Lessons India’s FMCG Distributors Are Learning From Covid-19 Disruptions
The disruption in supply chains due to coronavirus lockdown has brought with it pains as well as lessons for India’s FMCG sector.
The disruption in supply chains due to the coronavirus lockdown has brought with it pains as well as lessons for India’s FMCG sector.
Sales of fast-moving consumer goods contracted by 34% in April as the demand for shampoos, detergents and other non-food items fell for mom-and-pop stores, said Nielsen India. The kirana stores channel, part of general trade, saw 38% contraction in value, while modern trade comprising supermarkets and hypermarkets registered a value growth of 5% in April.
And as retailers struggled to stock up essentials, distributors learned how to navigate these tough times, something they would take forward as India gradually reopens for business under the cloud of pandemic-led uncertainty.
Adoption of technology, digital marketplaces and payments platforms in the long run are among their learnings, according to a BloombergQuint survey of seven distributors of consumer goods in east, west and northern India.
Leaner Credit Cycle
Distributors are opting for spot payments from retailers despite existing relationships. They have more or less eliminated credit periods to retailers—from 7-10 days previously—and this trend is expected to persist even if the lockdown is lifted.
Another learning has been hygiene. A distributor told BloombergQuint on condition of anonymity that as the virus can spread through currency notes, he is only accepting payments through cheques or NEFT or RTGS cash transfers.
The distributors BloombergQuint spoke with said they will also be looking at becoming part of online demand-supply aggregation platforms. They plan to enrol themselves on the Bharat eMarket portal to accept orders online as it saves them the trouble of sending salesmen to stores for demand aggregation.
Bharatemarket.in, an e-commerce marketplace for traders, is expected to be launched by Confederation of All India Traders and the nearly 40,000 trade bodies it represents. One distributor said this will also help prevent migration customers from moving to e-commerce sites.
Marketing And Distribution
A second distributor that BloombergQuint spoke to said his salesmen will only visit stores that order in larger quantities and will service other retailers over the phone or on mobile applications.
“This situation has taught us how to work with less manpower,” Dhairyashil Patil, national president of All India Consumer Products Distributors Federation, told BloombergQuint over phone. “Distributors are now looking at coming together
and hiring one truck in which they can send their goods to places.”
In such a situation, Patil said, two or three distributors can hire one truck for supplying to retail stores. This will, however, work better for distributors in rural areas compared to cities, where order amounts are higher.
Patil also said distributors would resort to ordering stock-keeping units that have to sell more. A third distributor told BloombergQuint on the condition of anonymity that these are unusual times and only time will tell if it can be implemented in normal times. He said distributors’ salesmen need to go to the market to even push new launches as companies initially offer higher margins on them—both to distributors and retailers. This can’t be done if orders are only taken online or through the phone, this distributor said.