Abstract
As markets mature, businesses adopt the multiple channel strategy to compete head on. With the intention of acquiring new markets and new customers, this strategy appears good and logical. However, if implemented in haste without a business model and proper orientation, can this multichannel strategy be beneficial in the long run? The press articles are rife with news of inter-channel competition and its consequences in different sectors. This case is set in the context of the fast moving consumer goods (FMCG) sector in India where the facts and figures are pointing to a disruption in the distribution network. How should distributors of different trade channels coexist? This case is developed from a general trade distributor's point of view on the challenges he faces and attempts to examine what should be the way going forward. Essentially, how should managers manage multiple channels? This question in channel literature has been commonly advised as a future area of research; it is unfortunate that still not much work has been done in this area.
TopBackground
The FMCG sector deals in relatively inexpensive high volume low margin consumer products which are primarily convenience goods. Consumer good products have a high turnover rate and usually get replaced within one year. The range of products which are consumed daily include toiletries, soap, detergents, cosmetics, oral care products, shaving products, packaged foods, and digestive products. It also includes pharmaceutical products and drugs. This FMCG sector is the fourth largest sector of the economy. This market in India is expected to grow at a CAGR of 14.9% from US$ 110 billion in 2020 to US$ 220 billion by 2025 (IBEF, 2022).
The Indian online grocery market is estimated to grow at a CAGR of 28.99% and cross the sales level of about Rs. 1,310.93 billion by 2026. The gross merchandise value (GMV) of the Indian online grocery market is expected to increase 18 times over the next five years to reach US$ 37 billion by FY25. In India, the FMCG sector is majorly dominated by international companies Hindustan Unilever Ltd, Reckitt Benckiser, Procter & Gamble etc. however there are some home-grown companies as well which have created their own space and image in the sector like Dabur, Marico, ITC and the recent entrant Patanjali with their large number of product lines. Many FMCG firms have partnered with e-commerce platforms such as Dunzo, Grofers, Flipkart, and Big Basket to deliver products at the doorstep of consumers during the COVID-19 pandemic. An interesting development to note that in the fourth quarter of FY21, e-commerce sales of Marico Ltd. was 8%, Hindustan Unilever Ltd. was 6%, Dabur India Ltd. was 5%, ITC Ltd. was 5% and Godrej Consumer Products Ltd. was 4% of the total FMCG sales. As of June 2021, e-commerce share has already touched 7-8% for some of the largest FMCG companies in the country, according to Accenture India (IBEF, 2022) The e-commerce market is expected to reach US$ 200 billion in 2026 backed by growth in online users which is expected to reach 900 million in 2025.
Key Terms in this Chapter
Showrooming: A specific form of research shopping in in which a shopper first searches offline and subsequently purchases online.
Multi-Channel Customer Management: The design, deployment, coordination, and evaluation of channels to enhance customer value through effective customer acquisition, retention, and development.
Omni-Channel Management: The synergetic management of the numerous available channels and customer touchpoints, in such a way that the customer experience across channels and the performance over channels is optimized.
Channel Conflict: A situation in which channel partner feels that another channel partner is involved in a behaviour which prevents the former from achieving their goal.