The past few years have seen a sort of revolution in India in the online shopping market. Increasing e-commerce penetration into India’s hinterlands has spawned unique expansion opportunities for the industry. Many big retail businesses have for long been operating in a restricted territory by offering services to only the urban areas. It’s only now that powerhouses like Amazon, ShopClues, Flipkart, etc. has penetrated the rural and confined corners of the country for an expanded business.
Dividing rural internet users in India into five categories, Boston Consulting Group had pointed out the potential of two large segments: ambitious users and next-wave users, estimated at 33 percent and 36 percent of rural users, respectively. While the typical ambitious user is young male graduate from less affluent household and nurturing aspirations to move to a city for work, the next-wave user is usually young female homemaker from an affluent household who has just started going online.
Why the hinterlands?
According to Census 2011, about 68.84 percent of India’s population lives in villages while the rest of 31.16 percent in towns and urban agglomerations, so it can only be imagined the kind of impact India’s economy will experience when rural e-commerce will gather serious momentum.
In order to tap this immense market, Amazon has initiated its pilot project ‘Udaan’ which integrates skill development and self-employment with assisted shopping and in some cases, even Amazon Pickup, thus enabling customers to benefit from the emerging digital commerce opportunity. “Since launch, Udaan has expanded to 21 states and union territories, having over 12,000 stores covering ~1,700 pin codes across India with partners like Storeking, Vakrangee, and small entrepreneurs like Linq, Indiabuys apart from hundreds of mom and pop stores who have signed up directly with Amazon,” informs Kishore Thota, Director - Customer Experience and Consumer Marketing, Amazon India.
Similarly, another e-commerce giant ShopClues which is present across all the states and over 31,500 pin codes in the country understands the potential of “Real Bharat”. Radhika Aggarwal, Co-Founder, ShopClues, believes that the real India lies in Bharat (tier –II, -III, -IV regions and beyond) and that this part of the country has been under-represented, under-serviced and under-recognised over the years. “Through its extensive market research and insight mining along with Artificial Intelligence (AI) based customer experience, ShopClues understands the needs of ‘Bharat’ where price points and value play a pivotal role in shopping experience,” maintains Aggarwal.
Not only these e-commerce giants, but Chinese mobile player like Xiaomi is also hitting the non-urban trail. It has rolled out 200 exclusive stores in rural Karnataka by StoreKing. RedBus, India’s largest inter-city online ticketing platform which boasts a network of 2,000 bus operators covering over 100,000 routes, owned by MakeMyTrip, too is busy making rural inroads.
For Amazon, non- metros continue to be the driver of new user growth, with share of new customers in non-metros moving past 75 percent, as on 2017. Amazon remains very clear about the idea of expanding the concept of online shopping to the hinterlands of the country. “We are an extremely customer centric company and our goal is to provide the widest selection to the maximum number of customers. Our measure of success is when we are able to deliver exotic tea or designer wear to a customer residing in the far corner of India,” says Kishore Thota.
Consumer Shopping Pattern in Rural India
Who wouldn’t want shopping at the comfort of one’s home, buying that perfect set of products by just one click on the smartphone. But is it that easy for our fellow countrymen in the hinterlands where either internet connectivity is weak or delivery options are scarce. To top all these technical issues, there also exist ignorance and trust issues among the village dwellers. But the e-commerce giants have found ways to build a better connect and the rural consumers too have been appreciative of the same.
“Customers everywhere are looking for a great shopping experience, with vast selection of products, competitive pricing and fast and reliable delivery. Customers from the hinterlands are just as enthusiastic in their purchase of products across categories. With the expansion of our selection to over 160 million products, we have witnessed phenomenal demand coming in - with tier -II and -III cities and towns contributing to over 65 percent of all orders received on Amazon,” asserts Kishore Thota.
Talking about the shopping patterns, Kishore Thota apprises, “Smartphones continue to be a favourite among customers across all geographical backgrounds. We have witnessed a surging demand for exclusives in the category, across our Udaan points clearly indicating the purchase aspiration in these geographies.” Radhika Aggarwal agrees, “During the first four days of Diwali sales, 80 percent orders were in feature phones category from tier -III, -IV and beyond as offerings are specifically created keeping Bharat’s needs in mind.
Amazon has also witnessed growing demand in aspirational products like shampoos, diapers and beauty products and consumables among the rural consumers, over the last 3 months. There also has been an increase in grocery shopping from Amazon’s Udaan points which is a strong indication that the consumers are getting more comfortable purchasing products in bulk from the e-commerce marketplace. Amazon Fashion is another fast growing category for tier -II and -III cities and towns.
In terms of response to the Diwali sale, for ShopClues the focus remained on the Re-New Gadgets category. “The Re-New category has tripled in growth this season, as compared to our overall marketplace growth of 2.5X,” says Radhika Aggarwal. While Amazon maintained that the company registered phenomenal growth in new customer acquisition through Udaan stores, as compared to last year.
Challenges & Way Ahead
Indians have traditionally been “touch and feel” shoppers and e-commerce was a new paradigm for majority consumers in India. While we see strong adoption in the urban consumers, changing this behaviour was a challenge for consumers outside of the top tier cities. “By partnering with existing store owners, we are leveraging the trust that they have built within their communities and taking their help in reaching out to this new consumer base. With a physical presence, we also give a physical manifestation to the online shopping presence that helps create accessibility and gives a sense of comfort for these new consumers,” says Kishore Thota from Amazon.
Another hurdle being logistics in these geographies. While urban areas are easily accessible, delivery to remote areas costs much higher that either drive down the margins or drive away the customers. For many of these companies working hard to penetrate the rural Indian market, the Indian postal service has come to the rescue. It is important to note that a whopping 89.7 percent of post offices in India are situated in rural India which gives e-commerce companies a vast infrastructural network to work with. “We also have third party carriers to enhance our last mile delivery experience. The ‘I Have Space’ program has reached a milestone of 180 cities with over 12,500 pickup points. Service Partner program is one of the last mile models by Amazon logistics in India to provide best in class delivery experience to our customers in remote areas. This program now covers more than 250 satellite cities and tier -II and tier -III towns and villages,” prides Kishore Thota. Meanwhile, ShopClues too is working in its full potential in order to overcome challenges that may come in the process of its rural penetration. Radhika Aggarwal shares, “E-commerce is the way ahead and rural India is very well adopting the channel. We have launched an exclusive label MEIA, designed for the hinterlands, which speaks for trust and dependability and more importantly, value for money.”
To sum up, it is not all a lost cause as far as rural Indian e-commerce penetration is concerned, and lot more is still slated to happen in the sector with many more companies going deeper into this market.