Unilever Assignment

Unilever Assignment
What are the challenges faced by E commerce (and especially e grocery) retailers in India?
Discuss possible ways to handle these challenges.
Unlike other forms of e-commerce, e-grocery stores faced unique challenges because
of supply chain complexities and low margins on products. The process was complex and
involved managing a variety of inventories with diverse storage requirements, as well as
gathering products and ensuring/maintaining quality. Because most of these products were
perishable in nature, cold storage and other facilities became necessary, leading to an
exponential increase in the overall cost of the supply chain and the risks associated with it.
One of the biggest threats to e-grocery platforms was the inability to offer a tactile experience
to consumers, especially for perishable products.
In India, consumption patterns and supply chain issues pertaining to food and grocery
were complex in that different regions had different consumer preferences. For example,
pickles consumed in one part of India were completely different from those found in another
part of the county, and varieties of rice also differed from region to region (e.g. sona masuri
rice was primarily consumed in South India while basmati was preferred in North India). E-
grocery stores had to be city-specific because products could not be couriered from one city
to another and fast delivery of goods was mandated.
Furthermore, the value-to-weight ratio of grocery products was higher than that of
other products, which made it financially unviable to courier these products. Therefore, for e-
grocery firms, expansion of the business to a new city was akin to setting up a completely
new operation because the supply chain had to be entirely local. The nature of the business
meant that the supply included fresh produce and companies had to comply with local laws
that restricted the flow of agricultural produce across state borders. Warehouses, inventory
and logistics also had to be operated on a local basis, which made it very difficult to replicate.
Unlike items such as steel utensils (which had retail margin of 60 per cent), most food and
grocery products worked on single-digit margins (around 6 per cent), except for organic
staples at 30 per cent. Very few companies across the world had managed to crack the
economics of this low-margin space.
Even Amazon had spent nearly five years delivering groceries to only a few Seattle
neighbourhoods before expanding to more U.S. cities in 2013. Another problem was the
security of online transactions. Indian consumers were still concerned about confidentiality
and security of financial information while transacting online. Convenience was an important
factor for online buyers as well. Less than 18 per cent of the population had access to the
Internet, and the quality and speed of Internet connections in India were highly variable.
Thus, for the majority of consumers, a positive online shopping experience (especially
in light of increasingly sophisticated image- and video-heavy websites) was not possible. In
addition, attracting consumers to etailing sites in an era of extreme competition was a
significant challenge.
Should HUL enter the egrocery field?
Given the current competitive landscape and evolving customer preferences with
rising Internet user base of over 400 million, HUL should consider entering the e-grocery
field. They already have a large market share and with diversification in the digital world,
there’s a high chance of capturing more market by creating convenience for the current
customers or those not tapped yet.
Furthermore, there was considerable hope that NDA would relax policies and
regulatory framework to boost the economy especially from online selling perspective.
If HUL decides to open an e grocery store, what should it strategy be and which e grocery
model should it follow?
HUL can consider going with inventory-based model and partnering with the various
ecommerce giants in the country. Since the local dynamics are very diverse and logistics,
warehousing and inventory has to be managed locally, it is important that the UHL allows the
deeply penetrated local settlers to move their products to the untapped market.
Similarly, it is important to abide by local laws and other configurations which will be
hard for UHL itself as it does not hold much experience in the field of e-selling. At the same
time, there is a possibility of quality of product being compromised in the inventory level as
the final product delivery will go in the hand of local inventory distributers. In this case, HUL
will also have to maintain strong accountability mechanisms to ensure timely delivery and
best quality for consumers.
What kind of technical & digital capabilities would HUL need to be successful in the e
grocery sector?
HUL will need to track four things for its profitability: the SKU, the basket, the
warehouse and finally, the company. Focusing on these aspects, the company can ensure
growth and success in the online industry. At the same time, they will have to look the
payment methods, crack the economies of low margins for groceries, creating maximum
convenience for the customers and manage the complex consumer preferences and supply
chain issues.
Should HUL enter the e grocery arena with a full range of products or only a select number of
products?
HUL can enter the arena with a range of products which are high sellers for the
company. In this way, it can gradually start introducing more products but first sensing the
demand of each region and consumer preferences. This way they will be able to manage the
supply chain much more efficiently and will be able to deliver the right quantity at the right
geographical region.
On the other side, introducing all products at the same time can incur high costs and a
potential risk of failing the business altogether.

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Unilever Assignment

Discuss possible ways to handle these challenges.

involved managing a variety of inventories with diverse storage requirements, as well as

to consumers, especially for perishable products.

to another and fast delivery of goods was mandated.

economics of this low-margin space.

addition, attracting consumers to etailing sites in an era of extreme competition was a

Should HUL enter the egrocery field?

customers or those not tapped yet.

model should it follow?

best quality for consumers.

potential risk of failing the business altogether.

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