zers ("digital natives" born after 1995) and consumers in small-tier towns will propel the growth story.
These changes will have huge implications for fast-moving consumer goods (FMCG) companies. By 2020, as much as $35 billion of FMCG sales will be digitally influenced, including $5 billion of actual FMCG e-commerce sales, according to conservative estimates.
But the future, as they say, is already here; it's just unevenly distributed. For pragmatic Indians, the internet is often simply about adapting a new medium to their day-to-day life. A Bain & Company-Google lead-user research found that about 80 per cent of such consumers were more likely to try new brands and products when buying online than when buying offline, and a similar percentage were willing to spend more when buying online. Online shoppers are looking for not just the best products at the lowest prices, but also a better experience than that at brick-and-mortar stores.
Indian consumers are engaging on digital platforms across the entire consumption cycle. In the early stages, Google searches grow rapidly: There was a 63 per cent increase in Google searches in FMCG in the last quarter of 2014 (versus the same period in 2013), with food products, infant care and beauty making up the majority of the searches. While searching in categories such as beauty and food, viewers demand video content as evidenced by YouTube search growth (viewing time by women for FMCG-related content increased by 400 per cent in 2014 versus 2013, with 40 per cent of that viewing done on mobile phones). Unsurprisingly, more than a fifth of online urban female consumers note a digital influence on their FMCG purchase decisions, while 35 per cent of urban males online are similarly influenced.
While online purchases of FMCG products are still relatively low, our research found that 40 per cent of the online respondents who currently do not buy FMCG products online intend to do so in the next one year, with the intent to purchase is highest in the beauty and infant care categories. We also found that 10 per cent of lead online consumers are sharing their experience post-purchase, writing product reviews or rating products. Such information sharing can significantly influence purchasing decisions of other consumers - hurting or bolstering sales and reputations.
Five 'gears' for the digital journey
Most FMCG companies have so far taken a tentative approach to the online opportunity in India. Even among those that have taken some steps, the majority still treat digital as a standalone element they need to pursue independently. They have not accepted that digital will be pervasive and will therefore require integration into all the elements of their existing strategies. The challenges are real, including economic and logistical issues in e-commerce and the lack of relevant metrics, appropriate talent and infrastructure support·and they impede efforts to integrate digital planning into strategy.
Our study proposes that FMCG companies move through five "gears". Just as in driving a car, shifting into each of these five gears will help FMCG players accelerate through this digital journey.
Gear 1: Uncover categories' digital truths. Ask fundamental questions about categories, consumers and profit pools, and how digital fits into existing brand strategies.
Gear 2: Choose where to focus. Acquire a granular perspective on the portfolio, including a nuanced understanding of category dynamics and consumer behaviours to identify the most relevant opportunities from a digital standpoint.
Gear 3: Deliver a 'perfect' online shopping experience. Use consumer insights to inform brand, assortment, promotion and other decisions; optimise e-commerce supply to ensure product availability and minimise the cost to serve; and use account management to ensure strong relationships with more complex online customers.
Gear 4: Reallocate resources. Evaluate the effectiveness of spending across channels and media types.
Gear 5: Deliver and sustain change. Looking at digital capabilities end to end, rather than piecemeal, will help ensure the entire organisation gears up to meet the changing requirements.
Biding time is not an option - by waiting, FMCG firms will lose a tremendous opportunity to gain mind and wallet share among India's rapidly expanding online community. Those that are slow will struggle for not just revenues and profits, but also for digital shelf space, scarce ecosystem resources to increasing number of digitally savvy shoppers. These players must look closely at their strategies for the digital future: given the size of the prize, these efforts will be well worthwhile.
These changes will have huge implications for fast-moving consumer goods (FMCG) companies. By 2020, as much as $35 billion of FMCG sales will be digitally influenced, including $5 billion of actual FMCG e-commerce sales, according to conservative estimates.
But the future, as they say, is already here; it's just unevenly distributed. For pragmatic Indians, the internet is often simply about adapting a new medium to their day-to-day life. A Bain & Company-Google lead-user research found that about 80 per cent of such consumers were more likely to try new brands and products when buying online than when buying offline, and a similar percentage were willing to spend more when buying online. Online shoppers are looking for not just the best products at the lowest prices, but also a better experience than that at brick-and-mortar stores.
Indian consumers are engaging on digital platforms across the entire consumption cycle. In the early stages, Google searches grow rapidly: There was a 63 per cent increase in Google searches in FMCG in the last quarter of 2014 (versus the same period in 2013), with food products, infant care and beauty making up the majority of the searches. While searching in categories such as beauty and food, viewers demand video content as evidenced by YouTube search growth (viewing time by women for FMCG-related content increased by 400 per cent in 2014 versus 2013, with 40 per cent of that viewing done on mobile phones). Unsurprisingly, more than a fifth of online urban female consumers note a digital influence on their FMCG purchase decisions, while 35 per cent of urban males online are similarly influenced.
While online purchases of FMCG products are still relatively low, our research found that 40 per cent of the online respondents who currently do not buy FMCG products online intend to do so in the next one year, with the intent to purchase is highest in the beauty and infant care categories. We also found that 10 per cent of lead online consumers are sharing their experience post-purchase, writing product reviews or rating products. Such information sharing can significantly influence purchasing decisions of other consumers - hurting or bolstering sales and reputations.
Five 'gears' for the digital journey
Most FMCG companies have so far taken a tentative approach to the online opportunity in India. Even among those that have taken some steps, the majority still treat digital as a standalone element they need to pursue independently. They have not accepted that digital will be pervasive and will therefore require integration into all the elements of their existing strategies. The challenges are real, including economic and logistical issues in e-commerce and the lack of relevant metrics, appropriate talent and infrastructure support·and they impede efforts to integrate digital planning into strategy.
Our study proposes that FMCG companies move through five "gears". Just as in driving a car, shifting into each of these five gears will help FMCG players accelerate through this digital journey.
Gear 1: Uncover categories' digital truths. Ask fundamental questions about categories, consumers and profit pools, and how digital fits into existing brand strategies.
Gear 2: Choose where to focus. Acquire a granular perspective on the portfolio, including a nuanced understanding of category dynamics and consumer behaviours to identify the most relevant opportunities from a digital standpoint.
Gear 3: Deliver a 'perfect' online shopping experience. Use consumer insights to inform brand, assortment, promotion and other decisions; optimise e-commerce supply to ensure product availability and minimise the cost to serve; and use account management to ensure strong relationships with more complex online customers.
Gear 4: Reallocate resources. Evaluate the effectiveness of spending across channels and media types.
Gear 5: Deliver and sustain change. Looking at digital capabilities end to end, rather than piecemeal, will help ensure the entire organisation gears up to meet the changing requirements.
Biding time is not an option - by waiting, FMCG firms will lose a tremendous opportunity to gain mind and wallet share among India's rapidly expanding online community. Those that are slow will struggle for not just revenues and profits, but also for digital shelf space, scarce ecosystem resources to increasing number of digitally savvy shoppers. These players must look closely at their strategies for the digital future: given the size of the prize, these efforts will be well worthwhile.
Nikhil Prasad Ojha
Head, Strategy practice, Bain & Company, India
Sachin Khandelwal
Principal, Consumer Products, Bain & Company, India
Head, Strategy practice, Bain & Company, India
Sachin Khandelwal
Principal, Consumer Products, Bain & Company, India