Horses for courses: ITC devises bespoke plans for distribution channels

In Q2FY25, ITC's sales on quick commerce grew by over 50 per cent year-on-year on a smaller base, contributing 50 per cent of its overall e-commerce sales

As kirana stores grapple with increasing competition from quick commerce platforms, fast-moving consumer goods (FMCG) major, ITC, is tailoring assortments across distribution channels to ensure relevance and survival of each.

 

In the second quarter of financial year 2024-2025 (Q2FY25), ITC’s sales on quick commerce grew over 50 per cent year-on-year on a smaller base and accounted for 50 per cent of overall e-commerce sales. But for a company that rolls out a stream of products every year, the touch-and-feel that brick and mortar formats lend to the consumer, is invaluable.

 

ITC executive director, B Sumant, told Business Standard, that it has adopted an omnichannel strategy. “Our core objective is not to push one channel over another. So, we are defining the role of each channel in the consumer’s life and aligning assortments accordingly.”

 

The approach ensures that the traditional shops stay alive while helping customers seek out the channel most relevant to their needs. “Otherwise, the channels are going to cannibalise each other. And that doesn’t benefit anyone,” Sumant explained.

 

ITC’s strategy comes at a time when unplanned purchases and convenience are steering many urban shoppers to online and quick commerce platforms.

 

According to Praveen Govindu, partner, Deloitte India, about 10-15 per cent of sales for FMCG firms have moved to online commerce in metro cities. This has come at the expense of general trade.

 

“Quick commerce accounts for about half of the shift. And that’s a big number for the FMCG sector,” Govindu said.

 

But the general trade has its value proposition, he asserts. “If you consider the kirana store, it has a personal connection with the consumer, which it leverages.”

 

ITC, which on an average, launches about 100 products every year, understands the importance of the brick and mortar channel.

 

“This year, we have launched 65 products so far. We need people to go and touch, feel and try the product. It’s very important that we get a chance to talk about the product and consumers actually get to experience it. Modern trade and independent self-service stores serve this requirement well,” Sumant noted.

 

“The e-commerce channel is for the more established products or for range and assortment,” he added.

 

But the first point of clash for the consumer is price. Modern trade and e-commerce offer discounts that the general trade can’t beat. Keeping that in mind, ITC has started segregating the ranges more sharply now.

 

Quick commerce tailored products have been launched including a range of gift boxes (from Fiama/Engage and Mangaldeep), Bingo! Korean noodles, Right Shift range of products, Aashirvaad ready to cook chapati, et al. Jumbo packs of Savlon handwash and Fiama shower gels are made available on Flipkart. An Engage range of deodorants have been custom-made for DMart and there is an Engage Spirit range exclusively for general trade. ITC’s premium skincare brand Dermafique has a D2C platform.

 

While ITC is doing its bit to make sure that every trade channel survives, is there a possibility that quick commerce might co-opt with kiranas going forward?

 

Quick commerce is heavily dependent on dark stores which are huge real estate spaces, Deloitte’s Govindu points out. “And there is a cost to it. But kiranas can become dark stores. Large companies can help the kiranas modernise towards this end.”