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Online shopping in small town India: Will it be a feasible model?

On behalf of : Manideepa Talukdar

India is the fastest growing e-commerce market in Asia according to a study conducted by Forrester Research in 2012 for ASSOCHAM's 2nd National Conference on e-Commerce 2012. In 2013 the Indian e-commerce market grew by a mind boggling 88% to $16billion as per a survey conducted by the industry body ASSOCHAM. In the early days Indian e-commerce market was being led by Tier I cities but the trend has moved on to smaller towns. For instance online shopping website Jabong.com derives 60% of its revenues from smaller towns.

Online retailers face several challenges while servicing small town customers:
a) The risky Cash on Delivery(CoD) is a preferred mode of
payment
b) High number of returned goods
c) Unreliable internet payment gateways
But the biggest problem faced by online retailers while servicing small towns is Logistics.

Let's look at a few options retailers have to overcome these challenges:
a) In-house delivery options
b) Online marketplace
c) Logistic solutions partners
d) Franchisee based model

Certain big retailers like Flipkart.com, Zovi.com are already using their in-house delivery model. But many times the in-house logistic divisions cater to only a few cities as large volumes are not seen in small towns. To drive volumes bigger retailers can offer delivery solutions to smaller players who can take advantage of a bigger player's network and expertise while the bigger player can optimize costs through volumes achieved.

The second option of online marketplace is where individuals and companies can list their offerings using one platform. They can then use the online marketplace's shipping and warehousing facilities. Amazon.in and Ebay.in offer such facilities to users. Even large online retail players in India like Flipkart.com and Snapdeal.com have started offering these facilities. Other well-known online market places in India are shopclues.com and craftsvilla.com.

The third option of logistics solution partners is a new business opportunity for traditional logistics solution providers. Logistics partners cannot just deliver purchased items to shoppers but also handle returns as well as handle cash for the COD option. DTDC has recently launched DotZot, a company which focuses on providing end-to-end logistics and warehousing services to e-commerce players. The other players in this space are Delhivery.com and Chhotu.in.

The fourth option is the franchisee based model. Big Bazaar has launched a new model for e-commerce called Big Bazaar direct in the Vidarbha district of Maharashtra, and will expand to the Northeast and Gujarat soon. In this model franchises personally visit customers and take product orders and place the same online through tablet computers.

Online shopping portal Edabba has set up Trust Points(TP) across the country which are managed by small shop owners who own computers. Shoppers who do not have access to the internet or would not want to carry out online transactions can visit these TPs to shop as well as collect their goods. This is an innovative solution which can drive down logistic costs in remote areas as all customers in a certain area can have their goods delivered in one place. In addition to this such a model can also provide home based employment to net-literate citizens who want set up outlets exclusively for franchisee related work. Such franchisee outlets can also provide a solution for 'feel factor' problem seen online retailing. Franchisee stores can allow customers to 'feel' the demo piece of the product and then order it online thus minimizing returns. Overall, it's a win-win situation for both the retailer as well the customer. The retailer will have to account for the service charges that it has to pay to the franchisees. But the service charges can be worked out to be lower than carrying costs of inventory to service small town customer across a vast country like India.

Online retail is expected to grow to $56 billion by 2023 according to ASSOCHAM. Small towns will continue to drive growths in a big way with more and more increased internet penetration. Online retailers who are able to provide innovative solutions to buyers from small towns will in the long run see a large growth in their market share.

Comments

The e-commerce market in India is well positioned for good growth. Some of the key drivers are 1)Rising aspirational consumerism 2) Demographics - millions of young consumers joining the market 3)Digital divide is shrinking at a faster pace because of mobility. This is germinating a lot of innovation in e-commerces services which reflects in the success of Flipkart, yep.com, jabong and others.

Thanks for sharing this interesting and helpful blog.
You explain very nicely and easily understanding.
Keep it up.

Today, the web is being used by a very large number of Indians to shop for a wide range of products, from airplane tickets to shoes. Of course, there are obviously plenty of reasons that why online shopping in India has gained so much popularity. In fact, the ability to shop over the internet offers quite a few benefits to the people in India, so they prefer this.

E-commerce is a trend these days. Nobody have time to go to shop and purchase, thus everyone looks for purchasing online and also each and everything is available on the e-commerce websites. This is the main reason behind the success of e-commerce websites.

The key in small town/ Rural e Commerce involving physical goods is Logistics and it has remained so for years. I am yet to see any worth while initiative /innovation in that space. It is what we say "Gadhha Mazoori" job, immensely unglamorous, costly , demanding but is the only critical success factor for eComm success in Rural, if not in small town...

Very Useful and Insight into the e-Commerce as I am Opening up my own Venture in the Similar Field. Good to Know the Challenges That are Faced and In deep analysis by the Author.

very useful information how to i start own Logistic in the small town. kindly give me a details
email id : mmjj84@gmail.com

Now a days online shopping has became very popular.Nice blog U have given a useful Info.

Great post online shopping is very useful to all.

Very informative post. Yes,India is growing very fast in online shopping. Every one buying products through online.

one of the best

This is Great Wonderful information.. Awesome Thanks for sharing.

Really A Wonderful Information...
We Can Do A Lot Of Shopping Just At The Tip OF Our Finger...
No Need For Walking Anywhere In The Hot Climate And Wasting Our Energy And Time.
Even We Can Shop For Gold Jewellery Online...
http://www.pngadgil.com/pages/Gold-Jewellery-Collections/pgid-544967.aspx

it is really very informative post

very informative post. good to be here.

A very good article, clearly elaborating the issues and methods followed by ecommerce companies while delivering their products to customers.Surely, ecommerce sites have greatly helped customers in getting the desired products.

I’m frequent reader of your blog. Every post sounds good. Thanks for sharing the info.

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