FMCG Giants make more profits on Zepto, Blinkit etc, than via offline channels!
It’s crazy that FMCG giants like Dabur and Colgate make better margins on Zepto, Blinkit etc, than on sales from offline distribution 🙌🙌
It’s crazy that FMCG giants like Dabur and Colgate make better margins on Zepto, Blinkit etc, than on sales from offline distribution 🙌🙌
I believed brands make lower margins on sales via q-com because of high commissions, advertising fees to push visibility and more.
And I am sure, there would be a massive lot of people who also think that way. But, I was WRONG.
Having spoken to 5 founders and FMCG executives, I have zeroed down on 3 factors.
One. Lower cost of distribution.
You directly ship to select warehouses of these platforms in massive volumes, and not smaller batches to thousands of stockists, distributors, wholesalers are so on and on.
And that makes a lot of difference in terms of people involved, size of trucks used, time taken for every one-sided movement and so on.
This saves a lot of hassle and money! 🙌🙌
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Two. Shorter or no credit periods.
Every FMCG company gives a credit period to those players in the supply chain.
This effectively drives up working capital costs. And from time to time, some money also gets stuck, especially if you are a small/new brand.
No such issues with Q-com. There are 1-2 week credit periods, versus 30-60 day periods in offline game. And often, you deliver stuff to their warehouses, you get the money.
There is very little need to chase for payments. Mostly it’s automatically done 🙌🙌
This leads to big savings.
Three. Premiumisation.
See, India has a lot of people who have disposable income and are increasingly premiumising on what they buy.
But, the problem is, these people are spread across the big landscape of the country, making it tough for the brands to reach them.
Thus, they need to invest big in distribution and reach and ensure presence at a vast set of touch points (supermarkets, hypermarkets, kiranas etc), which all comes at a big cost.
Plus, to ensure that all of those touchpoints have all or most of the higher margin premium products from you, that’s very costly. Q-com solves that beautifully, as much of the target audience is available at one single touchpoint 🙌🙌
Thus, for a brand, this improves the cost to reach the premium users and drives up average order values and margins.
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This is the reason why Dabur’s CEO Mohit Malhotra has publicly stated that they make up to 200 basis points higher margins on q-com.
-> Similar words from folks at ITC, Colgate-Palmolive, Emami and Britannia
-> No wonder Colgate is going all out to push sales via q-com, where its sales are growing 8x of company’s own rate of growth
-> Because, this 8x growth also brings in seriously higher margins, as claimed by MD Prabha Narasimhan
Best,
Jayant Mundhra