14 Jun 2021 17:09 IST

How HUL enabled small retailers to take the digital leap

The small mom-and-pop stores, through the Shikhar app, get to optimise inventory, make online payments, and improve sales

On December 8, 2020, Hindustan Unilever Limited (HUL) announced its online ordering platform — Shikhar. It soon became a sourcing point for about 3,00,000 outlets across the country, up from around 1,00,000 the year before. The mom-and-pop stores which sold HUL products could place orders using the Shikhar app, instead of waiting for the salesperson from HUL to visit them to take orders. Through a partnership with the State Bank of India (SBI), HUL enabled retailers who joined the app to avail an overdraft facility amid tough times.

The challenge is to bring more and more retailers onto its platform and ensure that such a digital inclusion of key channel partners is leveraged to make the company more competitive.

Distribution model explained

HUL, the Indian arm of the Anglo-Dutch FMCG major Unilever plc, is the India’s largest FMCG company. The company, which has been present in the country for more than a century, sells products under 20 categories which include soaps, shampoos, detergents, skincare products, cosmetics, tea, packaged foods, ice cream, and water purifiers. Over the years, HUL has built a strong distribution network that reaches every nook and corner. 

 

 

 

 

 

 

HUL’s distribution model ensured product availability through a “wholesaler network,” comprising of redistribution stockists and Clearing and Forwarding (C&F) agents. In this network, wholesalers and large retailers placed direct orders and the company salesman grouped all these orders and directed it to the company. Later, the company replaced the “wholesaler network” with a “registered wholesaler,” a stock point for product delivery.

Subsequently, it shifted to a “redistribution stockist,” who had warehouse facilities to store stocks and coordinated with the company’s salesmen. In addition to its traditional line of trade, HUL established a relationship through modern trade channels such as supermarkets and hypermarkets and had its own e-commerce channel. It achieved deep, rural distribution of its products through a network of more than 1,40,000 ‘Project Shakti’ entrepreneurs.

Technology-driven growth

Venturing into e-commerce in 2015, HUL launched Humarashop, a portal that featured several mom-and-pop stores in a particular area. As HUL generated 90 per cent of its income from small shops and general trade, it was looking at digitally enabling these stores. Humarashop, which connected shoppers with the local retailers, had a separate page for each store. Customers could order products from the store and have them delivered within two hours. This was started in a few localities in Mumbai on a pilot basis.

 

 

 

 

 

Taking this initiative of digitally enabling small stores further, HUL launched the Shikhar app in 2017. Shopkeepers could use the app to place orders with HUL directly, without the involvement of distributors and sales personnel. It introduced other features in the Shikhar app including helping retailers to see nearby outlets and products that were in demand in their locality. The app allowed retailers to go through a wide catalogue of products across HUL brands, and select the ones they needed. Given the repository of data residing in the app, Shikhar was able to give recommendations to the retailers on which products they needed to stock to improve sales.

Using the Shikhar app, the retailers could see different offers and schemes that the company was offering at any point in time. They could also search for the products through voice command and get notifications about the details of the orders, dispatch schedules, and delivery time. It also had an additional feature called ShopKhata, which enabled the retailers to maintain records of the goods sold on credit and the amount received. Through ShopKhata, the shopkeepers could send reminders to the customers about payments due as well.

Several shopkeepers started using the app and they said it made ordering easy and convenient. Not only could they order the products they needed, but they could also get to know about new products and offers from the company. They said that earlier, they had sometimes received products that they had not ordered, but with Shikhar, there was no such confusion.

By March 2020, Shikhar had reached 25 per cent of all Indian towns with a population of over 5,00,000. Around 1,00,000 retailers were using the app. However, several shopkeepers had downloaded the app but were not actually using it. HUL, on its part, was trying to popularise the app among retailers.

That was when the Covid-19 pandemic began to make its presence felt in India. The ensuing lockdown disrupted the traditional supply chains of retailers across the country, including that of HUL. Due to the restrictions in force, distributors and salespersons could not physically reach the retailers to take orders. This induced several retailers to download the Shikhar app and order directly from the company. By December 2020, more than 3,00,000 retailers were using the app; 60 per cent of the retailers in towns with a population of 5,00,000 started using it. Chairman and Managing Director of HUL, Sanjiv Mehta, said that the company had witnessed a two-time rise in order value and the number of stock-keeping units (SKUs) ordered, compared to pre-Covid levels.

Partnering with SBI

In October 2020, HUL partnered with SBI to enable credit access to retailers and dealers of HUL. Under this partnership, SBI would allow an instant paperless overdraft facility of up to ₹50,000 to retailers to help them settle their bills with distributors. The retailers could avail immediate and easy credit through SBI’s automated digital banking platform — YONO (You Only Need One) app and make instant UPI-based payments to the distributors.

This facility was available to the retailers using the Shikhar app. The bank was to install SBI Point of Sale machines at multiple HUL touchpoints across the country, to give customers the option of digital payments in smaller towns. According to HUL, the partnership would enable digital payments among HUL retailers and small entrepreneurs in semi-urban and rural areas.

In India, as many as 10 million retailers faced problems in accessing credit because of their informal operation and non-adoption of digital technology, according to Mehta. The partnership would remove the problems that small retailers and shopkeepers faced in accessing timely credit. The retailers could avail of credit seamlessly without any paperwork, and this could prove to be a gamechanger, he said. Rajnish Kumar, Chairman, SBI, said such partnerships would bring millions of traders into the formal economy and also help them digitise.

India has more than ten million retail outlets, with general trade accounting for 75 to 80 per cent of FMCG. Going forward, Mehta is looking at bringing in millions of HUL retailers on to the Shikhar app platform while ensuring that there is no cross-channel cannibalisation.

Analysis

Channel engagement tool

The wide distribution network and how HUL manages it is a core competency of the FMCG behemoth. Over the years, the company has had a stranglehold on general trade, which is the most important channel in a country like India. It is very important for companies like HUL to have sound channel strategies involving small retailers, which have an important role to play in serving the needs of millions of customers by making essential goods available. In fact, India’s FMCG market is largely reliant for sales on the country's general trade, comprising small mom-and-pop stores.

The Shikhar app is a smart retailer engagement tool with a user-friendly interface that enables retailer self-service, customer engagement, information transparency, product information, and convenient tracking of orders. The app helps in engaging the retailers through better connectivity. The retailers can use it to communicate directly with the company and can see the deals offered and the status of their orders. It also enables better conversion of leads.

  • It increases visibility and helps the company get real-time insights into the status and size of various orders and the performance of channel partners.
  • It leads to contextual enablement, as the retailers can be kept updated on new products, product information, the latest sales pitch, product positioning, and new features that can help the retailer sell HUL’s product better.
  • Ensuring connectivity, visibility, and contextual enablement can lead to optimisation, as a continuous real-time feedback loop of communication can be created that will help the retailer increase his/her business.
  • The app also helps engage better with retailers, through the company getting key insights from all the information that it gathers from the retailers.
  • HUL can leverage advanced analytics and Artificial Intelligence to understand the customer behaviour, use algorithms to segment the retail outlets, and provide smarter recommendations to them.
  • The company can also leverage the insights it has on the performance of retailers, conversion rates, and lead response times to spot trends, make revenue forecasts, and devise opportunities for improvement.
  • The Shikhar app provides retailers with the opportunity to go digital to best serve customers and capture the market during the pandemic. 

The pandemic has put e-commerce at the forefront of retail business. The FMCG companies have chosen to go online to reach their customers amid the distribution challenges posed by the lockdown. Considering the changing needs of the trade channels, HUL has put its Shikhar app to good use to not only drive sales for the company, but to also help retailers enter the new world of digitisation. The app has proved to be immensely helpful for retailers.

Empowering the channel partner

In any channel partner relationship, companies should see to it that it’s a win-win for everyone. Companies such as HUL understand the importance of helping and encouraging their channel partners to make the sales that will drive profits for both the channel partners and the company. So, rather than just incentivising a channel partner to sell more with some trade discounts, it makes more sense for a company to empower the channel partners so that they are better positioned to grow their businesses, which will drive sales for the company in turn.

Understanding the importance of retailers, HUL strove to sweeten the deal for the retailers who enrolled on the Shikhar app, through its partnership with SBI.

Through the Shikhar app and the partnership with SBI, HUL enabled retailers, who had till then been reluctant to opt for digital payments, to take the plunge and both accept and make digital payments. The retailers had no choice but to opt for digital payments given the social distancing norms necessitated by the pandemic. However, HUL made it easier for them to take this digital plunge.

The Shikhar app already has more than 3,00,000 retailers on board, and HUL has also been able to double the order value and number of SKUs ordered in 2020. The partnership with SBI is expected to attract several more retailers toward the Shikhar app. It is only natural that going forward, the general trade channels will see more digital intervention. In a country like India, general trade channels will continue to remain the most important channel even in the long run, and it is critical to engage with mom-and-pop retailers for the twin advantage of proximity and convenience that they provide. HUL will have to take care to target unique customer cohorts and see to it that there is no cross-channel cannibalisation and that it does not lead to any channel conflicts.

The Shikhar app not only helps the retailers by providing them with a push toward digitisation in a limited way that enables them to optimise inventory, place orders, and make payments online but also gives retailers the opportunity to improve demand capture/fulfilment and customer service and access to credit to grow their business. So, it prepares retailers to sell more of HUL’s products and makes it easier for them to do business with the company while preparing them to upgrade and compete with the channels of the future.

(Debapratim Purkayastha was Director, Benudhar Sahu is Research Associate, and Indu Perepu is Research Faculty, at IBS Case Research Center, Hyderabad.)

Read: Dr Debapratim Purkayastha (24/5/1976 – 7/5/2021) Debapratim was an internationally renowned case writer