What's Making Rural India Shop Online

After familiarizing urban India with online shopping, e-commerce businesses are now figuring out the right ingredients to capture the non-urban market

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Door-step delivery was a privilege mostly enjoyed by urban consumers till the pandemic. Today, with reverse migration, increased internet penetration, digitization and technology adoption, e-commerce is reaching India’s hinterland as well. 

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“The market opportunity for rural commerce is huge; the largest customer base still resides in the remotest village. Identifying this correct pain point of e-commerce business in rural India, business models will thrive,” said Mitesh Shah, co-founder, Inflection Point Ventures (IPV). He added that internet sales, like internet businesses, are growing at a phenomenal rate in rural India and internet business is only going to grow and expand. 

While smartphone penetration and internet adoption in India are still heavily skewed to urban centers, it is surely changing and so is the spending power among non-urban consumers. “With Instagram and Facebook first brands, many of these masses are being tapped. Likewise, with video-commerce picking up, it has been a boon for both sellers and customers. Venture-backed startups such as CoutLoot, GetNatty, SalesAssist are bringing technology to the fore. Also, the Meeshos of the world are creating opportunities for artisans and small retailers to tap into new and emerging markets,” said Ajay Ramasubramaniam, founder CEO, Startup Reseau, a Mumbai-based meta accelerator.

According to a report by the Internet and Mobile Association of India (IAMAI) and consulting firm Kantar, rural India will likely have more internet users than urban India by 2025. With almost 65 per cent of India’s population living in non-urban areas, this means e-commerce players have a vast untapped market.

“We can expect closer connectivity in remote areas in times to come as more players and delivery partners will enter the ecosystem. We have customers who are actively exploring this opportunity and are generating immense value both for end customers and themselves,” said  Soham Chokshi, co-founder and CEO, Shipsy.

Micro-entrepreneurship and Trust-Building 

According to the latest report by Bizom, in the fast-moving consumer goods market, rural consumption expanded 58 per cent year on year, twice the rate of urban consumption, which grew 28 per cent during the quarter ended September 2021. Thus, with the foundation set for an e-commerce play in rural India, the businesses in the space are now figuring out the right ingredients to capture the non-urban market further. 

Business in rural India thrives on trust and customer understanding, say experts.

“As a community, the rural market is not always welcoming to outside interference in their business, therefore it becomes really necessary to take the right route. The idea of micro-entrepreneurship has helped e-commerce businesses enter and successfully tap the rural markets. The close connection with rural influencers makes way for seamless acceptance within the community. With the help of social capital of these influencers, businesses have also been able to reach the targeted audiences with consumer insights,” said IPV’s Shah. IPV has invested in Hesa, a rural tech company.

Trell, Meesho, shop 101, Glowroad, Woovly, Bulbul, CityMall are some of the players in the social commerce space which is gaining popularity in Tier 3 and 4 cities. 

Another important method the companies are using to create space in the rural market is co-designing solutions with consumers. “To fulfill the unique demand of rural consumption, brands with customer insights are designing solutions unique to rural audiences. Rural consumption has seen significant shifts in recent years, moving only upwards,” said Shah. 

Further, assisted commerce with respect to language, customer support and logistics have vastly improved over the years. “This makes rural e-commerce a real possibility. The evolution of FinTech w.r.t payments and lending, is another major trigger for enabling rural e-commerce,” said Ramasubramaniam.

More traditional and new-age companies in the FMCG and FMCD sector are also planning to enhance their rural footprint. “With ongoing developments, the eCommerce industry eyes to penetrate the rural markets by strengthening the network of rural distributors and retailers. Digital platforms, especially B2B aggregators, provide the companies with inequitable access to the rural markets. All this will significantly increase the efficiency of rural supply chain, bringing in more profits to organizations,” said Sanjay Kaul, founder and CEO, Xpand, a B2B aggregator platform that equips FMCG and FMCD companies to reach the unserved and underserved segments of rural India. 

Reports show that the FMCG segment witnessed significant growth from the rural segment. While the rural customer segments still yearn for the ‘look, touch and feel’ before buying, the pandemic has altered the scenario considerably. “While expanding in the rural market the brand should focus on technology and various other factors like prioritizing affluent rural pockets, right product selection for each pocket, logistics and warehousing infrastructure at the micro-level, right collaborations and the right balance of digital and physical marketing,” added Kaul.

Rural-Specific Business Models

E-commerce models that are resilient, inclusive and fulfilling the need gap of the market are the ones that would rise in rural India, believe experts. “Rural consumers' demands vary, their everyday challenges play an important role. After-sales services, quality within affordability and user-friendly technology play an important role. Not all households are technologically savvy, therefore to design consumer-friendly technology is a must,” said Shah.

B2C and B2B are both viable models that can flourish in rural India. Further, considering our land’s vast expanse, the Kirana model shows great potential when it comes to first-mile pickup and last-mile delivery. “Local distribution centers foster ease of access for logistics providers to serve in non-urban regions. Local/neighborhood/Kirana stores become the PUDO (Pick Up Drop Off) points enabling logistics companies to serve within a radius of 5 km using the model. For instance, DTDC transforms local stores into pick-up/drop-off centers for customers to easily send/receive consignments,” said Chokshi.

To sum up, while the time is apt for e-commerce players to venture into the length and breadth of the country, they should analyze the market, have the right pricing, know the local festivals when most purchases happen, speak with the consumers, understand what drives rural economies and give more time for the rural consumers to get used to refunds, exchange and other benefits.