Food is the largest retail consumption category in India, accounting for 33 percent of the overall consumption expenditure. It is also the largest opportunity area, especially in times when market dynamics are changing dramatically, and consumer behaviour is no longer generic.
Indian consumers are becoming more and more indulgent with food (and vegetables), and they are experimenting with new and foreign cuisines; they are seeking variety and are open to international brands. They profess to enjoy foreign food and are ready to pay more for premium or organic food items. This is a huge shift from the last decade.
The changes to Indian consumer behaviour are being driven by increasing incomes, younger profiles of consumers and growing access to the Internet.
“There are a lot of pressures on the disposable income of the consumer. Factors like rising costs of real estate and the need to invest in health – important today because of the awareness and education on health are taking away good chunk of consumer’s disposable income and the expectation of value is increasing,” Iyer said on the sidelines of India Food Forum 2019.
Expectations, he said, have built up because the consumer has a lot of options, making him more demanding of quality and other conveniences. “Today’s consumer is time-starved. Working couples want ready-to-eat, on-the-go and on-demand food, and this is driving a lot of consumption,” he added.
To meet the shift in consumer demands, FMCG players are gearing up make the changes in their retail stores.
Share of E-Commerce in The Retail Pie
Iyer stated that the share of e-commerce is set to rise over the next 10 years aided by a rise in the Omnichannel format. This, despite the growth in brick-and-mortar retail from 2 percent to 12 percent.
“What works for today’s FMCG players is a ‘go-to market (GTM) strategy’. This is particularly true for small and medium enterprises who want to launch products. Since GTM is more about digital first, they use the opportunity to connect with consumers in today’s highly connected phygital environment,” he said, talking about the big change which the FMCG sector is witnessing today.
He stressed on the fact that it is extremely important to bridge the gap between physical and digital retail, especially since the consumer is going digital in terms of experience as also his touchpoints.
Tech-Savvy CX At Walmart
Sharing his insights gleaned from years at being at the helm of Walmart India, Iyer explained that that by enriching customer experience, Walmart has observed that the consumer has started purchasing more using the Omnichannel format – Rs 180 over Omnichannel versus Rs 100 spent at the physical store.
While citing technology adoption as the key to retail growth, Iyer also talked about the four key challenges that retailers need to face head on: food security, safety and nutrition, food wastage and sustainability.
“Feeding a rising world population of 10 billion, amid rising deaths of infants due to malnutrition and changing climatic conditions are key challenges. In India, phenomenal efforts are made on the regulatory front for safety and nutrition that will follow with awareness, compliance and enforcement of law. Significant investment amounting to Rs 92,000 crore in food processing in catchment areas is needed to overcome the wastage of 30 percent of all food and 40 percent of fruits and vegetables in the country,” he concluded.