The FMCG market is changing rapidly, becoming more digitally-driven as customers are increasingly replacing store visits with on-demand deliveries, using online marketplaces and e-wallets to browse and shop on the spot. With constant innovation and competition among industry leaders likely to accelerate the online transition of more consumers, FMCG players must evolve their eCommerce capabilities in this challenging era.
Alexander Friedhoff, Co-founder and CEO of eCommerce enabler etaily, says that they should equip themselves for this inevitable change, seize the opportunity to secure their market share, and align their business models to the new reality. He explains that eCommerce offers equally greater potential for value creation than offline retail: “We’ve seen the increase in global value of large companies like Beyond Meat and The Honest Company, yet others have created billions of dollars in economic value by using the digital native brands and excellence in supply chain management. Local and regional FMCG companies need to adapt to this and understand what opportunities they are missing. They should wake up from the old days and focus on the core challenges: cash, sales, and costs.”
Today’s FMCG brands also face a more demanding consumer base who, regardless of whether they shop offline or online, want their deliveries done quickly and securely, while saving them time, money, or energy. The competition is stiffer in the digital landscape because of its on-demand culture: FMCGs should have the capabilities to scale as well as operational advantages that make them stand out in a world of free shipping, voucher subsidies, and mega campaigns that offer big discounts.
Many FMCGs recognize that they do need to meet the expectations of this rapidly shifting consumer base. However, transitioning from the brick-and-mortar world to online retail carries its own unprecedented challenges. Trying to do it in-house would mean a huge, time-consuming investment in equipment, facilities, and manpower training. etaily’s end-to-end approach such as warehousing, fulfillment, channel management, and marketing services addresses all these pain points while giving the FMCG players more focus on their core business.
“The costs savings by using an enabler help offset this enormous eCommerce complexity that brands are taking on just to win online,” says Friedhoff, giving examples. “Instead of them doing it, we help make operating several campaigns with our in-house experts. We make shipping time faster for the consumer through our multi-warehouse capabilities, which will take FMCGs a long time and a lot of trained manpower to build on their own.”
The battle between Cost, Cash, and Sales
Ultimately, FMCG players need to understand the formula for winning the battle between Cost, Cash, and Sales (CCS). etaily defines several use cases for winning the battle against CCS. “We all know that margins in eCommerce are low, at least initially – but scaling helps. At etaily, we see that our FMCG partners are much more profitable online than others,” Friedhoff says.
He points out that efficient digital advertising and smart warehousing and fulfillment drive eCommerce costs but can also influence the market positively. For example, allowances tend to be higher offline than online. But other costs, especially on-site advertising and logistics, tend to be higher in online channels than in brick-and-mortar shops. On-site advertising, such as the ads that appear on retailers’ -eCommerce platforms, is usually costly for FMCG companies as they invest heavily to ensure the prominent placement of their products on the so-called digital shelf.
etaily efficiently addresses this pain-point triangle of Cash, Cost, and Sales, through its end-to-end eCommerce solutions with features like its local distribution and in-house demand generation as the core solutions to this battle. Delivery costs can be significantly reduced and managed if the delivery time of products itself is shorter. etaily makes this possible through its country-wide warehouse network maintained with its warehouse partners. For example, a consumer based in Cebu can choose the warehouse nearest its area to store its inventory; in contrast, another provider who can only offer them one option in a warehouse located in Manila will end up incurring them more costs in delivery and storage because of the distance.
As Friedhoff explains it, “Other players in the market are distributing FMCG products out of one centralized warehouse. This alone has an immediate impact on the three key challenges of Cash, Sales, and Costs, because the longer the delivery lead time, the higher the probability of a cancelled order and the higher the costs. But through our multi-warehousing approach, deliveries get delivered faster and thus the cash-cycle decreases. Another way that multi-warehousing affects Costs is that our partners can run better free shipping campaigns which ultimately end up in lower costs and higher sales.”
This ability to respond quickly and reliably to the final-end consumer also has a major role in boosting Sales which adds revenue to the etaily customer. “Conversion increases for our client because the end consumer is happy to get items faster,” says Friedhoff. “This scene of the unhappy final-end consumer who cancels the orders because the delivery is taking too long is all too familiar to sellers, who lose both customers, sales, revenues, and potential income in that canceled transaction.
“Our end-to-end fulfillment service prevents that situation from happening to our customers. More importantly, we empower and equip them to be agile, prepared, and responsive in an eCommerce highway that is always in a state of transformation.”