A guide to activation strategies in general trade for Internet First Brands (IFBs)

Indian consumer goods space has seen a rapid rise in the entry of new-age Internet First Brands (IFBs) across segments like spices, masala, snacks, beauty and personal care, home care, etc. General trade remains the mainstay of FMCG sales in the country despite the surge in q-commerce in the last few years. Despite double-digit growth seen by major FMCG brands in organized trade, traditional trade still accounts for ~85% of FMCG trade pan-India. Brands will always look to access as much of the economic strata of population as possible and carrying out distribution via general trade allows them the opportunity to do so. We have come across many brands that are doing well in organized trade but struggle to scale up in GT. This difficulty is driven by increasing competition, lack of visibility due to space constraints, limited data availability, etc. Thus, Internet first brands cannot neglect the opportunity in general trade in order to scale up their brand. Moreover, owing to better unit economics, offline channels can help IFBs drive profitability compared to organized trade.

Internet-first brands need to consider several factors to expand their physical presence in traditional trade outlets across regions. General trade allows one to reach new customers across the economic strata, presence in stores strengthens brand recognition and increases sales volume and brand reach.

Winning in traditional trade depends on mastering five areas:

Expansion into general trade requires appointing distributors who need to be evaluated on commercials, coverage, and reach. And that means identifying distributors who want to work with you because they believe in your product, not just because of the margin structures. Your distributors are the ones who will create that market penetration for you. A key lesson here is to partner with distributors who have the ‘right fit’ as well as the financial muscle to see you through your journey. Ideally, they need to have the hunger to grow as you grow.

Understanding where your TG lives is key to figure out where to start first in traditional trade. Identify the right clusters, shops and keep tabs on consumption patterns. Traditional trade landscape in India has a variety of store formats like 24x7 outlets, pharmacies, grocery stores, Cat A general stores, self-service stores, pan shops, etc. Different store formats typically cater to varying groups of audiences. Internet first brands need to identify the store format that matches their target audience. It’s essential to adapt your product, pricing and communication to the segment. For example, a healthy-for-you snacking brand entered general trade by placing limited number of SKUs with hero flavor variants catering to the local micro-market which was scaled in a progressive manner across cities. Further, as they deepened penetration within a city, the player launched lower priced variant targeted towards Cat B/C stores.