Online FMCG sales to touch $5 bn by 2020: Google-Bain study

Google-Bain & Co report predicts 5% of total FMCG sales to come from online, as India to have 650m Internet users by 2020

A study by a technology company, Google, and a consultancy firm, Bain & Company, said online sales in fast-moving consumer goods (FMCG)’s categories, such as male grooming, beauty, food and beverages, and infant care would reach $5 billion (Rs 30,000 crore) by 2020.

This would make up five per cent of total FMCG sales, estimated to reach $100 billion (Rs 6 lakh crore) by 2020, the study said.

"The current FMCG market size is $50 billion (Rs 3 lakh crore). Of this, online FMCG sales are 0.3 per cent only. The increase in the next five years is substantial and speaks of the rapid digital migration of consumers in the time-frame under review," said Nikhil Prasad Ojha, partner, Bain & Company.

The study, the findings of which were collated after three months of research last year involving 1,600 internet users across 13 cities, noted a third of the FMCG market in five years would be influenced in some form or the other by the digital medium.

Ojha said most FMCG companies in India had underestimated the impact of the internet on their business and were struggling to find a digital road map for their products. "Companies need to uncover the digital potential for different categories and align their growth trajectory with changing consumer behaviour," he said.

Vikas Agnihotri, industry director, Google India, said categories such as male grooming and infant care would see as much as 25 per cent of purchases coming through the internet, while beauty would see about eight-10 per cent of purchases online.

The study does not give a break-up of purchases of food and beverages online, but said it was among the top searched categories. "In the Google ecosystem, year-on-year query growth for apparels was the highest at 97 per cent. This was for December. Beauty came next at 75 per cent, food, 57 per cent, and infant care, 55 per cent. We have found search for food recipes online is high. If companies respond to this consumer behaviour, they could influence purchase decisions."

The study notes that 35 per cent of men are strongly influenced by digital for purchases, while the number for women is 22 per cent. Also, digital impacted product purchases the most in categories such as male grooming (39 per cent), skin care (26 per cent), infant care (24 per cent) and hair care (24 per cent).

"From an FMCG point of view, the growth of women users online will be significant in the coming years. Currently, 30 per cent of the 300 million total Internet users in India are women. By 2020, it should touch about 45-50 per cent of the total Internet user universe of 650 million. That is a significant increase," he says.

Also, the growth in users transacting online will also be steady. "In 2014, of the 300 million Internet users, 40 million transacted online. By 2016, 100 million will transact online. And by 2020, 250 million of the 650 million Internet user base will transact online," Agnihotri says.

This means companies will have to brace up to tackle the online medium as a serious channel, something they did a decade ago in the case of modern trade.