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Photo: Mint

E-commerce to contribute 5-6% of consumer packaged goods sales

Around 80% of medium and large retailers don’t expect to make any profit before August, shows a Kearney report

NEW DELHI : The increase in online shopping for essentials will push more consumers to e-commerce, but in terms of contribution, e-commerce will remain at 5-6% of packaged consumer goods sales in the medium term, consultancy Kearney said in a report on the consumer packaged goods (CPG) market in India on Monday.

Kearney said general trade stores will continue to form the bulk of retail trade, even as kiranas face liquidity crunch in the aftermath of the prolonged lockdown.

Across India, in terms of contribution to FMCG sales, the share of traditional trade—is still the largest—at 86.3%, said market researcher Nielsen said in a report in April. According to Kearney, such stores have proven to be agile in adapting to the covid-induced lockdown. “With high penetration and convenience, it will continue to be India’s leading distribution channel."

While traders had faced liquidity crunch even in pre-covid days on account of a general slump in demand, it will “worsen in the medium term".

Kearney estimates that around 80% of medium and large retailers don’t expect to make any profit before August.

As a result, retailers with some cash to spare will prioritize investments toward essential items over discretionary items. “This will put immense pressure on distributors to extend credit for longer periods of time, and they will bear the burden of higher costs of vehicles and manpower in medium term."

E-commerce, however, will grow 100-150%. “Indian e-commerce players will overcome capacity roadblock by making significant investments to expand supply chain, manpower and front-end capabilities. However, the economics of these players still make it infeasible for them to fulfil low-value orders," according to the report.

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