BackModern trade outlets see slow recovery despite unlock
As the lockdown left millions stuck indoors with grocery stores working under severe restrictions, it prompted shoppers to move online and pushed retailers to experiment with various formats including hyper-local deliveries
PremiumNEW DELHI: Fast moving consumer goods companies say while general trade has been recovering at a fast pace--after months of facing supply disruption due to the pandemic-induced lockdown--modern outlets have witnessed only marginal improvement in business as consumers continue to prefer neighbourhood stores and online marketplaces for monthly groceries.
“We are seeing general trade and e-commerce grow much faster. General trade, led by rural markets is showing strong growth. Stress in modern trade is also aiding part of the growth in the general trade channel," said Sunil Kataria, chief executive, India & SAARC, Godrej Consumer Products Limited. "We have seen a marginal recovery in modern trade. While, fewer lockdowns are leading to better footfalls in modern trade stores, they are still lower than pre-covid days."
Even as the government has allowed re-opening of almost all shopping centres under its unlock advisories, Kataria said, small stores are likely to benefit more from this move. "...Large hyper format stores will take some more time to get the same footfalls as earlier due to the prevalent social distancing norms."
The pandemic has reset consumer shopping behaviour. As the lockdown left millions stuck indoors with grocery stores working under severe restrictions, it prompted shoppers to move online and pushed retailers to experiment with various formats including hyper-local deliveries.
“From whatever we have picked up, the traditional trade, which gained a lot during the lockdown phase, that is more or less still holding. Modern trade had seen a little bit of a drop during that phase because of limited availability, and limited opening slots, and even when they were open, the number of people allowed was lesser. So modern trade took a little bit of a beating. E-commerce definitely grew," said K. Ramakrishnan, managing director, Worldpanel division, Kantar.
Sales of FMCG via traditional trade channels or kirana stores still account for a bulk of sales - at 87%.
“Kiranas are more than back for us because through our innovation agenda we have been able to grow. We are growing across all channels. E-commerce for us is growing very well—no doubt about it—it is a growth channel, the grocers are also fine," said Sameer Satpathy, chief executive, personal care products business division, ITC Limited.
“In modern trade it depends on who you are talking about—if you see it in totality there is a bit of a wobble at times but it also has to do with some corporate actions (consolidation), but it is doing well for us," he said.
Last month, in a sign of consolidation in the retail sector, Reliance Retail strengthened its position in the grocery and apparel market by acquiring rival Future Group in a deal that will bolster its position in the country’s organised retail trade.
Satpathy said modern trade remains a "mixed bag" right now. "There are challenges, but there are strong players and they are pivoting themselves to whatever they can," he added.
Meanwhile, the pandemic has also prompted companies to digitise supplies and explore partnerships for last-mile deliveries.
“There is a structural shift underway as consumers get accustomed to online shopping while enjoying the twin benefits of wider assortments and attractive pricing being delivered to them at their door step," said GCPL’s Kataria. Modern trade will bounce back from covid-led challenges, but will need to reinvent itself by providing a differentiated and relevant consumer experience in the new normal, he said.
During the initial days of lockdown, both general trade and e-commerce suffered with supply constraints and restrictions on movement while modern trade gained as shoppers bought large packs and accessed better inventory. However, the trend quickly reversed as the government eased the lockdown curbs.
A July report from market researcher Nielsen said modern trade witnessed a spike in sales towards the later part of March and early April, however, subsequently there were issues on count of foot falls that hit channel sales.
In all, modern trade, that accounts for 10% of FMCG sales in India, was down 5% year-on-year in the June quarter. On the other hand, e-commerce, that contributes 3% to value of FMCG goods sold, grew16% in the same quarter, while traditional trade formats were down 19%, but showed a 5% year-on-year growth in the month of June.
Nielsen follows a January to December calendar year.
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