From electronics and plastic goods, the Chinese threat will soon extend to consumer goods. As FMCG companies adapt their distribution models to suit large format retail, consultants say this is one threat that manufacturers might not be ready for.
Over the next three years, consultants estimate that nearly 30 per cent of consumer goods retailed in large format stores will bear the Made in China label.
With modern retail growing fast in the country, major retailers such as Reliance and the Future group are said to have set up sourcing offices in China. Consultants estimate that large volumes of their private labels are likely to be sourced from there.
The threat is, however, not likely to cover the entire sector. It will be restricted to non-food and even non-personal care FMCG categories such as home care products.
Naimesh Dave, director, OC&C Strategy Consultants India, said, "While in high involvement categories such as personal care products consumers would not switch brands too easily, in low involvement categories, where the consumer is not too attached to the brand, they would be more open to trying out newer products based on competitive pricing."
Even players estimate that demand for Chinese goods would largely be for household care products like utensil cleaners, toilet cleaners and mass market detergents.
Ranju Mohan, vice-president, sales and marketing, Henkel India, said most retailers would start with private labels in categories like dishwash liquids where the sales are higher and the margins are better in the modern retail outlets.
Big Bazaar has already introduced private labels in these categories, although these are being sourced locally at present. These are largely nascent categories, with toilet cleaners and dishwash detergents, being valued at Rs 90 crore (Rs 900 million) and Rs 450 crore (Rs 4.50 billion), respectively. In comparison, detergents is a Rs 4,000 crore (Rs 40 billion) category.
In the past, distributors have tried selling soaps and other personal care products from South Asian countries with little success.
In personal care products, however, the Chinese are expected to make little impact as the brand name is more important than the price. Hence while an imported Lux will be picked up from shop shelves, an unknown brand will not get enough consumer attention.
The categories where retailers would import products from China would also depend upon the cost of transporting it and the demand potential. Hence as Indian retailers expand, the China threat will play out completely.
