The Role Of E-commerce in driving the growth of Fmcg business in India

on Apr 22, 2024 | 6023 views

Written By: Tapasya.P

The FMCG or Fast Moving Consumer Goods sector is among the major contributors to the economy of India. It ranks fourth among the largest sectors contributing to the country’s economic value. You always have a demand for the products that you use regularly. These are exactly the products that the FMCG sector offers. With the e-commerce industry growth, there has been a more easy convenience and availability of FMCG products in India.

The nation has experienced of rapidly growing demand for FMCG products over the past decade and is further being estimated to grow continuously. Let's explore the market share of FMCG in India and the role that e-commerce plays in driving its growth.

E-commerce industry growth in India

The e-commerce market in India has the potential to expand to around USD 16-20 billion by FY 2025 with a growth rate of 55% to 60%. It is expected to grow by around USD 111 billion in the year 2024 to around USD 200 billion in the year 2026.

Additionally, the nation has had around 125 million population shopping online in the past 3 years, according to BIEF e-commerce market growth forecast reports. It also expects an additional 800 million buyers to join the group by the year 2025.

There has been a rapid e-commerce industry growth in India that is having an impact on almost all sectors of business including the FMCG industry.

Role of the E-Commerce Industry In Driving the Growth of the FMCG Sector in India

India has had a rapid boom in the e-commerce industry that is having a huge impact on the FMCG sector of the nation. Consumers can purchase their requirements with great convenience, with a wide variety of choices as well as attractive discounts through e-commerce shopping.

The companies in the FMCG sector have recognized the significance of e-commerce platforms and utilization by consumers in India. Thus they are making huge investments in the e-commerce distribution channels. They are also considering different strategies of digital marketing to raise their demand among consumers.

The FMCG sales through online platforms will reach nearly 1 trillion in the coming years with consumers' accessibility and convenience in shopping. Thus FMCG organizations are taking into consideration broadening their e-commerce clientele.

This is helping them further boost their sales and cater to consumer demands more efficiently.

Consumers purchase essential commodities frequently. Thus if they get convenience and ease in purchasing them sitting back at home, nothing will be better than that.

This is why FMCG companies are partnering with different e-commerce organizations. This is helping them to reach the orders of FMCG products as early as possible to the consumers and without any defects in it. The e-commerce platforms also ensure that they take the orders and deliver the products with care.

Thus the role of e-commerce in the FMCG business has made the entire process of purchase and delivery smooth.

Click here to find out the detailed role that e-commerce plays in the FMCG franchise business in India.

E-commerce industry growth drivers in India

Certain features are responsible for the e-commerce market growth in India. These factors may include a huge increase in smartphone penetration. It also includes a low price of data and an increase in affluence.

Thus it drives a growth in the demand for the e-retail industry of the nation. In India, there are around 751.5 million population using the internet until January month of 2024.

According to the Kepios analysis reports, there has been a rise from 19% to 11.6% internet users between January 2023 and 2024 of the same month.

Additionally, by 2030, it is estimated that Indian online shoppers will be ranked the 2nd largest globally. By 2025, around 87 per cent of the households in India will have a proper internet connection.

Therefore this rise in internet users will also lead to an increase in the number of consumers purchasing online. Thus it is a result of an increase in the e-commerce industry growth.

Different Types of Products in the FMCG Sector

FMCG products can be of different categories. You can check the following different types of products into the category of FMCG sector.

  • Food & Beverages: These products possess features of short shelf lives as well as a high rate of turnover that makes them perfect to be a part of the FMCG category. The below list is some examples of food falling under the FMCG category.
  • Ready-to-eat food items like packets of nuts, crisps, etc.
  • Beverages such as coffee cups, bottled water, soda cans, etc.
  • Prepared food items like chips, pasta, bread, etc.
  • Personal Care Products: Different personal care products including toothpaste, shampoo, soap, and moisturizers fall under the category of FMCG. This is because consumers are required to consume these products frequently and at lower prices as they are not long-lasting products. Some other examples of such products are deodorants, lotions, items of dental care, cosmetics, etc.
  • Healthcare Products: Products associated with healthcare also comprise the FMCG sector which the consumers frequently purchase and are in high demand. This category includes products such as medicines, bandages, plasters, syringes, etc.
  • Home Care Products: Goods that people utilize for home care come under the FMCG category. This is because such products are continually being standardized and are also low-durable. These products include washing powder, kitchen towels, cleaning supplies, toiletries, etc.

Market Share of the FMCG Products in India

The FMCG sector is growing rapidly in the Indian market due to the continuous rise in the cost of products especially of essential commodities as well as development that is consumer-driven.

Around 3 million people in the nation are employed in the FMCG sector. In India sale of FMCG products by revenue was estimated to rise by around 7-9 per cent in the FY 2022-2023. The market of food processing has reached around USD 307.2 billion in the year 2022.

Additionally, it is estimated to reach around USD 547.3 billion by the year 2028. This comprises a growth rate of around 9.5% during 2023-28. The use of digital advertising was estimated to grow reaching around USD 9.92 billion in the year 2023. It includes the FMCG sector to be one of the largest contributors with around 42% of the share of the entire digital spend.

You can expect a growth of 14.9% CAGR to USD 220 billion in the coming couple of years. Both urban as well as rural locations are getting more efficient internet connections over the years in India.

This may result huge rise in the demand for FMCG products from both parties using e-commerce platforms. The growing demand for the FMCG sector is drawing the attention of different investors.

The government has taken initiatives by providing the sector with 51% of the FDI (Foreign Direct Investment) in multi-retail brands. They have also permitted 100 per cent of the FDI in the food processing department.

Different Factors affecting the growth of FMCG Industry In India

  • Growth and Expansion of E-Commerce: Advancements in technologies and the facilities that they provide have revolutionized the life of both rural and urban locations in India. The e-commerce platforms offer the consumers with a huge convenience. It provides them with wide choices through websites and applications. Additionally, the option of home delivery of goods attracts consumers to purchase essential commodities through these platforms.
  • Value Augmentation: The rise in consumption among rural areas in India and their demand for the retail sector is also driving the FMCG growth. However, the spending of the rural locations in India in the FMCG sectors is around 36%. This sector is receiving huge support from the different industries comprising personal care, food & beverages, household, and tobacco.
  • Technology Contribution: The FMCG industry is utilizing technologies for different purposes for enhancing operational effectiveness and finding new opportunities. Thus the sector is also making use of these technologies for managing the requirements of supply chain management. They are conducting efficient market research to recognize their specialist in the field of sales and understanding consumer behaviour.

Advantages of the E-Commerce Industry In the FMCG Sector in India

Expansion in the Market Research

The platforms of e-commerce reduce the location or geographical barriers that enable FMCG organizations to reach consumers in rural locations. This expansion in the market reach is responsible for unlocking growth opportunities.

Enhancement in Consumer Convenience and Accessibility

With the e-commerce industry’s growth, consumers are capable of browsing through vast products of FMCG and shopping while sitting at home. Thus, this enhancement in accessibility and purchase convenience is responsible for boosting consumer loyalty and engagement.

It can also help FMCG organizations to drive higher sales and generate revenue. As consumers, you can easily select what products you require from home using the e-commerce channels through a few clicks.

Further steps involve paying for the same with secured payment methods and the goods will get delivered to your doorstep. The FMCG organizations consider this strategy to reach an increasing number of consumers.

They are making efficient use of the e-commerce platforms to grow and sustain in the market on a long-term basis.

Data-Driven Information

The e-commerce platforms allow FMCG organizations to get data-driven insights through advanced data mining and analytics. These insights can help gather information on consumer preferences, changing market trends, and patterns of purchasing.

Thus the FMCG companies can make use of these data for tailoring their products and services and reach their target customers to cater to their demands.

Personalized Strategies of Marketing

The platforms of e-commerce industry growth allow FMCG companies to personalize the strategies that they can implement for launching marketing campaigns.

It can range from creating target customer advertisements to customizing promotional events. Thus personalized strategies of marketing and promotions can create an engagement between the consumers and the organizations.

These platforms also help in facilitating direct engagement and communication between the companies and their target consumers. It is possible with the help of different social media channels, chatbots, or email marketing features of e-commerce platforms.

Final Thoughts

E-commerce industry growth is one of the major platforms enabling driving growth in the FMCG products and services demands among consumers. By leveraging e-commerce facilities along with other upcoming technologies, the FMCG sector can flourish successfully in the Indian market.

It can also create efficient investors for expansion and running smoothly. You will witness huge improvements in the sales and revenue generation of the FMCG industry with the implementation of e-commerce platforms effectively.

If you are interested in gathering more details on starting an FMCG franchise and the role of E-commerce in it, contact the expert team of FranchiseBazar.

Disclaimer: The brands mentioned in this blog are the recommendations provided by the author. FranchiseBAZAR does not claim to work with these brands / represent them / or are associated with them in any manner. Investors and prospective franchisees are to do their own due diligence before investing in any franchise business at their own risk and discretion. FranchiseBAZAR or its Directors disclaim any liability or risks arising out of any transactions that may take place due to the information provided in this blog.

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