In an emerging market like India, annual spend on groceries is little over $300. Assuming weekly shopping trips, it means a paltry $6.25 per week. You do not need to have an MBA to realise why Direct2Consumers (D2C) in FMCG is not a viable distribution option. The logistics costs alone would kill a business model. It’s no wonder corpses of companies which tried to sell grocery online litter the Indian business landscape. But fret not, there is a solution, and we are making it work.
India has approximately 15 million mom and pop kirana shops. That’s one shop, for 20 households! Now if you add up wallets of these 20 households, you suddenly get a weekly wallet of $125. Brands can work with that, can’t they? Now that unit economics is out of the way, let’s find how this solution works. The devil is in the details, my friend.
Consumers stick with apps they already use
Encouraging consumers to download a new application and ensuring consumers use it is a massive drain on costs for brands. With razor-thin margins, the consumer acquisition cost itself is huge. Fortunately, the solution is simple work with apps that consumers already use. Call, SMS, and wait for it, WhatsApp, of course! WhatsApp is ubiquitous in India. The simple chat-like interface with a BOT in the background is the perfect consumer front for eCommerce purchases. The bot can also be embedded with natural language processing and voice recognition to integrate with Amazon Echo/Alexa or Google Earth devices to make it genuinely universal! So consumers search and order through voice command much like they do in the real world.
Retailers adopt technology for consumer loyalty and footfalls
Our heroes at the pop and mom stores are incredibly agile and fast adopters of technology, especially when it comes to making more profits. We have seen retailers adopt and download applications and use them effectively, even in the rural heartland of India. The retailer app, apart from aggregating consumer orders, allows retailers to digitise their everyday processes. They can create delivery schedules, communicate with consumers, e-invoice consumers, keep inventory at the store and most importantly connect with brand supply chains to order the stock they need for their shops.
Brands evolve to just-in-time supply chain
For this system to work effectively, consumer brands need to move from push to pull distribution. Today, brands focus on increasing their share of the shelf at retailers, even at the cost of overstocking. In the consumer-driven environment, brands will need to rethink their supply chains to serve demand better by providing the best “just in time” delivery to retailers. It increases retailer confidence in the brand, and by availability, consumer confidence as well.
That’s it! Emerging economies can become D2C distribution dominated ones with just three simple steps. I can see the magic happen when we marry technology with the entrepreneurial spirit of mom and pop retailers across emerging markets.