Saturday, 9 April 2011

Virtual trade draws FMCG firms

A few have taken tentative steps, others plan to open portals for e-commerce.

Virtual shoppers are drawing the attention of fast moving consumer goods (FMCG) companies. While a few, such as Godrej Consumer Products (GCPL), ITC and Wipro Consumer Care & Lighting (WCCL), are exploring the possibility of setting up e-commerce platforms to distribute products, others such as Marico, Dabur and Procter & Gamble (P&G) have taken a few tentative steps in this direction.

Marico has been working with a few e-commerce websites to sell products under the Saffola umbrella, said marketing head Sameer Satpathy. Dabur's chief executive officer Sunil Duggal said the company has been selling its Uveda range of products online for a year. P&G is distributing free samples of brands such as Ariel, Head & Shoulders, Pampers, Gillette, Pantene, Whisper and Olay on a website it had launched a few months ago.

The companies acknowledged while this was a new avenue, the challenge of distribution remains. A key factor for the business to be viable, say industry experts, is to rationalise the cost of shipping. “At this point, cost of shipping is too high vis-a-vis the unit value of items sold,” said Satpathy.

Duggal said the firm has worked its way round the problem by selling high-value skincare and cosmetic products. “Typically, we look at those products that have a limited retail footprint. It makes sense to take them online because of their limited availability. Being high-value, the cost of shipping does not pinch, too, much,” he said.

Dabur, for instance, plans to take its Oxylife brand of skincare products, available in beauty parlours, an other beauty products online.

According to the Internet and Mobile Association of India (IAMAI), the total net commerce in India is estimated to touch Rs 46,520 crore by the end of this year, of which, the non-travel component will make up about 19 per cent (or Rs 8,630 crore) of the business. Of this, e-tailing alone will constitute the bulk at Rs 2,700 crore, which is an over two-fold jump since 2007, when e-tailing was Rs 978 crore only.

But the bulk of the products retailed online remain non-perishable items with the thrust on categories such as personal care, cosmetics, electronics, apparel, home products etc.

Kishore Biyani, managing director and chief executive officer, Future Group, which has an e-commerce portal called Future Bazaar said his team was working on putting more categories online. “At the moment we have categories such as electronics, apparel and home products. But we are looking at expanding the base. It boils down to how you link your back-end with your front-end,” he said.

Future, for instance, is building one million square feet of space for logistics and warehousing in its quest to distribute more products online. Currently, Future Bazaar does business about Rs 10-15 crore a month. The plan is to take the number to close to Rs 100 crore a month in a few years from now said Biyani.

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