In recent times, online retail channels have caught the fancy of many marketers, who ditched the traditional retail route by placing new launches online first. Cases in point are smartphone makers like Xiaomi, Hugo Barra, and Gionee who launched their phones via e-commerce portals to gauge the market potential and reach millennials instantly. Now, other sectors are taking a leaf out of the smartphone marketing playbook and following suit.
Packaged consumer goods companies have started launching products online before rolling them out in brick-and-mortar stores to engage with consumers better and reach markets where they were not available earlier.
For instance, in August this year, Mondelez India Foods Private Limited launched Cadbury Dairy Milk Marvellous Creations exclusively on Amazon India before making the product available across all major urban and rural retailers. Before that in November 2015, when Nestle India Ltd decided to do a relaunch of Maggi noodles after a gap of six months it introduced Maggi Masala noodles online first in a partnership with Snapdeal. Later in June, Nestle launched its new spicy flavours under the sub-brand Hot Head, again with Snapdeal, in a bid to appeal to young adults.
Similarly, Marico Ltd chose the e-commerce route for its brands such as Set Wet and Livon. While Britannia Industries, earlier this month, exclusively tied-up with Amazon for the launch of its latest product Good Day Chunkies, a super-premium chocolate chip cookie.
“Online is the only platform where you can get to know instantly how consumers are reacting to your product. For example, through an online advertisement, you can figure whether it is leading to a trial or not; if you run a sampling promotion on the product, you instantly get to understand the method’s efficacy (since you can assess the number of samples purchased by consumers vis-à-vis the number of samples offered). A similar strategy, if undertaken in the offline world, requires additional investment of both time and money,” said Chief Operating Officer, Marico Limited, Sanjay Mishra.
The company, which in June this year ‘pre-launched’ its hair wax Set Wet through the e-commerce route almost four to six weeks ahead of formally launching the product in the general and modern trade, says the response was phenomenal online.
“In case of Set Wet, we witnessed a very good response from our customers, who were quite excited to see our advertisements online. This only helped in boosting our assurance, as we upped the plan for our online strategy,” Mishra added.
Just like Marico, Nestle’s online launch was also received positively. The company managed to sold 70,000 units of Hot Heads within four hours of an exclusive online preview sale. Similarly, the first batch of 60,000 Maggi WelcomeKits, last year, were sold within 5 minutes of a flash sale going live on Snapdeal.
“Selling the product online enabled us to reach consumers in markets where the product was not available in the initial phase. The rapid demand online along with a solid marketing strategy helped generate a buzz around the product,” said Nestle India Spokesperson.
Online OR Offline: Which fares better?
Besides entering new territories and creating a buzz around the product by engaging consumers, companies feel that going online also allows them to do-away with various offline limitations.
“The offline world is confronted with multiple challenges. For example, for a promotional plan in Mumbai, you need to ensure that the product is available at every retailer in Mumbai and is being sold as per specific mode. The results can be comprehended only after a period of time. However, in an online platform, one can simply approach an online retailer and ask them to run a campaign for the brand and the response to the promotions can be evaluated at the end of the day. Hence, the online platform is like a melting pot, where one can conduct trials for different kinds of pilot projects, innovations and learn from them before scaling up,” explained Mishra.
Corroborating this thought, Nestle spokesperson said,”Our overall marketing approach was heavily digital-led (for Maggi online launches) where we created specific content with the ‘unboxing’ concept apart from TV and radio. We have also covered hoardings in malls, colleges, and bus queue shelters where the youth hang out. So, while it is a typical marketing budget for a large new product launch, the levers engaged are quite different from a classical Maggi launch.”
Wide reach but small contribution
Despite the clear advantages, the online grocery contribution in overall sales is yet to take off in India. To put things in perspective, the food and grocery industry in India is currently worth $383 billion, and is slated to touch $1 trillion by 2020. Out of this, the market share occupied by online grocery stores is less than $100 million at present.
This means that online grocery occupies around 0.03 per cent of the total market share of the food and grocery industry.
Mishra agreed. “Currently, online is a small portion of our overall business, as a result the numbers remain miniscule. However, it allows us to create a lot of buzz and excitement. It allows us to talk to our consumers and retailers. Thereafter, when we take it offline, the buzz is what benefits us. Having said that, there are specific categories where an online launch is more inclined towards sales.”
In comparison, FMCG e-tailing globally is growing at a fast clip. According to a July report by Kantar Worldpanel, FMCG online sales are all set to hit $130 billion by the end of 2025, revealing the true potential for the worldwide FMCG e-commerce market. Online’s share of FMCG purchasing in advanced e-commerce markets will double in the next 10 years and Kantar Worldpanel estimates online purchasing will reach 30 per cent in South Korea, 15 per cent in China and at least 10 per cent in the UK and France.
Although online makes up for just a small share of FMCG sales in India at the moment, experts believe it will grow tremendously going forward.
“The investment that is happening in the online space and the aggression that the consumer is showing is largely being driven by non-FMCG categories. Having said that, there is some interest towards FMCG categories by retailers and we are witnessing a growing excitement in the online space. In tomorrow’s world, there will be a lot of activities happening with the FMCG players and retailers,” Mishra asserted.
As for Marico, the company is on a roll with it’s online launches and in the near future, plans are afoot to come up with products which will only be launched online.
“Until now we have taken the approach of launching online and then moving to offline, but we are now taking a step forward and are looking at products that we will launch only online. It (online) allows us to launch new products, further segment consumers, talk to a particular kind of consumer even on a smaller base or cater to a niche requirement. We will continue to play across the canvas, there will be a focus on the personal care segment.” Mishra concluded.