What Does 2021 Hold For the E-Commerce D2C Space In Tier-III Cities?
Poised to become the second-largest e-commerce market by reaching a value of $99 billion by 2024, India's e-commerce market is now actively penetrating tier-III cities
The year 2020 witnessed unprecedented disruptions and first-of-its-kind business developments across segments due to the COVID-19 pandemic and the e-commerce sector was at the forefront of this disruption. The pandemic effectively transformed the way businesses interact with their customers and the D2C segment has gained immense traction in recent years. With the second-largest Internet user base, India has become one of the most prominent e-commerce markets globally. Internet and smartphone usage has surged drastically during the pandemic, thereby soaring the demand for e-commerce. Amid the rising demand, a fairly new market for e-commerce and the D2C segment has emerged in tier-III cities.
Poised to become the second-largest e-commerce market by reaching a value of $99 billion by 2024, India's e-commerce market is now actively penetrating tier-III cities. In fact, the demand from smaller cities is skyrocketing to the extent that they would soon catch up to the demand in metros. Logistics, which was up until recently a challenge for e-commerce players when it came to reaching these remote regions, with its bolstered, tech-enabled functions, is now enabling seamless services to even the remotest pockets of the country. That said, this year is set to witness the e-commerce and direct to consumer (D2C) boom in India's tier-III cities due to the following reasons:
Reverse migration is where people hailing from tier-II and tier-III cities had moved to urban areas for stable employment, moved back to their hometowns during the nation-wide lockdowns. This played a major role in facilitating heightened demand for e-commerce in small cities and towns. In a way, reverse migration helped people save the money they normally spent on rent or food, increasing their disposable income. People then used this to purchase products through online shopping. Besides, they also carried back their knowledge and exposure found in the metro cities that they may never have got in their hometowns. Through e-commerce and efficient logistics, people from tier-III cities and the hinterlands of the country are now able to search for, find, and buy any product at the click of a button.
The payments front
India has always been a predominantly cash-based economy. Even when digital payment methods made their way into the economy, it was initially limited to metro cities. But in the recent years, with increased internet proliferation, one has seen a surge in the adoption of digital payment solutions such as UPI-based payments, card payments, etc., even in tier-III and tier-IV cities.
Especially at the outset of the pandemic, the adoption of digital payments skyrocketed across the country with even tier-III customers opting for digital payments for online deliveries as safety concerns surrounding cash payments grew. Although the cash on delivery option is once again making its way into the e-commerce payment wing, the adoption of digital payments will likely prevail given their convenience for both customers as well as the sellers.
While 2020 disrupted the e-commerce, D2C space whilst also enabling them to grow rapidly, 2021 will be a lucrative year these sectors in tier-III cities. The lockdowns proved to be an inflection point for India's e-commerce and D2C segments. With businesses going online, the importance of having a strong social media presence has been identified and brands have started to harness its potential, thereby enabling social commerce to gain a strong foothold as a key wing of e-commerce.
Leading aggregator platforms have also observed that over half the sellers on their platforms hailed from tier-II and tier-III cities, striking an impressive balance between metros and tier-II, tier-III cities. As the e-commerce industry continues to evolve, riven by the changing consumer behavior, cutting-edge technology, and cut-throat competition, this year will be revolutionary for the sector and further propel it with more and more people across the country choosing the e-commerce D2C route.