Q-comm goes beyond grocery; all set to challenge e-comm dominance?

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January 8, 2024

Yash Bhatia, Afaqs

8 January 2024

In the 10th episode of Zerodha co-founder Nikhil Kamath’s YouTube podcast series, WTF, Aadit Palicha, co-founder, Zepto, says that consumer goods are the fastest-growing category for its quick commerce business. Initially, quick commerce brands just focussed on serving impulse grocery needs, but now they have changed their way to serve regular planned purchases too.

Major players like Zepto, Blinkit, Swiggy Instamart, and BBNow are expanding their offerings in gifting, makeup, ready-to-eat, baby care, pet care, meat, poultry and more to cater to a wider range of consumer needs and preferences.

Through our interviews with brands like Bombay Shaving Company, Bevzilla and Plum, it is evident that Q-comm business contributes approximately 10-25% of online revenue for different brands.

Also, according to a report by Redseer, the Q-comm market is expected to reach almost $5.5 billion by 2025. The report highlights, that these platforms can up their game by going beyond just grocery and extend their offerings to other consumables, electronics, newspapers and more.

It shows that quick commerce players would focus on other categories to reach this milestone. But, are brands ready for it? If yes, how is their strategy different for this model?

Aditi Handa, co-founder of The Baker’s Dozen, an artisanal bakery, states, “In our category, once the customers figure out a product in the physical store, then they tend to buy again on the quick commerce platforms rather than visiting a store. It works well in our category, as there is no need to touch and feel the product.”

Baker’s Dozen makes 60-65% of its online sales on Q-comm platforms.

Devangshu Dutta, founder of Third Eyesight says that quick commerce has spread across various product categories and he believes, “It is driven more by buzz than customer needs. Unless we meet a core demand with a large consumer market, there’s no sustained road to profit.”

Deepti Karthik, fractional CMO, SuperBottoms, says, “In the diaper category, there are a lot of unplanned purchases. We target customers who’re buying other products, and eventually get trails from them.”

She points out that a lot of gifting happens in the quick commerce segment. “Gift packs can be a great solution our brand can leverage.”

She predicts that for the baby-care brand, quick commerce will contribute 3-5% of overall revenue, led by gifting as a category.

Apart from the reduced delivery time, is there a reason that customers are opting to shop on quick commerce platforms?

Handa answers that two factors work in favour of Q-comm platforms: discounts and convenience. “As these players are expanding their portfolio, customers will find more reasons to go on these apps.”

Is the quick commerce business driven by celebrations?

India is renowned for its diverse festivities. Quick commerce platforms capitalise on this by selling event-related or topical assortments. For instance, they offer flutes for Krishna Jayanti, Ganesha idols for Ganesh Chaturthi, Christmas decorations for the holiday, decorative items for Diwali, and gold and silver coins for Dhanteras.

These platforms are also curating special web and app pages for such occasions, even for regional festivals like Chauth Puja. In 2023, Blinkit curated a specific page dedicated to the wedding season.

Karthik states, “The major business of this sector is driven by consumables and FMCG products. On special occasions, e-commerce brands used to curate specific products, which Q-commerce is now doing. The market share of the other modes is now being taken by the quick commerce players on festivals. That’s why every e-commerce is looking to launch its version of Q-commerce, like Amazon Fresh by Amazon, and BBnow by Big Basket.”

Handa believes differently and states that quick commerce is not taking up the market share of any other modes. “Currently we’re buying more than what we need. Quick commerce is creating some new markets, and people are spending more money as it is easy to spend now.”

Will Q-commerce take over e-commerce?

As the country embraces digital commerce, the battle between e-commerce and Q-commerce is intensifying. While e-commerce has a well-established presence with a vast user base, Q-commerce offers unmatched speed and efficiency. As Q-commerce players foray into other categories, will they take over e-commerce?

Ritesh Ghosal, former chief of marketing at Croma believes that Q-comm will not replace e-commerce. He says that Q-commerce will only be a successful mode for urgently needed products like trimmers, headphones etc.

Handa predicts, “In our category, Q-commerce will replace e-commerce purely based on better service. The only advantage that e-commerce holds is a variety of stock keeping units (SKUs). Like, some products will have a presence in e-commerce only like English Cheddar cheese, it will not be there in Q-comm, a customer can only get it through e-commerce.”

She says that quick commerce also provides a fast way to experiment with new products.

Kartik, says e-commerce will always be at the main stage for the brand and believes Q-commerce will be an incremental business for them.

She has observed that in quick commerce if a product gets listed, it starts to sell faster and gets a quick start as compared to the e-commerce route.

Challenges

While the benefits of quick commerce are evident for customers, these players in the backend face a lot of challenges including warehousing, labour expenses, and, most importantly, the orders are low-value, therefore the margins are less.

Balasubramanian Narayanan, vice president, of Teamlease services points out that the consumer preferences and buying patterns in the quick commerce segment evolve rapidly, making data collection and analysis a crucial aspect.

“Balancing data collection with user privacy is a key challenge. The data insights can help to create personalised experiences, predict demands, and improve operational efficiency. But this can be a challenge in this mode.”

Handa says in quick commerce, the biggest challenge is the stock keeping unit (SKU) mix, SKU selection is critical.

“Brands like Amazon, and Flipkart allow a plethora of SKUs, while quick commerce just allows a limited number, due to limitation of warehouse space and delivery time. The SKU selection by the brand becomes a critical aspect.”

In the physical realm, shelf presence plays an important role in reaching customers, in the online world, optimising the online presence is crucial to get the customers’ attention. She highlights that in quick commerce, the fight is to be at the top of the search bar.

“To be at the top, the brand should generate organic sales, secondly it’s about keyword bidding. A keyword that would search customers to find the product from the brand. The brand pays quick commerce players for this.”

Ghosal also agrees with this and states, “In the Q-commerce arena, most searches are by category rather than by brand. The brands have to tick more boxes in terms of categories/searches so that customers tend to look at them.”

(With additional inputs: Ruchika Jha)

(Published in Afaqs)

How Revant Himatsingka is waging a battle against FMCG companies and bringing them to their knees

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July 28, 2023

Manu Balachandran, Forbes India

July 28, 2023

Revant Himatsingka doesn’t despise junk food.

The 31-year-old firmly believes that those who consume it also know the perils and long-term risks associated with it. From obesity to heart disease and diabetes, junk food is often counted as a more serious threat to life than even smoking according to some studies. “Most people who consume Coke and cigarettes know they are bad for you and consume them,” Himatsingka says.

Himatsingka, however, has a problem with junk food masquerading as healthy. That’s why over the past few months he has been busy calling out its makers, and in the process taking on some of the world’s biggest FMCG behemoths.

Since April this year, Himatsingka, through his social media profile, Foodpharmer, claims to have taken on almost all the FMCG companies in India, whose products he has reviewed, and in the process has been swamped with lawsuits. Himatsingka has a following of half a million followers on Instagram.

“Food is probably 60-70 percent of what shapes our health,” Himatsingka told Forbes India over a telephone call. “And what is shaping our food today is packaged food, which is very different from what our grandparents grew up eating. Most packaged food is just selling junk and they’re marketing it as healthy. This happens even more in relatively poorer countries.”

Himatsingka began his war against fake claims with a video about Bournvita, made by confectionary maker Mondelez. That video, critiquing the children’s drink for its excessive use of sugar, was shared across social media and on WhatsApp. Himatsingka poked fun at Bournvita’s tagline Tayyari Jeet Ki (preparing for victory), instead suggesting that Bournvita was preparing children for diabetes.

He listed out all the ingredients in Bournvita, debunked claims that the drink is healthy, and remarked that half of a package of Bournvita is sugar, and [it] even contains cancer-causing ingredients.

Trouble soon followed. Mondelez sent Himatsingka a legal notice asking him to take down the video within 24 hours. Coincidentally, the notice came to him on the last day of his notice period at McKinsey where he had been working as a consultant. Unfortunately for Mondelez, the video continues to be in circulation, more so across WhatsApp. Himatsingka took down the video and even issued a statement saying that he had no interest or resources to take on the company in any court cases.

“Most people have Coke once a week,” Himatsingka says. “But people have Bournvita twice a day. So you end up having 14 [servings of] Bournvita in a week. So, the net impact of Bournvita is probably worse than that of Coke.”

“As a growing market, India is potentially a natural “dumping ground” for poor products and processes that have been used by prominent brands in other markets,” Devangshu Dutta, the founder and CEO of management consultancy firm Third Eyesight says. “It is incumbent upon Indian customers to be diligent, picking up cues not only from Indian consumer-activists and but also their counterparts in the developed economies.”

From Kolkata to New York and back

Himatsingka grew up in an upper-middle-class household, with a homemaker mother and a father running his own business in Kolkata.

After his schooling, Himatsingka went to New York to study finance at the New York University’s NYU Stern School of Business where he graduated in finance. For a year after that he worked with a bank in the US. At 22, he ventured out into writing a book, Selfienomics, a self-help comedy book focusing on managing finances, health, religion, death, starting a business, and even completing projects on time.

“I wrote one chapter on how to read a food label even then,” Himatsingka says. “Back then, and even now I believe that it is the most important skill in the 21st century.” While he did secure admission into the illustrious IIM Bangalore, Himatsingka turned it down, instead focussing on his book.

By 2018, Himatsingka went to do an MBA at Wharton and followed it up with a course in nutrition, while also starting work at McKinsey as a consultant. “As a consultant, you work to solve business problems and you try to structure solutions,” Himatsingka says. “We focus on our career when it comes to structuring solutions and being data driven. But I try to extrapolate that into life. In life, one of our most important aspects is health.”

Himatsingka was also concerned by the growing link between cancer and heart diseases to packaged and processed food. In 2019, a study published in the British Medical Journal (BMJ) suggested a possible link between “ultra-processed” foods and cancer. The study defined ultra-processed foods as those lacking vitamins and fibre, which also contain high levels of sugar, fat, and salt. Such ultra-processed food, the study noted, represents as much as half of the daily energy intake in several developed countries.

“This is such a big problem and no one is talking about it,” Himatsingka says. “No one is trying to solve it. So, I thought, I wanted to do something in this space.”

That meant, Himatsingka, who by his own account was making very good money in the US, decided it was time to come back home, and try and do something around awareness. “I’m very social impact driven,” Himatsingka says. “April 1st is when I made the Bournvita video. I made a video showcasing how Bournvita was falsely labelling itself. Their label showed that you get stronger bones and muscles. Then I got a legal notice from Bournvita asking me to take down the video in 24 hours.”

The idea for the Bournvita video, Himatsingka says, came from his concern that a product like Coke had become the face of obesity and junk food, while many others were marketing themselves as healthy, without it being so.

Mondelez, the makers of Bournvita soon retorted that the drink contains nutrients such as Vitamin A, C, D, iron, zinc and copper that help build immunity and have been part of its formulation for 70 years. It also said that every serve of Bournvita has 7.5 grams of added sugar, much less than the recommended limit for children.

imatsingka though found support from unexpected quarters. The Nutrition Advocacy in Public Interest India (NAPi) a think tank comprising independent experts in epidemiology, human nutrition, community nutrition and paediatrics, medical education, administration, and management, issued a statement supporting Himatsingka.

“The food product Bournvita falls under the ultra-processed food (UPF) category based on its ingredients list,” NAPi said in a statement. “This industrial formulation is inherently harmful. There is enough scientific evidence present in the public domain pertaining to the negative impact of increasing consumption of UPFs on human health, which include several chronic diseases such as obesity, diabetes, cardiovascular disease, cancer, and depression (Non-Communicable Diseases-NCDs).”

The National Commission for Protection of Child Rights (NCPCR) also issued a notice to Mondelez asking the company to review and withdraw all misleading advertisements, packaging, and labels. The NCPCR is a statutory body to protect child rights.

Fighting it out now

Personally, for Himatsingka, the pushback from Mondelez couldn’t have come at a worse time. “I had just quit my job. And my family was asking me what I was trying to do with my life. They said ‘you had such a good job, you left all of that, now you are getting into a legal fight’,” Himatsingka says. “So I removed the video as they asked me to. And that got even more attention.”

Since then, Himatsingka has been actively taking on FMCG companies and their products in the country, ranging from ketchup, and chyawanprash to juices and bread among others. Himatsingka recounts having received legal notices from Dabur and even been asked to remove a video by Sting Energy, owned by PepsiCo.

He says his strength, however, comes from many parents who have reached out to him and are thanking his efforts for making them aware of the importance of reading labels. “People are reading labels for the first time and have now started figuring that many of the products are not that healthy,” Himatsingka says.

However, the pressure of the job continues to be heavy. “There is a lot of pressure,” the 31-year-old says. “These companies send legal notices and I have no idea how to deal with it. These are very technical and very dense documents, where they analyse each line and write a paragraph on each line. I once got a 300-page document from one company and they were asking me for a few crores. It’s strenuous.”

What lies ahead?

For now, the 31-year-old says his focus remains steadfast on raising awareness around food.

“Because of the Bournvita controversy, the rollover impact is that all the other companies are also going to get scared now to falsely market themselves,” Himatsingka says. “I cannot think of a human problem that is relatively easy to solve than nutrition labels and it creates massive impact.”

A few weeks ago, Himatsingka raised awareness about the growing consumption of bread in India and how most makers of bread who sell whole wheat or brown bread use more maida, which has less fiber, and is unhealthy. He had also called out juice makers for their use of sugar by comparing various mango juices available in the country.

“When a movie comes out, there are reviews and I can openly say whether I liked a movie or not,” Himatsingka says. “So why can’t I say the same about a food product? I’m just unboxing a product and saying what is there inside it. So I don’t think I’m legally wrong. They can ask me for whatever money they want. But I don’t think they can win on that.”

Along the way, he says he has also seen positive changes in companies. For instance, Himatsingka made a video on ketchup and explained how Maggi Rich Tomato Ketchup has more sugar than tomato in its ingredients. “Last month, they (Nestle) announced that they’re changing the recipe,” Himatsingka says. “They’re reducing their sugar content and they are going to have more tomatoes than sugar. One tiny change like that has such a major impact on the large scale.”

Experts agree that the growing scrutiny about ingredients is certain to give FMCG majors sleepless nights. “Given that food has a disproportionate share in our spend, an enormous impact on our health as well as a tremendous ecological footprint, it is only natural for consumers to question the composition, the origins, and the overall impact of the food that is being sold by leading brands,” says Dutta of Third Eyesight. “Over the last several decades, packaged food has become laden with synthetic flavouring, colouring, and shelf-life-extending chemicals, which are being called into question by activists through blogs and social media. On several occasions, prominent companies are forced to change their product composition or, at the very least, admit to the health-negative implications of their ingredients.”

Meanwhile, over the past three or four weeks, Himatsingka says he hasn’t been flooded with lawsuits. That’s partly because he has become quite careful about how he words his statements, instead focusing only on the merits of his argument.

“There are millions of problems in the world. But most of the problems are very hard to solve, like air pollution. But teaching people how to read a food label is easy. I feel learning how to read a food label is more important than coding in the 21st century, where most of what we’re eating is processed or packaged.”

Indeed, the fight is long. And Himatsingka is only gearing up for more.

(Published in Forbes India)

Pharma retail emerges new frontier for organised players

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May 16, 2023

Viveat Susan Pinto, Financial Express

May 16, 2023

The country’s top two organised retailers, Reliance Retail and DMart, are shifting focus to the large but fragmented pharma retail market in India in their quest for growth. The Rs 2-trillion domestic pharma retail industry is largely dominated by mom-and-pop stores, much like the fast-moving consumer goods market and kiranas.

On Saturday, Avenue Supermarts, which runs the DMart chain of stores, said it had set up a new subsidiary called Reflect Healthcare and Retail to launch pharmacy shop-in-shops. Reliance Retail, on the other hand, proposes to step up the launch of offline pharmacy stores under Netmeds, the e-pharmacy company it acquired in August 2020. Netmeds is now a subsidiary of Reliance Retail.

The plan with Netmeds, according to persons in the know, is to open around 2,000 standalone pharmacy stores in the next few years. Reliance Retail already has around 1,000 shop-in-shop pharma stores across Reliance Smart Bazaar and Smart Point outlets.

During Reliance Industries’ fourth quarter earnings call last month, Dinesh Taluja, chief financial officer of Reliance Retail, said standalone pharmacy stores by the company would be positioned as destinations for pharma and wellness products. The aim, Taluja said, was to leverage omni-channel capabilities to serve customers better.

DMart, on the other hand, has launched one pharmacy shop-in-shop in the Mumbai Metropolitan Region (MMR) for now. But the future plan, according to industry sources, includes rolling out at least four to five more of such outlets in the MMR region in the next few months.

“While e-pharmacies are a growing concept, there is a large population out there that still prefers to go to a nearby pharmacy or medical store to purchase drugs or medicines prescribed or buy over-the-counter products,” said Devangshu Dutta, founder and chief executive of retail consultancy Third Eyesight.

“The number of organised retail chains in the pharma space in the country are limited. This presents an opportunity for organised players like DMart and Reliance Retail to expand their presence in the market,” Dutta said.

Apart from Apollo Pharmacy, which is India’s largest omnichannel pharmacy chain with over 5,000 outlets, the organised pharma retail space in India largely has regional chains or popular standalone outlets within cities catering to a captive market, say experts. So, organised retailers such as Reliance Retail and DMart can disrupt the market if they begin growing their presence.

Analysts at brokerage firm Kotak Securities, however, see DMart’s foray into pharma retail as a pilot programme, which could be scaled up in the future. “This is another pilot that is expected to boost footfalls in DMart’s brick and mortar business using existing store infrastructure,” they said.

(Published in Financial Express)

Sanitiser penetration grows but several FMCG companies deprioritise the product

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June 29, 2021

Devika Singh, Moneycontrol 

29 June 2021 

Post-COVID, the sanitiser market will shrink considerably and there will be room only for old trusted brands or bulk low margin suppliers, suggest experts.

Every one in two urban households are now using sanitisers, as per data from Kantar.

The pandemic has triggered a gold rush in the health and hygiene sector, particularly sanitisers – even if temporarily.

A severely underpenetrated category in the pre-pandemic period, sanitisers have witnessed massive adoption amongst the consumers since March 2020.

According to data from Kantar, annually, before the pandemic struck (March 2019 – February 2020) hand sanitiser penetration was about 1.2 percent; on an average in a month only 0.1 percent of the urban households bought the product.

However, during the first 12 months of the pandemic, the category reached nearly 50 percent penetration, a quantum leap.

It means everyone in two urban households are now using sanitisers, as per data from Kantar, the world’s leading data, insights, and consulting company.

Overall, the hygiene category had witnessed a huge spike in sales as the first wave of the COVID-19 pandemic struck the country in March last year.

Although the sales declined as the cases subsided, the demand jumped up again with the second wave of the pandemic.

Several companies had made a beeline for the category and joined the sanitiser gold rush.

According to data from Kantar, as many as 350 brands of sanitisers were launched in the first three months of the pandemic.

Consumers are also buying more products in the hygiene category such as vegetable cleaners and surface disinfectants.

Data from Kantar shows that vegetable and fruit cleaners now have a penetration of 2 percent and surface disinfectants 1.5 percent.

“For a category that is driven by a limited number of brands and has not even been there for a year, it is a huge success,” said K Ramakrishnan, MD – South Asia, Worldpanel Division, Kantar.

Though the category overall has seen an increase in demand, industry and experts expect only a few big brands with a strong legacy in the hygiene segment to sustain in the long run.

Hence companies such as Marico have already started deprioritising the category.

“Of late, we have realised that it (sanitisers) is more of a tactical opportunity for us to provide consumers what they needed then,” Pawan Agrawal, CFO, Marico, said.

“These products do not fit into our scheme of things as we understood that consumers will go back to the legacy brands with strong equity in hygiene, and hence three-four brands will have a larger play in the segment,” he added.

Marico, hence, has decided to not make any fresh investments in the category going ahead.

Raymond Consumer Care, which sells sanitisers under its brand Park Avenue, too, has similar plans.

“We believe post-COVID, the sanitiser market will shrink considerably and there will be room only for old trusted brands or bulk low margin suppliers. Given this context, we will maintain strategic presence in the chemist channel, but this segment will not be a priority,” admitted Sudhir Langer, CEO – Raymond Consumer Care.

Other companies such as CavinKare plan to focus on flagship products such as handwashes.

Said Raja Varatharaju, GM Marketing – Personal Care, CavinKare: “As the demand for sanitisers continues to slow down, our core focus will remain on offering a bouquet of products under the health and hygiene portfolio as we move forward. We will increase and strengthen our focus on hand wash, as it is a flagship product in our portfolio.”

Reckitt’s Dettol, ITCs’ Savlon and Hindustan Unilever Limited’s (HUL) Lifebuoy are some of the top brands in the health and hygiene space, which are likely to benefit from this trend in the long run, indicate experts.

Consumers associate certain products and categories with certain brands and are inclined to buy from them, said Devangshu Dutta, Chief Executive at retail consultancy, Third Eyesight.

Hence, companies, which saw in the pandemic the chance to tap the short-term opportunity, do not want to focus on it any longer.

Source: moneycontrol

Retail in Critical Care – The Impact of COVID-2019

Devangshu Dutta

April 7, 2020

Oil shocks, financial market crashes, localised wars and even medical emergencies like SARS pale when compared to the speed and the scale of the mayhem created by SARS-CoV-2. In recent decades the world has become far more interconnected through travel and trade, so the viral disease – medical and economic – now spreads faster than ever. Airlines carrying business and leisure-travellers have also quickly carried the virus. Businesses benefitting from lower costs and global scale are today infected deeply due to the concentration of manufacturing and trade.

A common defensive action worldwide is the lock-down of cities to slow community transmission (something that, ironically, the World Health Organization was denying as late as mid-January). The Indian government implemented a full-scale 3-week national lockdown from March 25. The suddenness of this decision took most businesses by surprise, but quick action to ensure physical distancing was critical.

Clearly consumer businesses are hit hard. If we stay home, many “needs” disappear; among them entertainment, eating out, and buying products related to socializing. Even grocery shopping drops; when you’re not strolling through the supermarket, the attention is focussed on “needs”, not “wants”. A travel ban means no sales at airport and railway kiosks, but also no commute to the airport and station which, in turn means that the businesses that support taxi drivers’ daily needs are hit.

Responses vary, but cash is king! US retailers have wrangled aid and tax breaks of potentially hundreds of billions of dollars, as part of a US$2 trillion stimulus. A British retailer is filing for administration to avoid threats of legal action, and has asked landlords for a 5-month retail holiday. Several western apparel retailers are cancelling orders, even with plaintive appeals from supplier countries such as Bangladesh and India. In India, large corporate retailers are negotiating rental waivers for the lockdown period or longer. Many retailers are bloated with excess inventory and, with lost weeks of sales, have started cancelling orders with their suppliers citing “force majeure”. Marketing spends have been hit. (As an aside, will “viral marketing” ever be the same?)

On the upside are interesting collaborations and shifts emerging. In the USA, Jo-Ann Stores is supplying fabric and materials to be made up into masks and hospital gowns at retailer Nieman Marcus’ alteration facilities. LVMH is converting its French cosmetics factories into hand sanitizer production units for hospitals, and American distilleries are giving away their alcohol-based solutions. In India, hospitality groups are providing quarantine facilities at their empty hotels. Zomato and Swiggy are partnering to deliver orders booked by both online and offline retailers, who are also partnering between themselves, in an unprecedented wave of coopetition. Ecommerce and home delivery models are getting a totally unexpected boost due to quarantine conditions.

Life-after-lockdown won’t go back to “normal”. People will remain concerned about physical exposure and are unlikely to want to spend long periods of time in crowds, so entertainment venues and restaurants will suffer for several weeks or months even after restrictions are lifted, as will malls and large-format stores where families can spend long periods of time.

The second major concern will be income-insecurity for a large portion of the consuming population. The frequency and value of discretionary purchases – offline and online – will remain subdued for months including entertainment, eating-out and ordering-in, fashion, home and lifestyle products, electronics and durables.

The saving grace is that for a large portion of India, the Dusshera-Deepavali season and weddings provide a huge boost, and that could still float some boats in the second half of this year. Health and wellness related products and services would also benefit, at least in the short term. So 2020 may not be a complete washout.

So, what now?

Retailers and suppliers both need to start seriously questioning whether they are valuable to their customer or a replaceable commodity, and crystallise the value proposition: what is it that the customer values, and why? Business expansion, rationalised in 2009-10, had also started going haywire recently. It is again time to focus on product line viability and store productivity, and be clear-minded about the units to be retained.

Someone once said, never let a good crisis be wasted.

This is a historical turning point. It should be a time of reflection, reinvention, rejuvenation. It would be a shame if we fail to use it to create new life-patterns, social constructs, business models and economic paradigms.

(This article was published in the Financial Express under the headline “As Consumer businesses take a hard hit, time for retailers to reflect and reinvent”