What's driving new FMCG players to omnichannel expansion?

Quick commerce platforms have opened up newer avenues for upcoming FMCG brands competing with industry giants to cement their market share. These platforms have been allowing brands to tap into the impulsivity of high-intent buyers in the metro cities. For penetration into tier 2 and beyond, e-commerce platforms are doing the heavy lifting to ensure these fast-moving consumer goods, especially the eatables, reach consumers as quickly as possible.

Large-format retailers, general trade stores and smaller grocery retailers are the landscape where emerging FMCG brands are becoming habits, seeping from novelty into the familiar.

A combination of all these channels, along with their own D2C websites, are creating endless touchpoints for FMCG brands to meet their consumers. They are tapping into every possible opportunity with an omnichannel approach, ensuring their products are visible across mediums and available for easy purchases online and in offline stores.

Supercharged by data-driven insights and omnichannel marketing strategies, upcoming FMCG brands have quickly joined the biggest players in contributing to the Indian AdEx.

As per the dentsu-e4m Digital Advertising Report 2024, the FMCG category makes the highest contribution of 36% (Rs 14,755 crore) to the Indian digital media industry, showing a growth of 29% over the previous year.

The report further states that 47% of the FMCG segment’s media budget goes towards digital media, out of which 44% is spent on online video, followed by 25% on social media.

When every rupee counts

Scrunched for funds, FMCG startup brands focus heavily on performance marketing while parallelly running their brand-building initiatives — nudging consumers to buy their products wherever they can spot them.

“Performance marketing is about 80-85% of our overall ad budget and 15-20% of the ad spends are utilized for brand-building efforts,” says Sudarshan Gangrade, Founder of Bangalore-based Lo! Foods, which sells high-protein, low-carb flour, snacks, cookies and chocolates.

For Hyderabad-based Skippi known for its ice pops, the budget allocation depends on the season. “From June to December, we focus on creating brand awareness, which takes 70% of our budget and 30% is spent on performance marketing. From January to May, which is the peak summer period for us, our performance marketing spends are doubled and branding takes a beat seat,” says Ravi Kabra, Co-founder of Skippi.

For GO DESi, known for its vibrant pop-up stores selling tangy DESi POPz at Namma Metro stations in Bengaluru, it’s about analysing data to find the weak links in the strategy.

“You advertise on Facebook, Instagram and YouTube to get people to your website. On e-commerce and quick commerce, you pay a margin to the platforms and run search ads. You essentially evaluate cost v/s sales for each medium. If they are at different stages of maturity, you figure out which platform has the largest potential and will fall the least if you stop or squeeze the marketing spends,” says Vinay Kothari, Founder of GO DESi.

No point of visibility without availability

Ensuring product availability in target markets is a critical challenge for emerging FMCG brands, which must strategically align distribution channels to match their promotional reach, ensuring consumers can readily purchase the product after being exposed to marketing campaigns.

“While we take a national approach to our communication on digital, we focus on postal codes for knowledge distribution and promotions. We limit ourselves in that sense to ensure we are not spending on advertising to consumers in regions we currently don’t service,” says Janardhan Swahar, Managing Director and CEO, Y-Cook India Pvt Ltd.

Known for its flavoured sweet corn products, Karnataka-based Y-Cook has been focussed on strengthening its distribution network with large-format stores like Spencer, Metro and Ratnadeep. Quick commerce is also a part of the brand’s distribution strategy, where it aims to soon grow its presence across 70-odd cities across India, especially in the southern states.

“For D2C products, marketing goes hand-in-hand with sales. Visibility creates a brand persona in the minds of the consumers. To facilitate sales, we ensure that our products are available in stores online and offline. There needs to be enough stock available so that customers are not disappointed,” adds Skippi’s Kabra.

From customer acquisition to retention

Given the smaller price points, acquiring customers is comparatively easier for FMCG brands. It’s the retention that requires data-driven decisions. Some of the popular strategies include offering discounts at retail stores, display ads at digital points of purchase and spending on search ads and contextual marketing on e-commerce and quick commerce platforms.

Y-Cook’s Swahar shares, “We look at the growth in-store purchases as acquisition. When there is a noticeable plateau, it indicates customer retention. We use sampling and trial-based offers as key strategies to increase customer acquisition. Discount coupons are used to encourage second purchases. We have noticed that it leads at least 30-32% of customers to buy again.”

“We aim to create visible spaces in the stores by using banners and end caps. Most of our media spend for in-store advertising is allocated for visibility and offer-led discounts at purchase points. In every round of promotions, we shift focus to different products, inviting consumers to try new variants and flavours. This way, we can offer consumers something new each time they are in the store,” he adds, explaining the brand’s strategy for retail advertising.

Search-driven marketing is a key component of Lo! Foods’ strategy. Gangrade says, “We engage consumers with contextual marketing. For example, consumers who are buying eggs and peanut butter are people who are looking for high-protein products. Our products become contextual there and we target consumers who are seeking that kind of benefit.”

“In addition to social media, we also do a lot of promotions at digital points of sales. We run ads that are visible to consumers by opening an app, scrolling through a particular category of products and during checkout. Display banner ads help us build awareness of our brand within the category. Ads during the checkout, in frequently bought products, and among related products are also working well for us,” he adds.

“Customer retention is driven by how salient your brand is when the need arises. Do consumers think of your brand when they think of that category of product? That’s the marketing’s job to create salience which will drive repeat purchases,” adds GO DESi’s Kothari.

Tapping into high-intent audiences

According to industry experts, almost 70-75% of sales on quick commerce platforms are driven by search. It means that most of the consumers are directly searching for the products they want to buy instead of scrolling through the categories. It leads brands to spend big on search ads on these platforms.

“On quick commerce and e-commerce platforms, people have already made up their minds. They are going on the platforms because they have a need. If your brand satisfies that need and is present there, the conversion of these high-intent buyers is much faster,” says Kothari.

While quick commerce is making strides in multiplying the universe of online shoppers seeking deliveries in under 10 minutes, brick-and-mortar stores continue to be key for FMCG brands selling products worth Rs 20 to Rs 50. Here, the vicinity of the retail store plays a key role in driving repeat purchases.

“You cannot expect a customer to drive 5 kilometres to get a 20 rupee discount. They will likely buy the product from the retail store they have been buying from for ages, which could be right under their apartment,” says Skippi’s Kabra.

He adds that if the product is good, repeat purchases are inevitable. “The idea is very simple. For a brand like Skippi, once it’s consumed, you will have a lot of loyal customers. We want to push customers to buy and try it first. So that they can become loyal customers,” he explains.

When e-commerce fills in the gaps

With quick commerce influencing consumer behaviour and expectations, FMCG players are expected to speed up deliveries regardless of existing infrastructure. It means partnering with faster courier services, building third-party channels for logistics in key regions and relying on the good old e-commerce giants.

“When it comes to tier 2 cities, we run a lot of campaigns on Instagram and Amazon Ads. E-commerce is an essential part of distribution because quick commerce has not penetrated tier 2 and tier 3 cities yet. This is where Amazon and our website help us a lot,” says Kabra.

Data-driven omnichannel strategies

As per Wunderman Thompson Commerce & Technology’s The Future Shopper Report 2023, 77% of Indian shoppers prefer to shop from an omnichannel brand. The stat underscores a shift in consumer expectations, where convenience, consistency, and connection across platforms are key to brand success.

However, it’s not just about having a presence on different mediums and enabling purchases across channels. Consumers today demand a seamless shopping experience — one where the transition between digital and physical channels feels natural and frictionless.

The report also brought to light that 56% of consumers say they want seamless communication across channels, and the ability to move from digital to physical, and vice versa. So, they may start their purchase journey by researching the product on an e-commerce platform, try the product sample in a store, and end up purchasing it on a quick commerce platform.