Rural markets are leading the growth of retail in most developing nations. However, in the second wave of COVID-19, the future seems wary as the spread of the Coronavirus strengthens in tier 2 and 3 cities, reducing the number of mom-and-pop stores.
To avoid rural demand from halting, FMCG companies need to proactively ensure the well-being of their channel partners, especially from a financial standpoint.
Retailers, distributors, and stockists prefer fast-moving SKUs, like essentials, with their limited funds during these challenging times. They will be reluctant to stock slow-moving SKUs yielding a higher profit.
Still, rural demand is beating urban demand, and SMEs have bolstered their rural distribution network to meet it. However, the growth of consumer demand in retail largely depends on the availability in stores.
Availability is directly dependent on the seller’s financial ability to procure stock. And with less opportunity present in the market in the upcoming months, slow-moving SKUs will take a backseat as they might not yield the needed rolling working capital.
Also, with intermittent lockdowns and rising health fatalities, many sellers are juggling between personal funds and business capital to make ends meet.
Hence, brands need to financially empower the supply chain to prevent the growing demand from dropping. Using this adversity as an opportunity, brands can move ahead of their competitors and increase their market share in growing consumer markets.
With the introduction of a digitized credit extension line, companies can help members of the downstream supply chain find adequate funds required to run their businesses. It will not hurt the pockets of FMCG behemoths and will also prevent the supply chain from facing a cash crunch.
Aljo Joseph, the co-founder and chief business officer of Finovate Capital, in an article in SME Futures, shared key insights into how well-managed firms can use financing to drive competitive advantage in times of Covid-19. He talks about how utilization-linked financing and allocating customized credit limits can help reduce the direct debit on balance sheets while creating a stronger supply chain ecosystem.
To quote Benjamin Franklin, who once said, “By failing to prepare, you are preparing to fail”.
Using structured digital financing lines, stockists, distributors, and retailers can get a working capital influx in dire times without pleading for hard assets. It will result in a smoother flow of the supply chain and create a stronger relationship with members of the supply chain.
Bizom has organized a retail intelligence masterclass on supply chain financing for FMCG brands. Do join us on 16th June, Wednesday, with Krishna Kothari, CEO of Bizom UK, and Aljo Joseph, co-founder, and chief business officer of Finovate Capital, to discover the opportunities and methods of supply chain financing.
For more daily highlights on the global economy, please write to us at firstname.lastname@example.org.