True
fortune lies at the bottom of the pyramid in India. While modern retail formats are meant for the
middle, upper middle and the affluent class to visit, there are those
indomitable small retailers who are always a force to recon with, given the
sheer enormity of the quantum of consumers lying at the bottom of the pyramid
in the country. And small retailers
cater to the needs of these consumers across India. They are widely spread with
an estimated whopping number of around 15 million. Then there are those hawkers in India who are
mobile and they are innumerable.
FMCG
companies operating in India struck upon the strategy of supplying their
products to these retailers through a network of distributors. who would
distribute merchandise to fairly big stores alone (often concentrating on those
who are credit-worthy), while dumping stocks with wholesale shops in
feeder-markets heavily. When I say wholesale shops, I mean small stores who buy
products in bulk and resell to still smaller retailers who come to their
doorstep on a regular basis, like every week, to buy. These small ‘cash and
carry’ stores are estimated to be around half a million, spread across the
country. These FMCG companies’ distributors often do not take pains to visit
small retailers. They may not have the time and perhaps the manpower for
ensuring a thorough coverage of the markets. They focus on acquiring
shelf-space in these ‘fairly big’ shops. They also take space-on-hire for
displaying their products prominently in an aggressive, below-the-line
marketing effort. Every FMCG company has a strategy to continuously keep the
distribution pipe-line full without leaving any gap. Any recess in the pipeline
may prove fatal as it may open up an opportunity for a competitor to enter.
Brand loyalty is definitely at low ebb and price always has the winning edge as
far as mass customers in India are concerned.
And the retailer often has the last word. Customers rely more on the
retailer’s recommendation, especially in towns and smaller markets. More than
70% of India’s customers live in small towns and villages and they visit small
retailers who are spread widely in every neighborhood!
It’s
the price-point selling that has made its mark in the Indian markets for a long
time now. Many FMCG products are now sold in sachets in price-points of Re.1,
Rs.2, Rs.5, etc. The game began when a small company based in Cuddalore, Tamil
Nadu, launched its product - Velvette Shampoo - in sachets for Re.1 in the
early eighties. The product hit the market so well that it gave HUL (then known
as HLL), a big run for its money. Soon many products were sold in small
quantities in single digit price points. That shows clearly that the majority
of customers in India buys needs on a daily basis and does not do a monthly or
even a weekly stock-up. Realization dawned upon the companies operating in
India in the FMCG segment and many towed the line of the mini pack strategy
leader!
And
today, be it personal care products, condiments, OTC products or snacks, they
are all sold in sachets that come in strings of tens and dozens. They are hung
in shops and sold. For many companies, now it’s an 80:20 ratio – with 80% of
the products being packed and sold in small sizes and 20% in bigger ones. The
bigger ones are sold more in modern retail. Many regional FMCG companies have
separate packs for modern retail and large retailers but those are small in
quantity. But yet, FMCG companies focus on shelf space and those who are
intelligent marketers look for acquiring maximum string space. Every small
retailer has string lines in the shop at different levels. Different product
strips and streamers vie with each other calling for customer attention in the
stores stridently! The small retailers are innocent unlike the larger ones;
strings are offered free of charge.
A
time may come when FMCG companies may take to the concept of obtaining
strings-on-hire! The larger retailers may offer strings on rental soon alongside
their end-caps.
Who
knows, they too may ‘tow the line’!
- Dr. Gibson G. Vedamani
