How the changing Indian demographic will affect FMCG industry in 2016

Indian FMCG has a surprise packed for the New Year. FMCG sector for 2016 plans on venturing into untapped, new areas, and customer sets. And as the buyer demographic changes, innovative strategies and products will have be churned out to gain their attention.

India’s growing Internet penetration also changes the composition of the buyers. If you take the numbers route, 40 percent of the Indian population resides in 35 top cities in the country and is composed mainly of men. Therefore, it’s appears as a no-brainer to identify the target audience. But the future will be different, states a study conducted by Bain & Company in collaboration with Google.

According to the report, women, Generation Z (those born in India after 1995), and residents of rural areas, Tier-2 and Tier-3 cities, are the new buyers in the e-commerce territory.

Women are influencers for offline FMCG purchases, but are most under-represented online, with only 15 percent of then. But that is estimated to double by 2020 with 200 million women online. This number will act as a catalyst in the growth of e-commerce.

Generation Z, digitally-savvy Indians born after 1995, are the new set of users FMCG will have to focus on. The 200 million of them will carve out a whole new subset of buyers. They are touted to play a major role as they will become financially independent over the next few years.

More than 66 percent of India’s population lives in villages, so it can only be imagined the kind of impact India’s economy will experience when rural e-commerce will gather serious momentum.

Amid all these speculations, the other set of new entrants that have already emerged and will continue to do so in large numbers are rural residents. According to a World Bank report, more than 66 percent of India’s population lives in villages, so it can only be imagined the kind of impact India’s economy will experience when rural e-commerce will gather serious momentum.

A lot of FMCG and e-commerce players are banking on it. “More than half of our traffic comes from Tier-2 and Tier-3 cities now as apps work better in 2G connections. It is much easier to promote apps in smaller cities and places with low bandwidth connection,” said Shamik Sharma, CTO, Myntra in an interview to Business Standard.

Ganesh Shenoy, VP, IT and Finance, MTR Foods too agrees that the changing buyers’ dynamics does impact the market and product innovation. “Woman and the younger generation are looking forward to something that can be cooked or eaten instantly. The demand for such products increase,” says Shenoy.

Shenoy of MTR Foods also believes that the emergence of payment wallets in the e-commerce sector will boost the growth of FMCG sector.

The emergence of residents from rural areas and Tier-2 cities as the new buyers isn’t surprising. The increase in their annual income and awareness about these digitally available products will make them one of the major influencers of the FMCG sector.

Inthree, an e-commerce organization, through their web portal and app Boonbox, have been serving rural India with the wonders of technology advancements for the past six years.

“When rural e-commerce takes a leap, manufacturers and others involved will start taking it seriously, hence more investments. Today, nobody services a product beyond 40kms of range, but this will definitely change. The potential of this market is limitless,” said Ramachandaran Ramanathan, founder & CEO, Inthree, in an interview to CIO.in.

While FMCG prepares for the new set of customers, only time will tell who will fare better in engaging the new bunch with their innovative products and solutions.