Challenges in Indian FMCG

Although the organised market is gaining strength, majority of the share is still captured by the unorganised market. Also, since majority of the Indian population live in rural villages, there is an absence of retail networks.
 

 
 
1. Since majority of the Indian population live in rural villages, there is less presence of super markets and other retail networks in these regions. As a result, the reach of MNCs and bigger players to these rural areas has become restricted.
 
2. Rise in disposable incomes and more young population have spruced up demands for products in the personal care, processed food etc segments. This has led to competition among the FMCG companies thereby putting the profit margins under pressure.
 
3. A tailor-made product helps to unearth the key consumers. Indian consumers are fond of packaging that are re-usable and recyclable keeping the attraction and tag-lines that hits the emotions of the consumers targeted.
 
4. The basic challenge is the high distribution costs involved. To face this challenge, collaboration & partnerships between various corporates, between corporates & NGOs, between Government & the private players (PPP) need to be worked out. Worold over, when there are collaborations in wide range of business activites, I do think it is possible.
 
5. FMCG vertical is so named because of the nature of goods that are produced under this label. FAST MOVING. It means that these goods need to be in ALL areas of SALES, VISINILITY across all the counters and EVERYWHERE wherever there is a chance to sell these products. Also equally important is the CORRECT pricing. That is what makes it FAST MOVING!!

The question is no longer how much consumers spend but how they spend it

Technology has made consumers more powerful than ever, as they search for, source and compare products all over the world within a few clicks or tabs in a matter of seconds. While this benefited consumer products and services that offered good ‘value for money’ in recent years, consumers have now started to demand much more than value.
 
In sophisticated European economies for instance, consumers are looking for good value products that are environmentally friendly in themselves or originating from companies that have strong social responsibility mandates.
In less sophisticated economies like the Asian emerging markets, consumers are also demanding much more than value. For the first time, consumers in markets like India, China and South East Asia are demanding quality and sometimes attributes like the ‘organic’ and ‘green’ labels. According to another GIA survey among 67 Asian consumer and retail industry professionals in China, India and South East Asia in November 2010, industry players say that on average over 50% of Chinese consumers  are  willing to pay a little more for organic/green food, beverages and personal care products, and approximately 10% are willing to pay much more. The same survey in India and South East Asia produced similar results with a much higher percentage of people willing to pay much more (25% in India and 18% in South East Asia). On the other hand, the survey also revealed that consumers are less willing to pay more for organic/green household or furniture and fittings products.
Consumers are not asking for new products, they’re asking for new shopping experiences

Food and Beverage, Retail chains, Fashion houses, FMCG and other consumer goods companies are concerned about how they will respond to reduced consumer spending in mature markets and how to target new demographic groups and emerging markets.
GIA’s Consumer and Retail Trends survey revealed that companies see innovation is a key factor for successful strategies in mature markets. More than 65% of the companies interviewed said innovation for growth will be their focus over the next two years.

But what does innovation really mean in the Consumer and Retail industry these days? In a world inundated with all kinds of products, it is practically impossible to think that companies can launch really innovative products. Even pioneer companies like Apple struggle to launch products which are truly new and unique every year. More often, consumer and retail companies simply launch new, improved versions of old products. This difficulty in generating new products was certainly the driver that pushed the ‘discounting’ effect as an innovative way of selling in the last decades. Studies however, show that discounted periods are not giving retailers the same sales kick as in previous years.
The modern answer for innovation probably lies in the shopping experience. Consumer research reports show that people are not necessarily enjoying or looking for new products but they are responding well to new ways of shopping.
Some retailers have been particularly smart about this: Apple has created stores which are more experience centers than stores. In the fashion world, Abercrombie and Fitch has also been clever at creating stores that feel like trendy night clubs.

Other than the physical experience, retailers can also be innovative in delivering different shopping experiences through the Internet. Amazon was the pioneer providing instant social reviews and since, many more innovative models have emerged. Examples include Gilt which brought the concept of private sales online, Groupon which developed the group buying experience, and many other retailers, like Etzy, which focused on high technology to deliver unique browsing experiences on their sites.

Innovation is indeed needed and demanded, especially in the mature markets, and retailers need to invest in creating stores (physical or online) that deliver a new and different shopping experience; be it through designs that get talked about, high touch, high tech or any other creative means.