Indian FMCG conglomerate, Hindustan Unilever is widely recognized for their innovative business strategies. Be it starting a mobile radio service to reach every nook and cranny of India, to developing a special caller tune that announces latest offers and discounts on HUL products to its users, every move is a well-thought tactic to augment HUL’s brand value. Therefore, it didn’t come as a surprise that soon after the news about change in Hindustan Lever’s business model came out it open, it created a strong buzz that HUL will most likely take a plunge in India ecommerce industry.
Until now, the FMCG multinational followed a direct selling model, which was adopted by the company in 2003. Their premium home and beauty care line of products under Aviance and Lever Ayush brand name were sold using direct selling as a platform as opposed to physical stores. But from hereon they will be only available online through official HUL network consultants.
An HUL spokesperson said, “The Hindustan Unilever Network business model has transitioned from physical servicing to an online ordering and fulfillment model.” The intention behind this switch is to increase efficiency and gain competitive edge after company’s internal review revealed that a change in business model is need of the hour.
Harish Manwani, Chairman of Unilever, admitted that the last financial year has been “extremely challenging for the direct-selling industry due to ambiguity on acceptable norms for direct selling in India.” Direct selling has a bad reputation in our country thanks to bogus pyramid schemes and MLMs. Although it is legitimate and can be an extremely effective distribution model, like in the case of Amway and Tupperware, few bad cases have made it difficult for the genuine companies to operate smoothly.
While HUL recognized the roadblocks in working with direct selling model in India, on the other hand they also acknowledged that Ecommerce emerged as the current trend to do business.
During one of his media interactions, Paul Polman, Unilever’s Chief Executive stated, “Three-four years ago, many would have said e-commerce wasn’t for India. But surprisingly, it has grown very fast. Surely, we are going to be there.” He further added, “Over the next few years, our global e-commerce business will approach the size of HUL’s business…it won’t be small.”
Mr. Manwani also emphasized on HUL’s seriousness in venturing in ecommerce by sharing, “We have created a global, dedicated team that is looking at e-commerce and seeing how, across our key markets including in India, we can bring the best practice in terms of how to manage it collectively rather than taking a market by market approach.”
Just like most of the segments of Indian ecommerce, online grocery is also one of the fasted growing online sectors. The potential is huge as the trend to order household necessities online is picking up, especially in urban cities. If it wasn’t growing then Reliance & Godrej wouldn’t have entered the online grocery space nor would have BigBasket received Rs. 200 crore funding. Thus, if HUL continues to churn out creative marketing techniques that they are famous for, it won’t be long that they also capture the online FMCG space because they have the experience, bandwidth, resources and customer base to achieve success in this area.