Mumbai: Packaged consumer goods companies are taking a leaf out of the smartphone marketing playbook. They are launching products online before rolling them out in brick and mortar stores to create a buzz about their brands and quickly reach millennials.
Next week, Mondelez India Foods Pvt Ltd, plans to introduce its product Cadbury Dairy Milk Marvellous Creations exclusively on Amazon to be delivered only in select cities. This online partnership will continue for a few days before the product becomes available in the regular retail space.
In July, L’Oreal India Pvt Ltd launched Nyx Professional, a make-up brand, in an exclusive tie-up with Nykaa, a specialist e-tail site for personal care products for a month exclusively before rolling it out in stores.
In November, when Nestle India Ltd decided to do a relaunch of Maggi noodles after a gap of six months it introduced Maggi Masala noodles online first in a partnership with Snapdeal.
“The reason why these tie-ups make sense for the consumer packaged goods companies is that e-tailers provide the fastest and most economical model with scale to reach millennial,” said Ashvin Vellody, partner at management consulting firm KPMG India.
For L’Oreal, which launched on 7 July online on Nykaa, the top-selling units of the brand which has as many as 350 different stock units saw some of its most popular items sold out within three hours. “The sales are five times above our expectations. We have never experienced anything like this,” Satyaki Gosh, director, consumer product division at L’Oreal, told Mint in an earlier interaction following the launch.
The number of tie-ups in the consumer packaged goods space is far lower when compared to consumer durables. Online grocery shopping is yet to take off in India.
India’s grocery market size is estimated to be Rs.19.9 trillion, contributing to about 48% to India’s total retail consumption.
Despite the large size, this market has remained predominantly unorganized due to ubiquitous local stores/vendors and the late emergence of organized brick-and-mortar retailers.
“We peg the size of opportunity for organized [including online] grocery retailers at Rs.3.4 trillion, based on the requirements in urban metropolitan areas [cities having population of over a million’,” said a January report by Kotak Institutional Equities Research.
For categories like beauty and hygiene two-thirds of the sales could be digitally influenced by 2020 whereas 20% will come from online, said a February 2016 report titled Impact of Digital on Beauty and Hygiene by Indian Beauty and Hygiene Association, Bain and Co and Google whereas for the overall consumer packaged goods category online sales will account for 8%-10% on their overall sales.
Online grocery suppliers have to deal with their own unique set of challenges. Take for instance, delivery of chocolates, which typically have to be stored in temperatures less than 35 degrees Celsius.
Mondelez is working with Amazon and its third party direct sellers to train their delivery staff on how to handle chocolates and is also providing chilled pads to the last-mile delivery support staff that will keep the products at a suitable temperature, said Prashant Peres, director, marketing (chocolates) at the firm.
Globally, China is the largest online grocery market at $41 billion (Rs.2,737.37 crore), followed by UK at $15 billion. The US is a distant fourth at $7 billion, possibly due to the well-developed, existing organized retail network, said the Kotak report.