Why Patanjali is going the e-commerce way

Some may have seen the irony in Patanjali Ayurved Ltd tying up with foreign-owned/funded e-commerce companies, even as it swears to end the reign of foreign-owned consumer brands in the market. Patanjali is only being pragmatic in doing what’s good for its own business, of being available where the consumers are. Its decision is one more pointer to the growing importance of e-commerce as a distribution channel for packaged consumer goods.

Now, companies such as Hindustan Unilever Ltd have highlighted how modern trade (chain stores) and e-commerce channels have been growing faster than the traditional (kirana) segment. Between 2014 and 2017, revenues of modern grocery retailers rose by a compounded annual growth rate of 16.1%. The growing smartphone population and cheaper data rates mean the target market for e-commerce can increase further. E-commerce does away with the need to have a physical store to sell in a locality, the reason why modern retail’s expansion has been relatively slow in smaller markets.

Modern stores would include formats such as supermarkets, hypermarkets and convenience stores. In this same period, traditional retail’s sales grew by 9.8% CAGR. These are not directly comparable with the modern/traditional grocery retailing figures. Remember these are relatively small in online at the moment, so take the growth figures with a pinch of salt. Food and drink internet retail saw sales rise by 42.7% CAGR between 2014 and 2017, while beauty and personal care rose by 20.1% and home care by 35.1%.

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