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The Golden Dilemma - Should Leading FMCG Companies support Organised B2B E-commerce players?

Many startups e.g Udaan, ShopKirana, Taikee; have emerged in the recent past, promising to solve the nuisance of distribution of FMCGoods to local Kirana Stores. In addition to these young startups, some prominent B2C E-commerce giants e.g. BigBasket and Amazon are also finding these Kirana Stores very attractive and so stretching their Supply-Chain to serve them. And then there is one 1000 Kg Gorilla called Reliance Retail who is toying with every possible idea to dominate this market from head-to-tail.

Now if FMCG companies do support this B2B E-commerce, they may have many advantages as promised by these companies, e.g. 

1. Data-Driven Sales

2. Efficient Supply Chain

3. On-demand & Transparent Priced deliveries.

4. Reducing over-all Cash-to-Cash Cycle

If FMCG companies do not support these new sales avenues, they may lose this sale to competitive brands that any FMCG companies can not afford at any price.

So these Brands will opt for B2B E-commerce startups to further strengthen their sales and market presence.

But my apprehension is different. What will happen if these B2B E-commerce companies will use this dominance to launch their Private Labels? And use their data/tech-enabled knowledge to own the supply chain.

We have already seen this in B2C space e.g. BigBasket’s private labels generate up to 25% of total sales while AmazonPantry has reached up to 15% share. (BigBazar in Modern Trade B2C space already has above 30% share)

People may argue that this may always happen irrespective of whether FMCG companies do support or do not support it. To strengthen my p.o.v I would add the following points

1. In the last 15-20 years, organized retail has grown only 10% of the total retail market and General Trade (GT- Kirana Shops) still holds the ground firmly. This is a very Big Market with numbers of stockists, Distributors, Sales-man in the chain. So by giving access to this 90% market in the form of B2B E-commerce, these new startups will be in a dominant position; i.e. they will own the whole of the supply chain, thus reducing the negotiation power of Brands in the long-term.

2. These startups will be targets of Mammoth B2B2C players like Amazon/Reliance/Walmart to further consolidate the market in the hands of few players which will hamper the FMCG Brands.

3. Startups like ShopKirana and Taikee have already started working on/selling private labels to GT retailers and the response is good.

So what should be the course of action? We have one company that is leading by example. Biggest FMCG Brand of India; HUL is innovating and experimenting with many ideas simultaneously.

1. On one hand, HUL is launching Shikhar App to enable every GT store to order online. These orders are fulfilled by their existing distributors. This is bringing transparency in the system vis-a-vis strengthening their existing stakeholders in the supply chain, instead of creating a new supply chain altogether.

2. On the other hand, HUL has invested in the B2B e-commerce platform Taikee to experiment and/or learn the curve of this B2B E-commerce space.

Nobody wants to miss the “new-wave” of tech-enabled eCommerce, but results may vary for Brands. Let companies decide what is good for them. Keep experimenting, Keep Growing, Keep Creating, Keep Improving, and KEEP QUESTIONING.

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