Consumer confidence in India is at an all-time low, as per the RBI’s May 2021 round of the Consumer Confidence Survey. The Indian consumers’ assessment of the current situation, as well as their expectations from the future, are more pessimistic than ever in the second wave of the pandemic.
While aggregate supply hasn’t been impacted to the degree it was during the same time last year, the greatest toll of the current wave has been an erosion in demand, characterized by loss of mobility, decreased discretionary spending and rampant unemployment. The situation has not improved by accumulating inventory, which locks cash flow and hurts all participants in the economy.
Considering these factors, here are some key strategies, that FMCG companies must focus on over the coming months:
It is high time that companies focus on fast-moving SKUs over higher-margin SKUs that do not move as quickly. Due to dampened demand, consumers are less likely to go for these SKUs. With low demand and limited manufacturing capabilities due to state-wide lockdowns, it is important to prioritize SKUs that will sell faster, even if margins are lower.
This will affect ROI for channel partners, as margins will be lower even with higher turns, but increasing turns should be the top priority to ensure healthy cash flow is maintained, instead of chasing the promise of greater profits without factoring in the demand shock our economy is experiencing.
Unlocking cash flow:
With increased inventory levels, cash is being locked in for all channel partners, and with no respite in sight, companies and their partners will soon feel the heat of delayed receivables. This problem needs to be addressed at two fronts – liquidating existing inventory and easing cash flow.
Support should be provided to channel partners to liquidate aging inventory, via schemes and discounts, especially for slow-moving SKUs, and companies should use this time to move away from the traditional push-heavy sales model to a lighter, just-in-time replenishment model that hinges on demand to reduce liability for their channel partners.
Cash flow can be eased by providing partners access to credit lines to limit their exposure to the vagaries of the market. While early payment programs can help ensure that companies get paid on the day of sale and reduce their dependence on receivables to ensure optimal cash flow. Bizom works closely with companies like Finovate Capital to ensure that our clients and their partners have access to working capital management solutions that are tailored to their needs.
As spending continues to contract, it is key for companies to increase their presence in existing markets and expand to new markets. Doing so will strengthen their position in the industry once demand returns to normal levels.
The immediate play here is to capture a greater share of the dwindling spends. Waiting for demand to normalize is not a good idea; the pandemic has levelled the playing field for all players in the industry (because larger businesses have larger overheads), and it is important that smaller brands act now and capitalize on this opportunity and capture as many outlets as they can. Coupling this with an exceptional GTM plan will help companies grow even in this time of crises.
Demand for non-essentials is unlikely to return to pre-pandemic levels this year, especially if the third wave, expected in September, hits the country with the same intensity as the ones preceding it. However, companies can learn from their mistakes and work towards overhauling their sales channel to ensure that they remain in a position of strength.
To know how to effectively implement these strategies to recover market share, connect with our team at email@example.com and we will show you how the biggest FMCG brands are making use of them to stay ahead of the curve.