Driven by changing lifestyles, easier access, rising income levels, and growing needs the FMCG sector in India is the fourth largest sector in India. While the urban sector accounts for the largest revenue share, the rural sector is rapidly growing and along with semi-urban segments contributes 50% of total rural spending. With the onset of the pandemic, the FMCG market rose by 7.1% driven by food items, health, hygiene, and rural areas.
In this report, the focus is on FMCG retail market, where changing dynamics of organized, unorganized, online, and offline markets are considered in the sector. The organized sector composes of supermarkets and retail chains whereas the unorganized sector is largely composed of the neighborhood shops that cater to almost every Indian household.
While the online markets are composed of traditional retailers with brick-and-mortar shops, the online retailers compose of e-commerce platforms offering a wide range of products to their customers on their doorstep.
The pandemic brought about significant changes to the present dynamics of the four segments. Before the pandemic, only a few consumers were experimenting with e-commerce platforms for their FMCG needs that they otherwise fulfilled from their preferable offline shopping stop. With the onset of the pandemic and the frequent lockdowns and rising restrictions on commuting, people changed their shopping modes. While the organized sector through its supermarkets and retail chains had a setback as a result of supply chain disruptions and lockdowns, the unorganized sector formed by the Kirana stores flourished. Similarly, e-commerce
platforms seemed to have satisfied a majority of consumers’ needs with offline platforms becoming more and more inconvenient to reach unless they were the neighborhood stores. Thus, overall, the unorganized sector and e-commerce have emerged to be the most resilient during the pandemic. The incorporation of unorganized stores by the big e-commerce platforms like Amazon and Jio-Mart has also enabled the sustenance of the friendly neighborhood Kirana stores we’re all familiar with.
The pandemic has urged customers to take into consideration hygiene protocols, adopt digital solutions and change their buying behavior in response to the changing dynamics. The report analyses the impact of COVID-19 on the consumers in the FMCG market by modeling the decision-making process in the FMCG sector. The framework highlights the opportunity for disruptions in the decision-making process that has enabled the consumers in the market to adopt new modes of shopping and explore new brands. This presents an opportunity for all four segments to understand the changing consumer dynamics and enable growth. Whether the new habits formed as a result of the pandemic would sustain or the consumer behavior would tread back to old habits is yet to be known.
The first section looks at the FMCG market in India, followed by a deep dive into the dynamics of the four segments, organized, unorganized, offline, and online sectors. Finally, the report uncovers the changing dynamics of consumer behavior through a decision-making framework.