RETAIL:A BOON OR BANE FOR FMCG COMPANIES.

Retail sector is one of the most growing sector of present time. The increasing trend of huge urbanization and modernization encourage the growth of retail in a peak level. In those days, everyone interested to go for a retail store like big bazaar, subiksha or vishal mega mart in place of going for traditional markets. As the income level of consumers increasing, the trend of going for retail store is also increasing.

If we carefully observe, then we will find that more than 90% products sold in the retail store are FMCG products. Basically, the consumers gose to the retail stores for buying FMCG products. Now, everybody are thinking that retail stores are path finder of the FMCG products. Somewhere we can also say that retail ssector is like a boon for the FMCG.

But after a careful survey, I have find that there is a different story behind it. In the some sence , we can say that the increasing trend of retail is not a boon but it is like a bane for the FMCG sector. It may be like a silly comment but there is a permanent reality behind this statement. The most of the retailers like Kishore Biyani takes on the FMCG companies, mostly MNC’s in the price war that has been brewing between retailers and consumer companies. Biyani is asking retailers to build their own brands , private levels, and own distribution network. He is doing so himself: private levels, Biyani says, would become his core business and that he would use his logistic form, future logistics, to take on the FMCG companies.

Marketing and distribution cost for the volume-driven business of the consumer products are typically very high. FMCG companies distribution reduces margines on a product because of how it is structured: from manufacturer to distributor to wholesaler, and finally to store. So big bazaar, instead of selling Pepsi’s Frito Lays and Cadbury’s, chose to market its own label.

Low store sales may be forcing retailers to bank on private labels to improve margines. Besides, private labels do not incure any significant marketing costs, unlike products may be FMCG companies. “But this is only makes sanse in the long run, when more people will take to using retail stores for all purchasers.

The battle has the making of a classic David versus Goliath saga, but global FMCG brands have become brands largely through an enormous amount of investment and spending on marketing, advertising, and distribution.

Biyani works with over 120 vendors for his private level business and caters to a variety of household goods. ”we also have over 4 million sq. ft of logistic space to support our private label business” he added.

It is the whole story of the retail sector of India. So it is totally depand on the future that what will happand tomorrow? Can the splash that that Biyani made with his call be the first step on the way to making ‘future brands ‘ an FMCG company.