Data Analytics in FMCG Industries

Data analytics is the practice of analyzing datasets to derive meaningful insights. It provides answers to questions, patterns, and aids in decision-making based on relevant evidence/context. 

 

In recent years, many businesses from various industries have adopted new technology to process data and derive insights. Following suit, the FMCG (Fast Moving Consumer Goods) industry streamlined its manufacturing, distribution, and customer service operations.

 

The FMCG industry is the world's largest market, also known as the Consumer Packaged Goods (CPG) industry. Prior to the Covid-19 pandemic, consumer goods were in high demand in the MENA (the Middle East and North Africa) region.

 

 

What is the FMCG Industry?

 

The Fast-moving consumer goods (FMCG) sector is India's fourth largest industry. The high turnover of consumer packaged goods distinguishes it, i.e. goods that are produced, distributed, marketed, and consumed in a relatively short ‌time. 

 

Detergents, toiletries, tooth cleaning products, cosmetics, and other FMCG products currently dominate the market. Pharmaceuticals, consumer electronics, soft drinks, packaged food products, and chocolates are also part of India's FMCG sector. 

 

Because the sector includes a wide range of products, different companies dominate the market in different sub-sectors. Dabur (60 percent), Colgate (54.7 percent), and Hindustan Unilever are among the top FMCG companies in India (54 percent ).

 

The FMCG industry in India is divided into rural and urban India demographics. The urban market accounts for 60% of the FMCG market's consumption revenue in India. This industry had a market value of $29.4 billion in 2017. While urban areas have led the growth of India's FMCG industry, semi-urban and rural segments are growing at an alarming rate. 

 

The semi-urban and rural segments account for over 40% of total FMCG revenues in India. FMCG companies in India have grown faster in rural areas than in urban areas. With 12.2 percent of the world's population living in India's villages, investors cannot afford to ignore the Indian rural FMCG market.

 

Consumer goods are items purchased for the average consumer's consumption. They are classified into three types: durable goods, nondurable goods, and services. Nondurable goods have a shelf life of less than one year, whereas durable goods have a shelf life of three years or more. 

 

The fastest-moving consumer goods are the most common type of consumer goods. They are nondurable because they are consumed quickly and have a short shelf life.

 

Every day, nearly everyone in the world consumes fast-moving consumer goods (FMCG). They are small-scale consumer purchases made at produce stands, grocery stores, supermarkets, and warehouse outlets. Milk, gum, fruits and vegetables, toilet paper, soda, beer, and over-the-counter drugs such as aspirin are all examples.

 

FMCGs account for more than half of all consumer spending, but they are typically low-risk purchases. Consumers are more likely to show off a long-lasting item, such as a new car or a beautifully designed smartphone, than a $2.50 energy drink from the convenience store.

 

Also Read | Tools of Data Analytics

 

 

Why is Data Analysis Important in FMCG Industry?

 

Whether it is inventory, supply chain, or consumer experience, data analytics can assist the FMCG industry in making the right decisions by using predictive intelligence in real-time. We'll concentrate solely on how big data analytics firms help businesses deal with consumer preferences and understand the target market.

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Importance of Data Analysis in FMCG Industry

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1. Analyzing Potential Customers

 

A competitive market exerts undeniable pressure. With new brands, products, and companies entering the market daily, it's difficult to maintain loyal customers in the FMCG industry. Data analytics can assist you in better understanding your target audience.

 

Who are your ideal clients? What information do you have about them? What are the statistics? Data analytics can provide answers to such questions. It aids in the identification of potential customers for a long-term relationship with the company.

 

2. Improved Targeting

 

Marketing and promotion are important in today's world. Businesses must use marketing to capture customers' attention and wow them with their products. To do so, the company must first determine which marketing and advertising strategies will yield the best results.

 

To reach internet users, for example, having a business website and optimizing it for search engines has become mandatory. TV commercials are effective for brands whose target customers spend more time watching television. Data analytics will provide the ‌insights for marketing campaign planning.

 

3. Reduce the possibility of Fraud

 

Identifying fraudsters is an important issue besides attracting customers. How does a company know that a customer is genuine and not a fraudster? The rise of online retailing and eCommerce has resulted in an increase in the number of fraudulent transactions. Many businesses have suffered losses as a result of a lack of awareness and control over such incidents.

 

Data analytics can help define weak points and analyze a customer to determine the likelihood of a fraudulent transaction. To avoid losses, such transactions can be blocked, rejected, or prevented.

 

4. Anticipate Customer Requirements

 

Anticipating their needs and delivering the products/services is one way to inspire consumer loyalty. If a customer wishes to go digital and make online purchases, an eCommerce website will help keep the customer rather than losing them to a competitor who provides this service.

 

FMGC data analytics uses data from multiple sources and processes it in real-time to predict what customers want via predictive analytics.

 

 

Use Cases of Data Analytics in the FMCG Industry

 

Let's look at some data analytics use cases in the FMCG sector to see how it can help with every aspect of the business to shift the focus from product-centric to customer-centric.

 

1. Inventory Optimization

 

The rise in customer expectations has put FMCG companies in a difficult position. How much stock should they put out there? How much space should they keep in the warehouse? 

 

What should the work-in-progress-to-finished-goods ratio be? Data analytics will provide answers based on both historical and real-time data. Companies can now manage their inventory to meet market demands.

 

2. Implementing Supply Chain Analytics

 

The supply chain is the most important component of the FMCG industry. A single delay could disrupt the entire supply chain, throwing the company into disarray. This happened during the COVID-19 pandemic. By predicting issues and empowering the business, data analytics can reduce the risk of supply chain disruptions.

 

3. Pricing Evaluation

 

One of the most difficult aspects of working in the FMCG industry is determining how much to charge for a product. Aspects such as target buyers, product quality, competitor pricing, market demand, and so on should be considered. 

 

A similar approach is required when discounting the price for promotions. Data analytics employs input details to generate reports that assist sales and marketing teams in making sound decisions.

 

4. Demand Forecasting Optimization

 

To forecast market demand, the sales teams use a variety of analytics. This provides the necessary information for the company to make continuous changes and improvements to its approach. Accurate demand forecasting will propel the company forward by lowering expenses and increasing returns.

 

5. Customer Retention Analytics

 

The FMCG industry is known for its hyper-competitive markets. A company's ability to retain customers can make or break it. Data analytics will assist businesses in identifying ways to inspire customer loyalty in various segments. Companies can tailor their strategies to each customer segment and achieve the desired results.

 

6. Reduce your operational costs

 

Is a company overspending on product manufacturing? Is it possible to cut costs without sacrificing quality? Can the company experiment with new raw material suppliers? 

 

Will using third-party logistics service providers help you save money? Data analytics can provide answers to these and other questions. The FMCG industry can discover the secret to balancing expenses and returns.

 

Conclusion

 

According to Subrata Dey, Global CIO at Godrej Consumer Products Limited (GCPL), every business faces the challenge of growing their top line in today's disruptive and competitive environment. Godrej is no exception, as the company is attempting to increase its top line by leveraging data analytics in the FMCG industry.

 

FMCG companies now have the opportunity to revamp their marketing and operations. FMCG companies that use data analytics techniques can move beyond simple reactive operations and make proactive decisions.

 

Marketing, inventory, seasonal changes, returns, out-of-stock, raw material availability, localized pricing, and other factors drive the FMCG industry. In these uncertain times, the FMCG industry can rely on data analytics to identify trends, gaps, and opportunities in customer behavior and purchasing decisions.

 

Data analytics in FMCG companies improves the business's scalability, flexibility, and value creation. It is a dynamic industry that necessitates an equally dynamic approach in order to stay ahead of trends and provide valuable services to consumers. The omnichannel shopping experience, for example, can be best delivered when the enterprise leverages big data analytics.

 

Data analytics causes changes to existing business systems. Older technologies and legacy systems are incompatible with advanced analytical tools. To create a streamlined data flow within the establishment, businesses should first work on digital transformation and invest in data management solutions. 

 

It is critical to understand which tools and technology to use in order to successfully implement the data-driven model in the business. This is where offshore solution providers come in, offering end-to-end services for setting up, integrating, implementing, and managing big data analytical tools.

 

Seasonal changes, socioeconomic conditions, politics, ideologies, raw materials, pricing, and so on all have an impact on the FMCG market. Tracking every aspect of the business necessitates the use of the appropriate technology.

 

Big data companies' data consultancy services assist businesses in rebuilding their systems to meet volatile market demands and become industry leaders. Data analytics will help businesses identify gaps in their business strategies and prepare them to be proactive in dealing with market trends.