JIO MART – RTN asia

Online sales of daily needs is here to stay, says HUL Some of the gains made by the e-commerce sector during the COVID-19 lockdown is permanent and retailing will never be the same again even after the pandemic, said Sanjiv Mehta, chairman and managing director of Hindustan Unilever Ltd. As India's largest supplier of consumer goods, HUL has a lot at stake in health and longevity of India's brick-and-mortar retailing sector, and Mehta's comments, therefore, carry more weight than that of a typical market analyst or expert. Mehta said the e-commerce sector -- particularly in the daily needs and grocery segment -- has crossed a crucial "inflection point" during the lock-down. "Online shopping, particularly online grocery, will not revert to pre-COVID levels once social distancing is no longer in place," he said, while interacting with investors after outlining his company's performance for the July-September period. Illustrating his point, he said the contribution of various e-commerce channels to HUL's sales doubled during July-Sept of 2020 compared to the same period of 2019. Compared to the previous three months of April-June, the growth rate of the e-commerce channel doubled in the latest quarter, he added. Even though Mehta did not name any player, most of the spurt is likely because of the expansion of Reliance Retail's online store -- Jio Mart -- to hundreds of small cities during the period. Reliance has also been aggressively pushing the service through ads, as well as thousands of its regular, brick-and-mortar stores. Reliance's aggressive move has forced rivals like Amazon and Flipkart to put their foot to the pedal as far as their own operations are concerned. Another rival from the brick-and-mortar world, Avenue Supermarts, has seemingly been forced throw some of its traditional caution to the wind and rapidly ramp up its online ordering and delivery capabilities. The Mumbai-based player shut two of its regular stores -- in Mira Road and Kalyan near Mumbai -- in August and converted them into fulfillment centers for its DMart Ready hybrid e-ommerce model. It also expanded online ordering to Pune. DMart's moves point to the changing perception of the sector. Earlier, whenever the discount chain was asked about e-commerce, it has always pointed to the almost unlimited growth opportunity in India's modern retailing space. Modern retailing refers to shops where customers walk along aisles and pull down what they want into a trolley, instead of standing at the shopfront and listing out the items they want. Unfortunately, out of the three types of retailing -- traditional shops, e-commerce and modern retailing -- it is the last one that has been hit the hardest by the COVID-19 pandemic as people avoid crowded places like super markets, department stores and malls. E-commerce, and to some extent neighborhood general merchant stores, have both seen their relative shares go up, while modern retailing has been left praying for the pandemic to subside. As far as neighborhood shops are concerned, said Mehta, the pandemic has led to a kind of "renaissance" within the category. Currently, people prefer to stand outside their neighborhood shops instead of walking down the air-conditioned aisles of super markets and department stores. The bullishness around modern retail is based on studies that show that people buy more when they can walk around and see what's on offer, compared to when they are standing in front of the store trying to remember all the things they need. Mehta maintained that it was beyond dispute that modern retail and e-commerce will take larger and larger chunks out of general traders' market share, but the transition will take longer than what many people think. "I don’t think, from a long-term perspective, the shift towards modern trade is going to stop, because it gives consumers a much better shopping experience," Mehta said. "There is a bigger assortment, there is very clearly a theater impact inside the store and people like the ambience. In many small towns, it’s very clear that it is a family outing, going out to the mall and going out to the store." But, he warned, don't "write the obituary" of the general trader. "Over the years, there will be a secular shift towards modern trade and e-commerce. It is bound to happen. But even after ten years, I believe, India would be a country where GT would still be the biggest channel, but it would be a GT which has adopted technology, which is connected, and which has adopted the science of retailing." In the direction of tech-enabling general merchants, many of HUL's retailers are increasingly using an app, Shikhar, to order their supplies from the company, Mehta pointed out. Earlier, the system was largely manual, with a sales person going to each shop and taking orders. However, due largely the movement restrictions imposed by the pandemic, the app has seen a sudden upsurge in usage in recent weeks. HUL's guarantee of delivering products within 24 or 48 hours also helped, Mehta said. For HUL's part, the move from GT to modern retail to e-commerce could end up benefiting the company, as people tend to prefer well-recognized brands when ordering something online. Local brands, on the other hand, stand a better chance in neighborhood stores. Indeed, the company currently claims to have a greater share of spends on e-commerce channels compared to modern retail, and on modern retail compared to neighborhood shops. However, the emergence of large, pan-India e-commerce and modern retail chains also has to potential to lower HUL's power to negotiate margins. Such large retail players also have the scale to source and sell in-house branded items at prices that are competitive against those from players like HUL.

Tag: JIO MART

Online grocery hit critical mass in lockdown: HUL