3 Key Benefits of Digitalisation in Pakistan’s FMCG sector

This last decade witnessed a major digital transformation in Pakistan. Earlier, it was easy to see a huge digital usage gap exhibited by the connectivity dispersion between rural and urban areas, and digital disparities across age, gender, and income groups. This prompted the government to initiate the Digital Pakistan Policy in 2019 as well as the e-commerce council of Pakistan. Subsequently, the COVID-19 outbreak catapulted the population’s dependence on digital transactions, as social distancing and restrictions were enforced. This sprouted the usage of e-commerce, as well as quick commerce, so the citizens could continue to make purchases, such as their daily essentials, from the comfort of their homes with a single click of a button. As such companies, particularly in Pakistan’s FMCG sector recognized the potential of digitalisation from their operations, advertising to sales channels.

Online transactions became a gateway as businesses struggled to shift gears and manoeuvre their way to stay afloat amid the disruptions from production to distribution. Technology became a lever that bridged the whole FMCG supply chain from suppliers to warehouses and distribution centres and retailers up to sortation centres for last-mile deliveries until the final stage, the end-consumers. The traditional way of doing business has become more inefficacious with the ever-changing consumer dynamics, coupled with the various technological advancements. This would require the evolution of FMCG business processes.

Digitalisation Developments in Pakistan’s FMCG Sector

E-commerce & quick commerce:

The rising use of smartphones and network connectivity coupled with the government’s e-commerce Policy Framework are empowering consumers to make purchases online. Similarly, this enables FMCG companies to diversify their sales channels and look for transformative ways to streamline their processes to capture profitability. This is evident with the tremendous uptick in the number of e-commerce merchants in Pakistan, from 1,362 in FY2019 to 4,887 in FY2022. This shows the growth potentials brought by digitalisation bring opportunities for sales and business profitability.

Online payments:

In 2021, the State Bank of Pakistan (“SBP”) launched its first digital payment system, Raast, enabling online payments. The first stage of the launch enabled transactions for between entities and individuals, and the second phase in 2022 enabled Person-to-Person (“P2P”) payments. Through Raast, merchants, businesses and individuals can send payments through their smartphones. Parallel to this, SBP has set-up the digital banking framework and awarded five licenses to Easy Paisa DB, Hugo Bank, KT Bank, Mashreq Bank, and Raqami in January 2023.

Social media as a marketing platform:

The influence of e-commerce has shifted marketing and advertising focus to social media. Large FMCG organizations have leveraged online marketing to ensure they maintain a competitive advantage. At the same time, smaller businesses are recognizing the importance of social media marketing as a cheaper promotion avenue that enables FMCG retailers to actively engage consumers to make a purchase.

Challenges in the Digital Transformation of the FMCG sector

The stringent requirements and high-cost investments to create a digital network for their end-to-end business processes are hurdles for FMCG companies in Pakistan, particularly the smaller ones. The major challenge lies in the large cost that companies have to invest in securing the right systems and tools as well as in training their workforce and supply chain partners to be adept in dealing with them.

• Most FMCG companies are either partially or not fully capable to deploy digitalisation due to limited access to technology
• The investment to secure software solutions for an integrated and autonomous supply chain also requires tremendous financing
• The onboarding for retailers requires a rigorous process as they have to shift away from cash on delivery (“COD”) to a digital payment gateway
• The need to upskill workers to be digitally savvy necessitates strategic investments for businesses

Digitalisation Advantages for Future FMCG Prospects

Despite these challenges, digitalisation is becoming ever more important in the FMCG landscape in Pakistan. The ever-changing consumer dynamics and the fast-paced environment requires businesses to be agile and swift to respond with the use of digital tools in providing real-time and streamlined processes in delivering end-consumer products. The dynamic interaction between businesses and consumers opens a vast potential for companies to constantly tweak their digital marketing approach to fit a variety of consumer segments in Pakistan. This will propel the capabilities of the FMCG segment to increase profitability, presence, and competitive edge in the country.

• Real-time visibility: The proliferation of digital connectivity amongst consumers are creating waves and demand for swift and transparent delivery. The capability to provide real-time visibility will solidify trust and loyalty from consumers and ultimately improve customer satisfaction and profit margins.
• Value Chain integration: Omnichannel integration is a capability that will elevate and streamline the processes from each stage of FMCG manufacturing and supply chain
• Agile and Targeted advertisement: The expansion of digitalisation not only created a sales channel but also a marketing avenue. Companies are now capable of advertising their products through social media platforms, even allowing them to create different story lines for different target markets. This way, companies are able to be more agile and create variations in their marketing campaigns.

Future of FMCG Logistics in Pakistan: Challenges and Opportunities

Omnichannel integration to streamline the end-to-end operational cycle:

Large businesses in Pakistan have started to leverage software solutions to ensure inter-visibility across the various steps within the business operational cycle, integrated sales operations, e-commerce, order management, inventory management, payment infrastructure, supply chain, and multi-channel logistics capabilities. This enables businesses to take control of their operations and mitigate potential risks and monitor potential improvements.

However, this would result in having to integrate business and supply chain partners into the same software solution. This can pose a challenge in a fragmented value chain leading to an investment of time and cost into onboarding and training all the partners involved particularly for suppliers and logistics. A strategic partnership with a reliable, agile and experienced partner who already has an efficient solution to overcome a vast majority of these challenges will save the business a lot of time and money in the long run. Thus, enabling the business to gain the end-to-end real time visibility of their operational cycle without putting in too much effort and instead focus on their growth strategies.

Supply Chain Automation and Warehouse Management:

Digitalisation of logistics does not only empower businesses but at the same time, the entire ecosystem – the suppliers, merchants, retailers, distributors, end consumers, and all ancillary services within the value chain. The automation of Warehouse and Inventory Management has been crucial in encapsulating the entirety of the operations, whilst ensuring the logistics is streamlined.

Digitalisation enables all aspects of logistics operations to be executed and completed while mitigating challenges, risks and disruptions as businesses capitalize on the opportunity to take the lead ahead of the competition and ensure satisfied consumers. This is especially vital for the FMCG sector (i.e.: packaged goods), as products need to be processed safely and of high-quality standards.