Is e-commerce the only way to go for FMCG players?

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E-commerce is ubiquitous in retail these days. In contrast with low FMCG increases globally, e-commerce continues to show sold growth. In Asia, e-commerce has managed to score significant shares in FMCG within North Asian markets –China, Taiwan, and Korea, posting strong annual growth. With this in mind, is e-commerce the only way to go for all players in Asia?

Regardless of advancements in digital technology, the most important thing is that FMCG players focus on what their consumers want most. Across Asia, we see that shoppers seek convenience in every aspect of their life –choices are based on what makes them more comfortable or allows them to do things more easily. Our data shows that channels that provide this convenience in terms of proximity outperform others. Proximity to shoppers is key and means not only online stores (digital proximity) but also brick and mortar shops that are easy to reach (physical proximity).

Supported by strong infrastructure and government support, South Korea’s FMCG e-commerce is ahead of the others in terms of size and growth, followed by Taiwan and China. For the rest of developing Asian countries, online is still dwarfed by other non-digital channels. Despite shoppers’ yearning for convenience, there are still challenges to e-commerce progression and convenience can sometimes be better delivered through a local, physical, store.

Physical proximity means being easily reached by shoppers and includes not only modern convenience stores, but also independent (non-chain) minimarkets, as well as small traditional mom and pop shops located around the neighbourhood. These channels contribute the biggest shares to total FMCG across all South East Asian countries, with respectable levels of growth. It seems that even in developed markets, payment and speed of arrival may still be a hindrance for online shopping and result in the remained popularity of physical proximity.

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Each market in Asia is developing differently and needs to be handled individually. E-commerce will continue to grow in Asia, in some parts more than others, but convenience and local stores will remain popular across the region. Proximity retailing is an important part of the strategy for retailers and manufacturers alike. Deciding which strategy to pursue depends on the company’s goals, resources, capabilities, and understanding of the shoppers in the markets they are in.

Written by: Jason Yu (General Manager of Kantar Worldpanel China, specializes in consumer panel research with 17 years’ experience working with both manufacturers and retailers in Asia and Europe).

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