The Great Indian E-Commerce Solution
With internet usage increasing across the country and the general public becoming more aware of online shopping, companies selling products and services through websites are looking at smaller cities to grow their business. For the e-commerce market, the rural sector is where opportunities lie when it comes to expanding their horizons.
The concept of rural e-commerce has baffled quite a few people around the world. Most e-commerce pundits are of the opinion that this untapped market share will ensure a seamless growth of the e-commerce sector within the country in the coming years. This benefits both e-commerce players and rural citizens who will now have access to a broader product range.
Before diving into the multiple aspects of rural E-commerce, let’s review the current situation of e-Commerce in India. When we look at South and East Asia—the region where e-commerce has the fastest growth—the lion’s share of the market is owned by homegrown players such as Alibaba and JD.com in China and Flipkart in India. While Amazon and eBay failed to enter the e-commerce market in China, they have managed to establish a significant footing in the still-developing Indian market.
The battle between Amazon and Flipkart in India changed the investors’ perception to a large extent. Investors did not initially want to put in much money into e-commerce ventures as they were scared about its future. Ambareesh Murty, co-founder, and CEO of online furniture seller Pepperfry remembers how in 2013 fewer investors were willing to invest in e-commerce companies leading to 15 of his executives taking a pay cut to save the company. But those times are in the past as the growth of this sector has helped to make it easier than ever before to obtain funding.
The competition has only heightened after SoftBank put in billions into Flipkart in 2017. This is still just the beginning as Walmart has picked up a 77% stake in Flipkart and has decided to pump in another $2 billion into the company’s operations. The move is expected to wash out most of the subsidiary e-commerce companies that wished to compete directly with Amazon and Flipkart. Except for Paytm Mall (which is backed by Alibaba), none have the financial muscle to face off against someone as big as Amazon and Flipkart.
The World Bank reported India’s rural population to be around 67% making it one of India’s greatest untapped resources. The government needs to come up with a plan to generate more jobs opportunities in the rural sector and E-Commerce might be the answer to the government’s problem.
E-Commerce companies face some operational hurdles in rural areas given the poor infrastructure available in those parts of the country. The low literacy rate is another issue as even the educated people in rural areas are not able to handle cyber technology effectively. Internet penetration in rural India is constantly increasing, but people are still unaware of all the benefits of online shopping, such as better deals, saving of time and money and the convenience of getting things delivered home. Besides, those who do know about these benefits still feel reluctant to shop online because of sheer unfamiliarity and a lack of trust in the system due to improper understanding of how it works.
China, on the other hand, realised the potential of the rural population when Dinglou Village went from a stagnant piece of land with scarce economic opportunities to a costume market raking in $26.2 million annually. This was made possible by Alibaba’s partnership with Taobao villages. The Chinese government has since shifted its focus to the rural economy by releasing guidelines for a massive expansion of E-commerce in rural areas to fight poverty and hopefully eradicate it by 2020.
In the past couple of years, several e-commerce startups have emerged that focus solely on rural areas. Inthree, Storeking, ipay, and edabba are a few companies which have been driving the path for others to wander into rural India. These startups are also spreading awareness in the rural populace about the benefits of online shopping. “In recent years, rural markets in India have acquired significance, as the overall growth of the Indian economy has resulted in the substantial increase in the purchasing power of the rural communities. Estimates show rural markets are growing much faster than urban markets. But some factors are hindering the growth of eCommerce in the country, the biggest of which is low Internet penetration, payments, and distribution logistics.” said Sanjay Panigrahi, CEO at Sahaj eVillage.
Distribution is a problem at local Kirana stores that stock grocery. When rural e-commerce companies sell grocery, they do better than Kiranas because of the use of analytics. Kiranas only stock what they feel is necessary, not what the consumer needs. They don’t have the data required to gauge what the customer needs and they can’t invest in analytics because they don’t have the human resources or the financial backing. When they partner with e-commerce websites, it gives them a lot more data which they can then use to their benefit.
Delivering goods to rural India throws a significant challenge for eCommerce marketers. Amazon, Flipkart and other major e-retailers and local startups have made large investments to improve the infrastructure in place. They have developed an in-house digital payment solution to help meet the growing demand for online payments. Looking further into the future, it is inevitable that the eCommerce industry will see more investments coming their way which will enable them to improve their logistics and serve rural consumers better.
The Digital India campaign hopes to connect villages with broadband internet. A Mckinsey report says that the country’s GDP will be boosted by $550 billion, pushing the GDP to $1 trillion by 2025, if the campaign succeeds. E-Commerce firms are striving to bank on India’s rural market in cooperation with the government’s Digital India initiative. Firms such as Flipkart, Snapdeal, Infibeam and Paytm have signed Memorandum of Understanding (MoU) contacts with the government to reach rural areas and villages.
The Ministry of Communications and Information Technology wants to connect e-commerce companies with its common service centers (CSCs) in villages. While the government has around 100,000 CSCs, it plans to set up another 90,000 by the end of March 2016. The government believes such CSCs will generate employment opportunities by helping in the development of ancillary industries such as handicrafts and textiles, among others.
Paytm has suggested that CSCs be used as payment banks, and also for recruiting banking executives in villages. Snapdeal is already helping khadi (hand-spun and hand-woven cloth) product makers in Uttar Pradesh sell their products online. Infibeam has a team which trains village entrepreneurs who help with the dispatching of online orders. The partnership between Amazon India and Uttar Pradesh Khadi & Village Industries Board, intends to empower and generate livelihood opportunities for rural artisans and boost the economy of the Khadi and Village industry.
With initiatives such as Seller University that trains and nurture sellers, Service Provider Network, a pool of third-party vendors to support sellers in their online journey and logistic support through programs such as Easy Ship, Amazon.in has been working extensively to meet the business requirements of sellers and entrepreneurs and help them grow their business online. That’s not the end of it; Amazon India has also partnered up with various government institutions like TRIFED to uplift the rural population making it a win-win situation for both the sides.
By supporting the craftsmen, these coordinated efforts enable them to take advantage of India’s booming e-retail economy. The option of moving items on the web, grants artisans the capacity to extend their reach, get a proper price for their items, which in the long run will help raise their quality of life.
Rural India represents 66% of the nation’s populace which adds up to around 807 million individuals, and their movement to the web will fuel the nation’s online business growth. If India is able to use the rural populace to its benefit by partnering with E-Commerce websites, it can bridge the gap between the rural and urban population and increase human resource efficiency. The utilisation of the E-Commerce potential of India can serve as a big step for the development of this country.