How Covid-19 has Transformed the Food and Grocery Retail

How Covid-19 has Transformed the Food and Grocery Retail
The Indian FMCG market is estimated to reach $220 billion from $110 billion between 2020 to 2025 at a CAGR of 14.9 percent, as per a report by IBEF.

By Vaishnavi gupta , Sr Correspondent

20 Jul 2022 | 9 min read

The fast-moving consumer goods (FMCG) sector has been one of the fastest-growing sectors during the pandemic. This growth is attributed to the swift adoption of cutting-edge technology, conscious health, environmental changes, and many other factors. The Indian FMCG market is estimated to reach $220 billion from $110 billion between 2020 to 2025 at a CAGR of 14.9 percent, as per a report by IBEF.

At IReC (Industry of Retail and E-commerce summit) 2022, various retailers spoke about how as brand leaders and omnichannel retailers, the FMCG brands are adopting the inevitable transition to micro fulfillment and determining how to infuse the brand into an experience that emphasizes the customer. They further talked about how omnichannel and being relatable with the customer has become more prominent and become the talk of the town today.

Online Grocery Shopping in India Gets Pandemic Boost

The Covid has accelerated every sector’s movement; what should have happened in the five years has really happened in the last 24 months. During the pandemic, the customer did not have an option to go offline anywhere to shop, therefore, everything had moved online and that channel gained prominence.

“Five years ago, we started this journey where we thought that the customers want to shop online, and we realized that omnichannel would be the way that we should go. In a few years, we have found out that the customers who shop offline and online, their average bill values are 20 percent higher than if they are shopping completely online or offline. We also observed that 50% of the customers who shop with us actually don't shop at the store anymore. They've completely shifted online and I suspect that the age group of the customer who has done the complete shift is between 27-40,” K Radhakrishnan, Director & Co-Founder, TATA Starquik said.

“Grocery can be delivered in so many different ways - 15 minutes, three hours, same day, next day, next week, etc. The retailers now have to do their work well, and decide how to deliver products in the right way to the customer,” he added.

How Covid-19 has Transformed the Food and Grocery Retail

“Within the two years of the pandemic, we've actually had a D2C surge, a mainline e-commerce surge, a quick commerce surge, and now the businesses are kind of flattering and going back to the modern trade and general trade channels because the consumers are moving out,” Rahul Gandhi, CMO, iD Fresh Foods noted.

“As marketers, we always tend to measure customer's behavior and then have marketing activities and distribution platforms align to customer behavior. If the customer is offline, we are offline with the communication. If the customer is online, we are online. If the customer wants to do Meta tomorrow, we'll do Meta so that way we are always mirroring our marketing and distribution activities to mimic the customer behavior,” he further asserted.

A Major Challenge in Building the Brand

The real problem that any brand faces is Customer Retention. If the brand is getting 40 percent of its next month's sales from new customers, imagine how many hundreds of rupees it is going to pay to get every new customer and if it’s not able to retain them, then what business it is in.

Customer Retention is not only a challenge for online players but it’s critical for offline businesses too. “For instance, if there are 10,000 customers who walk through the brand’s store in a month, how many of them come back and shop with it the next month? How many is the brand able to retain? The biggest cost in the business is customer retention. Brands have to see how they create stickiness for that customer to come back to its website or store; maybe through personalization or offering better service,” Radhakrishnan stated.

Customer acquisition is the biggest business imperative; without retaining its customers, the brand cannot survive. For instance, if five lakh people are entering the brand and three lakh people are going out, your brand is growing. If it's the other way around, then your brand is de-growing. Therefore, customer acquisition is the inlet pipe, which has to be nurtured continuously.

“A grocery retailer's product is a service. We buy, stock, and sell, and we have to be good at doing that. The retailer has to understand the customers, understand the data, and communicate with them and then get the customer back on a cycle,” Radhakrishnan further asserted.

Gandhi added, “At iD Fresh Foods, we have a 75-80 percent customer retention ratio. So, if 10 people are trying, our brand, eight people are sticking to us and buying it again. The customer is finding utility in what we are doing.”

Future of Food and Grocery Market in India

The food and grocery markets will continue to grow in India. During recessions or times of trouble, it is observed that this market grows. Even at the time of the pandemic, the market has shown a big growth as far as food is concerned as food consumption was fantastic at that time.

“In the coming months, the food market is going to be observe the launch of several brands, but the clutter and the ability to get to the customers and to find a space in the customer's mind is going to be a big challenge. The biggest challenge in the food and grocery market in India is distribution. It's because the smaller brands find it difficult to be able to cover a thousand towns, which have already been covered by big brands in the last 50-60 years. Hence, e-commerce is the only way to break that barrier and reach more consumers,” Radhakrishnan said.

The other thing that will help in the growth of this market is experimentation. “Food is a rare industry where you can actually create the chefs in every hotel. They can actually create a meal that consumers have never had before. There are only a few industries that can do this experimentation and create a product out of nothing just by a concoction of the mixture. And the best way to test this experiment is e-commerce channels,” Gandhi concluded.

The fast-moving consumer goods (FMCG) sector has been one of the fastest-growing sectors during the pandemic. This growth is attributed to the swift adoption of cutting-edge technology, conscious health, environmental changes, and many other factors. The Indian FMCG market is estimated to reach $220 billion from $110 billion between 2020 to 2025 at a CAGR of 14.9 percent, as per a report by IBEF.

At IReC (Industry of Retail and E-commerce summit) 2022, various retailers spoke about how as brand leaders and omnichannel retailers, the FMCG brands are adopting the inevitable transition to micro fulfillment and determining how to infuse the brand into an experience that emphasizes the customer. They further talked about how omnichannel and being relatable with the customer has become more prominent and become the talk of the town today.

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