Is it time for CPG brands to go Direct?

A regular morning for us could start with Colgate brush and toothpaste, Red label tea, Lux soap, Head & Shoulders Shampoo, Maybelline beauty (or Gillette grooming) products, Kellogg's cereal, Amul milk and then zip zap zoom to office. Our interaction with these Consumer Packaged Goods (CPG) or Fast Moving Consumer Goods (FMCG) continues throughout the day. These are high frequency, low cost purchases for a consumer and were traditionally associated with lot of loyalty as a Colgate using household did not easily switch to Pepsodent. Gone are those days, however, as not just big television-ad brands but smaller private label brands from retailers have been substituting our regular CPG companions at home.

There have been discussions if these CPG brands should sell directly to consumers, bypassing the distribution network comprising of Wholesaler-> Distributor-> Retailer (your kiranawala or the likes of Walmart, Big Bazaar). The adoption of e-commerce by consumers in the last few years is a great driver but the benefits to CPG brand need to be evaluated. I conducted a quick dipstick survey (of urban educated consumers of various age groups) to understand if there is any existing adoption to buying directly from CPG brands.

Survey findings indicated more adoption to buying directly from FMCG brands in Gen Y (born between 1980-1994) as compared to Gen Z (born between 1995-2010) and even less in Gen X (born between 1960-1979). However, both Gen Y and Z are buying more of the small, online-only FMCG brands from online retailers like Amazon instead of the individual brand websites.

So does it make sense for FMCG brand to sell directly to consumers?

Big FMCG players like Procter and Gamble (Gillette, Tide, Pampers), ITC (Kitchens of India Ready to eat food)

• Why- For consumer data insights (like buying behaviour, preferences, etc.) to help in New Product Development and managing Product Lifecycles; testing new products and markets, customer engagement to retain loyalty
• When- Losing market share to private label of retailers, retailer discounts putting pressure on margins
• Where- Online/ Mobile, Social, Shop-in-shop, Pop-up stores
• How- Subscription Model (like shaving, diapers monthly supplies), IoT-based (like Tide button attached to your washing machine which when pressed creates an online order for Tide)

Small, Newer FMCG players like Dollar Shaving Club (US), Birchbox (US), The Man Company (India), Being Juliet, Peebuddy (India)

• Why- Market entry or market penetration- less costly than investing in distribution network
• When- New products, no shelf space given by retailers due to their high bargaining power, niche products
• Where- Online/ Mobile, Social, Pop-up stores
• How- Referral schemes (for acquiring customers through word-of-mouth), Subscription Model (like shaving, diapers monthly supplies)

I believe that the timing is right for brands to try reaching customers directly in India as FMCG is the next big growth category in online retail and one-third of the FMCG sales in India is influenced by digital mediums (Google-Bain study)  Although it will be a fraction of total sales for the big brands but the consumer insights will be the gold mine to dig for on this path. And for the thriving small FMCG players, these wouldn't have existed without the direct channels.


(The opinions expressed in the blog are personal)

Use of Technology to improve Customer Experience: A Reality Check

Last year I was working on a paper on enriching customer experience (CX) in the digital age with examples of pioneering global brands. However, recently I was faced with a reality check on current use of technology to enhance CX in India during my frequent shopping trips to the organized retailers. The technological interventions to enhance CX in-store are incremental, the online buying is admirably smoother but omnichannel experience is still distant.

My No.1 pick in impressive in-store interventions is Virtual Mirror at Caratlane's store (Brick and click jewellery retailer)  for trial of earrings. The staff was not too forthcoming to offer a trial but the resulting experience was good. It seemed time-saving and convenient for a customer than trying-on each piece of earring individually (additionally considered not-so-hygienic internationally).

The other in-store technology interventions seemed to be laggard adoptions of global trends. Few examples were:

• Self Checkout Kiosk at Lifestyle - Caught my eye and appreciation but then I realized it is merely an 'assisted checkout' by store staff and only they have the access to remove the RFID tag from the shopped item.

• Customer Feedback at Shopper's Stop - Placed at all Point of Sales and at Customer Service Desk, the tabs request a smiley-based feedback (Happy, Neutral, Sad). However, it felt like one-way communication with no opportunity to offer real qualitative customer feedback.

• Price Check Kiosk at IKEA - Placed at some odd locations in your long journey in IKEA store, it is helpful as IKEA price labeling does not communicate the selling price too well.

On the online side, department stores like Shopper's Stop and Lifestyle have integrated their card rewards program to their online retail sites to check and use the points. But it is far-off from omnichannel experience of single customer and order database where customer information and order history from both channels is visible in both channels. If the groundwork is missing, one can forget using advanced analytics attempting to track customer preferences, contextualize insights and give personalized offers to customers.

On a concluding note, I want to mention about some non-technological interventions around CX - how shoe retailer Skechers has a sanitizer bottle on their POS (hygiene never hurts). Considering shopping and eating-out goes hand-in-hand in India (more revenue share of food than shopping in the malls), it is sheer common sense yet none of the dedicated shoe retailers had thought about it.

On a side note, talking about contextually targetting customers in a physical world - have you ever seen an ethnicity-based mannequin? Well the young Sikh boy mannequin in a small Sikh pilgrimage town made me rethink that innovation and inspiration can be found anywhere. 

(Note: The opinions expressed in this blog are personal)