Indian FMCG Ecosystem: An Efficient National Infrastructure with its own Guard Rails
The Indian grocery retail industry is currently one of the top-five retail markets globally by economic value. Estimated to be worth around $600 billion, the industry is predominantly led by the 15 million small merchants and entrepreneurs servicing the essential needs of 1.3 billion people around the country. Over the last two decades, in particular, global intervention, the growth of big brands, the rise of e-commerce, and technological advances have served to transform the industry into one replete with customer choices for every stratum of our socio-economic structure. Let’s take a closer look at how low- and high-income transactions alike are supported in this space.
The MRP System
The MRP (maximum retail price) system was introduced in India in 1990 to protect customers from profiteering and provide essentials at fair prices. The system made it mandatory for MRP to be displayed on every packaged product, along with information about the manufacturer or importer, date of packaging and expiry, and other details. Prices were determined based on market dynamics and demand-supply interactions, and initiatives were taken to educate customers about the prices of what they were buying. The key objective was to protect unwary customers from exploitation - particularly those in rural or otherwise backward areas - and thus maintain an inclusive consumption ecosystem.
The supply chain in India has constantly attracted interest and research for its remarkable efficiency. Among the key findings is the low-profit margin made by Indian retailers and distributors compared to the global average. For instance, against the global average of 30-35 percent, the average Indian retailer makes a minuscule margin of 10 percent on every sale. It is with this profit that millions of small and medium-size retailers manage their personal and household expenses. Similarly, a distributor who has tied up with a popular FMCG brand makes anywhere between 3-5 percent, while the global norm is approximately 15 percent. This fabric of efficiency is built into the value chain of the country and is what enables a sachet of shampoo to be available for just one rupee in the remotest part of the country.
Technology – The Way Forward to Optimize and Protect the Infrastructure
Digital transformation has already begun and is the key to helping the FMCG sector evolve. It is crucial to note, however, that digital inclusion also lies at the core of digital transformation. The two major roadblocks on this path are low digital penetration and poor digital literacy. As a consequence, a significant fraction of consumers in rural areas are still dependent on physical modes of financial operations and transactions. It is thus essential to execute more national policies targeted at digital inclusion so that digital transformation can have a macro-level impact. In particular, the Kirana store network serves as a high-frequency touch-point to 90 percent of India’s population. Digitally empowering these stores is, therefore, essential to achieving true financial and digital inclusion.
Several companies have recognized the need to empower Kiranas, and at the forefront of these efforts is Snapbizz. Their best-in-class solutions enable easy digital store management, bringing the Kirana shop online to better serve its consumers and acquire new ones, while also integrating with all key stakeholders of the supply ecosystem. Snapbizz is also helping small merchants acquire a connected and inclusive knowledge of pricing, analytics, and leveraging the benefits which the entire ecosystem is willing to offer. From saving time, efforts, and resources to minimizing losses in logistics to better visibility in supply chain operations, digital transformation in this systematic fashion ultimately leads to an increase in margins and a more prosperous family, society, and country.