This is guest post Manu Agarwal Founder and CEO of Naaptol Online Shopping Pvt. Ltd
The eCommerce industry witnessed an unprecedented growth over the last 5 years. 2014 being the ‘year of the mobile’ provided the much needed push to the retail revolution by adding mCommerce to eCommerce blitzkrieg. The growth was primarily driven by rapid technology adoption led by the increasing use of devices such as smartphones and tablets, and access to the internet through broadband, 3G, etc, which led to an increased online consumer base. Adding to the lore, favored demographics and a growing internet user base helped aid this growth. The growth shown by homegrown eCommerce and mCmmerce players and the keen investor interest around these companies displayed the immense potential of the market.
The sector is burgeoning in the urban cities and a huge share of traffic is coming from the tier 2 and tier 3 cities as well. With the expansion of logistic carriers’ network, now a shipment can be delivered across a wider geography. Let us take a look; as compared to the 8 tier 1 cities in India, namely Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune, there are as many as 3,133 tier 2 and 3 cities and more than 1,233 rural hubs. One third of India’s 1.2 billion population lives within tier 1-4 cities, while only 8% of these reside in tier 1 cities. This implies that an online seller cannot ignore the combined volume of the more than 4,500 cities and hubs that make up the rest of India.
Cities and towns beyond the metros are in the limelight for all the excellent reasons. On an average, almost 50 – 55% of eCommerce business comes from the tier 2 and tier 3 cities. With urban markets reaching the point of consolidation and saturation, experts believe that tier 2 and 3 cities are going to be the biggest drivers for ecommerce businesses in India in the near future as the demographic dividend is essentially aspirational out there. Established players and even the newer ones are currently committed towards building a well entrenched and robust supply chain to cater to demands coming from such cities.
With the exposure facilitated by television, social media, internet penetration and migrant population, the consumers of tier II and tier III cities are increasingly following and trying to emulate lifestyles of their counterparts in metros and tier 1 cities. In this context, digital influence in forms of teleshopping and online shopping has driven dramatic change.
Talking about the driving engine, nowadays, internet is available to all and sundry. With the growth of affordable smartphone industry and cheaper internet, customer can now place orders easily using applications or websites on their handheld devices. They no more have to rely on laptops or a desktop. Moreover, individuals residing in tier 2&3 cities do not have access to popular brick and mortar stores in their vicinity offering the latest item or variety, hence buying online remains the only viable option rather than travelling huge distances. Complementing this growth, many startups are emerging to cater to the logistic challenges. eCommerce companies themselves are coming up with their own fleet of logistic carriers to cater to the orders coming from the length and breadth of the country.
There still exists a section of the rural population who don’t know how to buy online and e-retailers are increasingly putting to use data, analytics and the power of big data to figure out products that could appeal to these new customers. A powerful recommendation engine that understands the “aspiration” dimension may be an indispensible factor.
With the confidence to shop online having grown to 71% among the Tier I and Tier II audience and with more than 30% of traffic on eCommerce platform arising from handheld devices, the Indian market is set to reach $15 Billion by the end of 2016, reports say. All said, the present Indian eCommerce market is similar to the Chinese market in 2005!
Consumption pattern and buyer’s behaviour
An evident influence of eCommerce on tier II and tier III cities is tied to the paradigm shift in consumption pattern and buying behavior. E-commerce is a potent leveler between rural, semi-urban and urban population. People in tier II and tier III cities are leading a more aspirational lifestyle with home appliances, apparels and consumer electronic products including mobiles and tablets forming the bulk of orders, coming from there.
eCommerce has certainly passed on the reigns to the consumers. Shoppers now have access to a wide range of goods, services and suppliers to choose from. They make their buying decisions based on price comparison, customer service and after interactions with various online stores, offering a multitude of tempting deals and offers.
Times are changing, thanks to education, changing mindsets and empowerment. Women today are the primary decision makers, purchasers and influencers for offline FMCG products in Indian households. They are also actively participating in online purchases, especially Teleshopping; thus, significantly boosting the potential for digitally influenced sales in India, especially in tier II and III cities. The subgroup of working women is even more promising. The boom in the online apparel and accessories market is almost entirely driven by women.
The job market is another domain which is expanding hand in hand with the e-retailing boom. It has opened up a myriad of opportunities for local regional sellers and residential parcel delivery services, offering them a well built platform to build and expand their business. Acting as a powerful channel to grow their customer base and sales potential, sellers are fast realizing the opportunities that online marketplaces offer, powered by the internet – internet is definitely a fertile grounds on which the ecommerce garden can flourish. As the eCommerce ecosystem evolves in India, the Tier II and III cities and towns might experience reverse migration as well.
Last but not the least, are the growing opportunities that this sector carries
As mentioned earlier, almost 50-55% of the ecommerce business comes from tier II and tier III cities. The increase in disposable income of consumers in these markets coupled with the restricted choices available offline have contributed in thinking the rural-urban gap, in terms of revenue earned. Furthermore, thanks to the rising internet penetration, the gross number of online users in India now exceeds the number of people who have completed primary education. This shift emphasizes the increasing relevance of India’s digital economy.
The industry will be further fuelled as more and more virtual payment options emerge along with unique concepts like COD. Digital Payments options including net banking, credit/debit card transactions, prepaid cash cards, mobile wallet and IMPS are permeating into the Indian consumers’ hands no holds barred.
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