Ecommerce and digital media consumption to reshape Indian FMCG sector

“Small towns and cities of India are expected to contribute more in reshaping future demands for the Fast Moving Consumer Goods (FMCG) sector, while ecommerce companies will increasingly contribute a large share of sales for such companies”, as per a joint report “Re-imagining FMCG in India” by BCG (Boston Consulting Group) and CII (Confederation of Indian Industry).

Increased number of nuclear households, growth in disposable income and increased urbanization are driving growth of the Indian FMCG sector which is currently around $65 billion. At the release of this report, BCG Director Abheek Singhi said, “The growth opportunity is massive, yet, the shape of this opportunity would be very different in the future.” According to him, tier 2-4 towns will be the growth drivers this time.

It is estimated that by year 2020, over 150 million consumers would be digitally influenced in FMCG sector and they are expected to spend more than $45 billion on different FMCG categories. Also, ecommerce is expected to account for 10-15% of sales of consumer goods companies by 2020. That is why, companies would have to build capabilities in digital marketing and they’d need to have a better clarity on what role ecommerce would play for them. Without affecting their brick and mortar partners, they should know how they’d engage with ecommerce and other digital marketing channels. The companies would have to focus more on rural regions of the country and tier 2 and 3 cities. There are two key reasons behind this. First, their contribution would be a remarkable source of demand for the sector and second, more and more consumers are moving from non-branded to branded segment.

The combined effects of ecommerce, proliferation of internet connectivity and digital media consumption are going to reshape the whole FMCG sector.