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MOSL: CONSUMER (GROUND REALITY)-Mobile ordering led disruption in general trade

CONSUMER (GROUND REALITY):

We conducted channel checks across Mumbai to understand how mobile ordering is reinventing general trade (GT). Although the sample size is restricted to only one city, we have gathered several insights into the changing market dynamics. Key takeaways:

** Kirana outlets (also known as mom & pop stores) account for over 80% of sales for most staples and F&B companies. Modern retail and wholesale players are making conscious efforts of late to disrupt the company-distributor-mom & pop retailer chain with technological initiatives such as mobile/online ordering.

** While there is already an evident shift in the channel mix of consumer companies toward MT, we note that it is rather gradual (up to 100-150bp annually). The aforementioned disruption will likely accelerate the shift, providing MT players with benefits such as (a) better bargaining power with consumer companies - both in terms of credit/margins, (b) access to the much-larger GT market and (c) data to analyze consumption patterns.

** Our channel checks in Mumbai indicate that the implementation of mobile ordering (a) is still at an early stage, (b) has received mixed-to-negative response from kirana stores, (c) has been beset by glitches and frequent modifications and (d) is facing challenges both in terms of manpower and technical understanding constraints at kirana shops. The progress of such initiatives by retailers needs to be monitored by investors in (a) both staples and F&B companies and (b) retailers/disrupters.

** In fact, kirana owners are still largely in favor of the incumbent distributor-led model as it provides them with better credit terms, avoids conflicts with brands/distributors and is friendly when it comes to return policy. Also, many retailers are not in favor of complete transparency of their sales in order to save on taxes.