May 15, 2020 | 02 min read
In an emerging market like India, annual spending on groceries is a 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 groceries 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 the 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 out how this solution works. The devil is in the details, my friend.
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 to 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 commands much like they do in the real world.
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.
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.
Disclaimer: Bizom recently announced a partnership with Yellow Messenger to provide this exact service to 500 plus brands in its portfolio.