Organized retail now accounts for 30% of FMCG sales in metro cities: Nielsen
3 min read . Updated: 30 Apr 2020, 08:02 PM ISTNielsen says in the first quarter of 2020, share of modern trade stores in metro cities rises to 24.7% from 22.3% a year ago
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Organized retail now accounts for 30% of FMCG sales in metro cities: Nielsen
NEW DELHI : Shoppers in India’s metro cities are increasingly shifting to supermarket chains, and even ordering their groceries online, prompting the two organized retail formats to corner more share in the sale of fast moving consumer goods in a county where local grocery stores still control a bulk of the market.
In all, the two formats now account for roughly 30% of FMCG sales in the country’s metros, market researcher Nielsen said on Thursday. Nielsen counts 52 cities as metros, or those with a population greater than 10 lakh.
Nielsen said that in the first quarter of 2020, share of modern trade stores in these metro cities moved up from 22.3% in the same period a year ago to 24.7% now; while that of e-commerce went up from 5% in the January to March quarter of 2019 to 7.3% in the same period of the current year. Nielsen follows a January to December calendar.
In a quarterly update on India's FMCG sector, the market researcher assessed the contribution and growth rates of traditional trade, modern retail, and e-commerce sales channels to FMCG sales in India. The researcher looked at retail channels in India's metros, as well as mapped their popularity pan-India.
However, across India, traditional trade still continues to control bulk of stores where goods of daily use are bought and sold.
Across India, in terms of their contribution to FMCG sales, the share of traditional trade—still the largest—dropped from 88.5% in the first quarter of 2019, to 86.3% in the first quarter 2020, shrinking by 2.2% in the span of a year. Whereas the share of modern trade moved up from 9.6% in Q1'19 to 10.9% in Q1'20. Across India though, contribution of e-commerce is still minuscule at 2.8%.
"The contribution or the channel mix (of different retail channels) has been changing over the last one year. Traditional retail has come down to 86%, so there is clearly some movement towards organized trade, and within organized trade, both modern trade and e-commerce are taking share for now," said Sharang Pant, lead retail vertical and RMS, Nielsen Global Connect.
However, Nielsen said the “channel shifts are even more amplified in metros where traditional trade salience has dropped by almost five percentage points in the last one year."
Now, as Covid-19 sways shopping behavior prompting more consumers to avoid crowded places, it is likely to boost adoption of online retailing in India. Online grocery retailers such as Grofers, and BigBasket have been overwhelmed with orders since India’s strict lockdown started.
Large marketplaces like Amazon, and Flipkart, too, are currently engaged in the delivery of essentials.
The demand has also prompted more industry players to join in—FMCG companies, and physical retail stores too have amped up their presence online with new apps, and tie-ups with logistics companies for home deliveries.
Nielsen also said that over the years, modern retail chains have drawn in huge numbers especially through their own sales and promotional activities such as celebrating key occasions—what Nielsen calls ‘big days’. These include sales around Republic and Independence day that have become significant.
“Retailer driven ‘big days’ have played a big role in this performance of organised trade channels, modern trade and e-commerce, in Q1’20. Organised channels witnessed consistent “double-digit" growth in the ‘big day’ months, indicating that ‘big day’s’ could be an important lever to drive growth for the FMCG industry in future months," it said.
It, however, added that e-commerce ‘big-days’ have progressively outperformed modern trade.
In a post-earnings call on Thursday, top executives at Hindustan Unilever Ltd said that going forward they expect the covid-19 pandemic to alter shopping behavior, among them an uptick in online shopping as consumers avoid going out.
“We could see that relevance the humble grocers could go up, and there could be a renaissance of that. Secondly, of course, would be on e-commerce certainly. As people become averse to stepping out this should give a fillip to e-commerce and we would be ready for that," Sanjiv Mehta, Chairman and Managing Director, HUL, said.
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