"Brands are weak online": Vikas Agnihotri, Google India

Google and Bain have released a joint report on the impact of the internet on the FMCG sector.

Yesterday, Google, leading search engine, and Bain & Co., a management consulting firm, released a joint report about the influence of digital on the FMCG sector.

According to the report, the internet will influence a third of the total sales in the FMCG sector, in the next five years. As more and more users log online to research for FMCG products, the internet will influence $35 billion worth of FMCG sales in India, by 2020, finds the Google & Bain study.

Research agency Millward Brown has worked on this study.

In fact, by 2020, $5 billion worth of FMCG products will be sold online (50 times more than the current level), contributing five per cent (as opposed to the current 0.3 per cent) of the total sales.

High-impact segments include male grooming, infant care and beauty. This means, more and more people will research online for information related to products from these three categories.

According to the study, by 2020, about 25 to 30 per cent of all male grooming products will be bought online. For infant care products, the estimated figure stands at 20 to 25 per cent, and for beauty products it stands at eight to 10 per cent.

The estimated number of internet users by 2020 is over 650 million. By 2020, the number of online shoppers is estimated to cross 250 million.

The sample that was research comprised an 'evolved' lot of 1,600 internet users (male and female) from 13 cities in India, including metros and non-metros.

Eight FMCG categories were studied - skin care, hair care, oral care, home care, infant care, male grooming, beverages and food.

Findings from the study reveal that 35 per cent men and 22 per cent women are strongly influenced by digital for their purchases. The influence differs from category to category, though; it is maximum in the case of male grooming (39 per cent), followed by skin care (26 per cent), infant care (24 per cent) and hair care (24 per cent).

According to the study, consumers have a high propensity to shop online for FMCG products.

Among the respondents who do shop online, 50 per cent had bought an FMCG product online sometime in the past three months. Among the non-e-buyers, 40 per cent women said they are likely to purchase an FMCG product online sometime within next 12 months; the percentage was found to be higher for women from non-metros (45 per cent).

Further, 60 per cent men said they are likely to purchase a male grooming product online sometime within the next 12 months. As far as the pre-purchase online activities are concerned, respondents said they look for product information, reviews and recommendations, and compare prices.

Vikas Agnihotri, industry director, Google India, says, "By studying the behavior of the lead consumers from an FMCG standpoint, it is clear that FMCG companies in India need to start thinking of digital as a more strategic medium and chart out a digital growth path for their products."

Says the study, by 2020, 200 million digital natives or "screenagers" will be online. Also, 30 percent of the female population in India will be online by then, reaching a count of 200 million. A total of 100 million women will shop online then. And, over 200 million users will be from rural India; their disposable income will continue to grow.

"With these three key consumer segments moving to digital and spending more time online, FMCG companies will need to prepare themselves for this digital future," he adds.

About the beauty segment in particular, Agnihotri alerts us to an interesting finding: While it is a highly 'searched' segment online, only 15 per cent of these searches tend to be branded searches. Which means, people are a lot more likely to key in generic terms like, say, 'red lipstick', into a search engine, than include the name/s of specific brands while surfing for information on lipsticks online.

"Brands are weak online," Agnihotri tells afaqs!, in this regard.

Food, by the way, is the 'most searched' FMCG category, in terms of search query volume. Beauty comes second.

Interestingly, searches pertaining to the actual purchase of beauty products online are growing at over 100 per cent, year on year (YOY).

Nikhil Prasad Ojha, partner, Bain & Co., says, "Most FMCG companies in India have underestimated the impact of the internet and are struggling to ascertain a clear digital roadmap for their products. Companies need to uncover the digital potential for different categories, and align their growth trajectory with the changing consumer behavior. This report will serve as a useful reference point to start thinking and engaging consumers."

These research findings are consistent with the online search queries via Google, in India.

Search queries that are about FMCG products are second only to search queries about apparel, in terms of YOY on year growth.

Queries that have to do with beauty, food and infant care products are growing (YOY) at 75, 57 and 55 per cent, respectively. These figures are higher than those found in the case of categories like art and entertainment, and travel and tourism.

Detailed Report Below: