What FMCG companies can learn from the online trading industry
By Venkata Prasad Palakiti - Dec 18th 2018, 08:09
Fast-Moving Consumer Goods (FMCG) are, by their very nature, products that are designed to be sold quickly at a relatively low cost. Unlike luxury items that often need to sit on the shelf for an extended period of time in order to build up some exclusivity, FMCG products need to be sold as quickly as they’re advertised. With speed being the key ingredient in the FMCG industry, any weak links in the chain can harm a manufacturer's bottom-line.
Writing on ResearchGate.net, Venkata Prasad Palakiti from the Indian Institute of Technology noted four areas that can disrupt FMCG distribution:
“1. Cost reduction at processing, transportation etc.
2. Inventory levels at each point in the supply chain.
3. Delivery time of product.
4. Product availability or Substituting the products.”
There Can’t be Any Weak Links
Supporting these points, Kah Huo Leong from the University of Malaya pointed to data from PepsiCo that showed technical capabilities and risk management both have an impact on distribution. To put it another way, without the right technology, distribution will be too slow and expensive to make an FMCG product commercially viable. Naturally, the leading brands have gradually refined their products over the years to ensure their processes are cost-effective and efficient. However, there are also lessons to be learned from other industries.
With the last decade, online trading has become big business. Although exact figures are hard to ascertain, data from Statista shows that 14.59% of the US population had bought stocks or shares online in 2018. Delving further into the data, 12.19% of 18-to-29-year-olds had done the same. In many respects, stocks and shares are like FMCG products. Given the volatile nature of the financial markets, investors need instant access to commodities in order to obtain the best price and, in turn, generate the greatest profit. To facilitate this, online trading technology has had to meet consumer demands.
Trading Solves the Speed Issue
Today, a professional-level online trading platform doesn’t simply act as a portal to the financial markets. In addition to algorithmic orders and live data feeds, modern trading software contains features such as enhanced trade tickets. Essentially reducing the number of clicks needed to complete an order, these features make it possible for customers to access products in a more efficient way. For FMCG companies, there’s a lesson to be learned here. By reducing the number of steps both in the distribution and buying process, scalability becomes easier.
For the online trading industry to work it needs liquidity and that’s only possible when you have volume (i.e. lots of people trading). If there was any disruption in the supply chain and investors couldn’t access stocks in real-time, the entire framework would crumble. Fundamentally, this is the same in the retail sector. If consumers can’t find what they’re looking for within a few clicks online, they’ll move onto something else. When that happens, turnover drops and, therefore, profits drop. So, while the trading world might seem disconnected from FMCG, they share the same need for speed. For those looking to thrive in the latter industry, applying the former’s focus on technology is crucial.
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