Direct to Consumer – The Beginning of a Trend in FMCG


June 22, 2020
6 MIN READ
Vinculum
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Vinculum
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FMCG has been out there for years. It’s a part of every person’s life. Due to the Covid-19 pandemic, everything changed; the demand-supply chain was disrupted, it led to a big ruckus in supermarkets and other places.

A supply chain revamp was needed

The Covid-19 pandemic brought in some amazing changes across the world. Covid-19 also showed how handicapped the supply chains can possibly get during a global crisis, like the one we’re facing today.

FMCG viz. Fast-Moving Consumer Goods companies have been facing several challenges with regard to navigation of panic purchases, stockpiling and more, leading to most brand’s products suddenly being ‘Out of Stock!’

Due to the lockdown, the logistics team also could not do much; states, cities, even countries declared a shutdown. Hence, restocking became very challenging. However, something new emerged; online delivery of products helped the FMCG industry do its job.

Emergence of DTC

DTC, also known as Direct-to-Consumer experience, emerged. DTC didn’t emerge all by itself; it was adopted by some top global brands in order to really become visible and work its magic.

For instance, Nivea, in India partnered with brands like Zomato & Swiggy, in March 2020 in order to reach out to 100+ cities across India. Heinz, on the other hand, in the UK, delivered canned food products in bundles of 16 from April 2020. The company plans on expanding its reach this way with other products as well.

Brands like Unilever also found their way out of the Covid-19 pandemic. In April 2020, Brazil, Unilever and delivery service brand Rappi partnered to deliver household cleaning products, personal care products and more.

FMCG disruptors led to use of DTC model & maybe it’s the new normal

The DTC model is not something that emerged out of the blue; it’s emerged amidst the crisis several countries have been experiencing.

Several FMCG brands have shifted their focus towards making investment decisions in niche products; products that can be sent to people’s homes directly.

With the onset of Covid-19, several FMCG brands have adopted the DTC model to re-connect with customers and keep the brand loyalty going.

During uncertain times like we’re in, the need for essentials is something that needs to be taken care of; FMCG did it well enough!

Maybe this change will be the new normal. The target audience for this change (adapting to online ordering of essentials) has been targeted for ages 20-29; the working population, who will stay updated, alert, active and be very protective of the older members at home.

Covid-19 brought in a lot of tension, this also led to targeting another age group with regard to DTC, the pensionable age group (65+) because of the vulnerability the group was facing; infection, perhaps death from the virus. This led to them embracing the eCommerce market.

Keeping the prior points in mind, let’s look into the Key FMCG Trends this 2020:

From linear supply chains to connected ones

When it comes to countries like India, FMCG distribution networks can be a key differentiator or a strength. During the pandemic’s peak, brands were relying on a huge army of distributors, stockists and others to ensure safe distribution of their products to retailers.

However, retailers have become increasingly tech-savvy now; online marketplaces have helped them replenish their stocks, keeping all free of hunger and stocked with essentials.

Brands like Bausch and Lomb helped the world by training its customer support team, mobile app and other measures in order to bring in accountability and predictability into supply chain systems today.

In fact, more brands are going to migrate to the new supply chain system and opt for self-ordering, and other aspects that are yet to be discovered.

Rural locations can grow; they need to be tech-focused

Rural consumption is not like the urban world’s consumption. The overall growth rate for rural consumption of essentials was growing at a rate of 1.5% but has dropped now. Local me-toos or wholesale distributors have catered to rural consumption needs during this time.

However, several brands lost their value in the market due to this inaccessibility in these rural areas. There is a need to help kickstart rural distributors in order to get the market shares back on track.

The trend of digital solutions has led to brands like BizCom help brands kickstart growth and overcome major challenges with regard to low/no internet connectivity with their rural distributors. Rural areas are the urban world’s backbone and they need to evolve as EPR today’s need certainly.

Gamification stands

Gamification refers to brands promising rewards in exchange for usage of their service. Google Pay is a brilliant example; the brand successfully managed to make financial transactions online in exchange for scratch cards and more.

The trend of FMCG & gamification is emerging; brands like Hershey’s Kisses have implemented the same, only it’s for their sales force. No matter what the objective, gamification stands strong and is possibly the new normal.

Direct distribution focus needs to increase

Direct distribution can be a little pricey however,it ensures growth. Parle Argo, maker of Frooti, could grow consistently at a rate of 25% each year over the past 15 years; this was possible with direct distribution. DTC is a great way, a somewhat personalized way to reach out to your audiences, wherever they are.

Rise in FMCG startups

We’ve been observing this change for a while now. Look at brands like Epigamia; this brand sells yogurt range seamlessly. Before, it was just a sprout in a big world of essential products.

Now, it is a popularly consumed essential and has a double-digit growth. This is the time for you to kickstart your FMCG business if you’ve been thinking about it.

Post COVID-19 strategy

FMCG players seem to have it in control by now; essentials are always available, premium brands are slowly bringing back their supplies and more. Post-COVID time is going to be a time for sustainable strategies.

There sure is a potential for a crossover when it comes to DTC offerings and FMCG, especially with regard to recycling and reusing. Brands like Coca-Cola, Chile are already taking off with the plan. Let’s see what happens.

Final words

Direct-to-consumer is the need of the hour for the FMCG brands and ecommerce platforms today. Brands are trying their best to go digital and we understand how difficult it is to do so. Hang in there.

With social distancing being the new normal, Vinculum is a global player in SaaS platforms that can scale your e-commerce business with integrations from Dunzo, Swiggy and bring you closer to your customers and maximize your competitive edge.

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