India’s ecommerce salvation lies far outside the capital

Photo credit: tpabma / 123RF.

Media is replete with stories of how India’s ecommerce market has caught the fancy of investors, not only from India but globally. Amazon announced it will invest US$5billion in India, Walmart is in talks with Flipkart, while Alibaba and Rakuten are hunting for office spaces to scale their operations in the country. However, amidst all this fanfare there is a bitter reality which often gets overlooked.

Despite 370 million Indians connecting to the internet, only 20 million people shop online regularly, according to RedSeer Consulting, a research and advisory firm. To be clear, a person who shops online at least once a month is tagged a regular shopper. The number increases to 50 million if quarterly estimates are considered. So the ecommerce boom has been a limited edition success which does not represent the majority of India, as it is often portrayed.

“India is an amalgamation of small markets and hence ecommerce companies in India cannot think of it as a single market,” says Tyagarajan S, former CEO of Chalkstreet, who has worked with both Amazon and Flipkart. He says ecommerce in India has so far seen only limited success.

Tyagarajan says that though Flipkart, Amazon, and the likes have been able to somehow crack the urban market, there is a lot that needs to be done as far as smaller cities are concerned, and this requires a different mindset. “For the top 10 to 15 cities in India the market is more or less the same. However, what works in Hassan [a district in Karnataka] might not work in Ratnagiri [a port city in Maharashtra].”

Making changes

Photo credit: Santabanta.

The growth potential is huge though. The Reserve Bank of India has laid the groundwork in the form of the unified payment interface. The government is encouraging growth of mobile payments. With the launch of Reliance Jio, high-speed connectivity is all set to grow further.

Ecommerce investments are based on the premise that the growth will be driven from the hinterlands of India – second-tier cities and beyond. The ecommerce market in India is set to reach US$120 billion by 2020, with 65 percent of it driven by the second, third, and fourth-tier cities, according to Ashish Jhalani, founder of eTailing India.

Only 30 to 35 percent of the revenue for the big three players – Flipkart, Amazon, and Snapdeal – in India are generated from the small cities. Hence, the market is up for grabs for companies looking to create a niche for themselves. The likes of Shopclues, Naaptol, StoreKing, and Voonik are on it already.

According to Shopclues, one of the leading players in the small city segment, it needs different DNA. Radhika Ghai Aggarwal, co-founder and CBO of Shopclues, says that marketing and operational capabilities have to be tweaked to meet the specific requirements of shoppers in those areas.

“For advertisements, we use a lot of print and radio. We offer them merchandising experience by organising Sunday flea markets where goods are sold at wholesale prices. Here everything is priced under the 1,500 rupees range,” says Radhika. That’s US$22.

Even the mobile shopping experience needs to be such that people are able to relate to it, she adds. “We have a very light app, keeping in mind that people will probably have a three to four-inch screen sized phone. Many have told us that our app looks chaotic as too many items are displayed on the home page, but this is what people from second- and third-tier cities want. Rather than spending time searching for a product, people want options right in front of their eyes,” Radhika says.

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