e-Commerce Potential In Indian Tier II and Tier III Cities

It was a gloomy day in Madikeri, Coorg district, about 270 kilometers from Bangalore. The narrow winding roads across coffee plantations are ubiquitous to this place as the clouds are to the sky. Ramesh, a 27 year old junior farmer is looking forward to next week to celebrate his mother’s birthday. But before the day arrives, Ramesh is eagerly waiting for a package to be delivered well in advance. A gift for his mother, apparently. He walks around with a 5 inch Zen smartphone in his pocket, wherever he goes. Just a couple of weeks ago, Ramesh had ordered a beautiful cotton silk saree on one of the marketplaces via his mobile phone. To his astonishment, the package was delivered well in advance. He had also requested for it to be gift wrapped, the young sod. Now, he can’t wait to cheer his mum up on her birthday. The tradition of shopping in rural areas are being slowly changing. And so is the selling style.

You see, only a third of India’s population has made urban cities their home. The rest, are distributed across the millions of towns and villages across the country. When medical care and education are delivered to tier II & III cities via the internet, e-commerce hasn’t been left behind.

Opportunities with Tier II & III Cities

Marketplaces and sellers have to grapple with the challenges of logistics and delivery when it comes to catering to the tier II & III cities. Haphazard and complex naming of layouts and hamlets means a disorganised physical address structure in India. Big marketplaces such as Amazon, Flipkart et all, with their deep pockets are vigorously tying up with mom and pop (kirana) stores as a last mile delivery hub. ShopClues and Snapdeal are working with India Post to reach their shoppers in the remote corners of India. Why? Here are some statistics (source):

  • 40-45% of consumers who shop online reside at 10 metro cities, rest of them hail from 3,133 tier II & III cities, and 1,233 rural hubs
  • In 2015, almost 55% sales for Amazon Fashion came from Tier-II cities as compared to 45% in 2014. Jaipur and Nagpur topped the list in terms of sales, followed by Surat. Overall growth of Tier-II markets have been about 600%.
  • Half the shoppers in Tier-III cities are already on mobile, as compared to the one third from Tier-I cities, according to a Forrester’s report.
  • 12 million kirana stores are part of new age shipment pickup strategies formed by major marketplaces
  • State owned India Post has 154,882 outlets, majority of them are scattered across rural India, which will soon be a part of e-Commerce delivery network
  • E-commerce companies report 50-60% sales from tier-II & III cities
  • 35 per cent of the sales of luxury brands in India are coming from non-metro cities like Aurangabad, Ludhiana, Kochi and Bellary. (source)
  • Other most bought products in Tier II and III are fashion related i.e. apparels and footwear, bags etc.

Catering to the demand in small towns, Snapdeal further acquired a stake in Delhi based logistics and delivery services venture GoJavas in 2015. More and more e-commerce big players will be following the suit as these Tier-II & Tier-III towns are turning out to be the force behind the growth of online retail in India.

Mobile, A Key Driver in e-Commerce

Mobile technology is also revolutionizing the Tier-II and Tier-III markets. Half the shoppers in Tier-III cities are already on mobile, as compared to the one third from Tier-I cities. Cheaper smartphone technology and the growing range of connectivity in Indian towns seem to be the root cause of these figures, and an online retailer must not ignore them. In fact, the m-commerce (mobile commerce) market in India is slated to reach $19 billion by 2019 according to some estimates.

Source: economictimes

So, What is the future of small town retailers going online?

India owns craftsmen, artisans and designers, manufacturing diverse and unique range of products. And much of these skilled professionals belong to the 68.84% of rural population. Reason being, people here are taking their traditional business to another level. They are skilled with professional handicrafts and workmanship, which anyhow can not be achieved with machines. Hence, the products which they manufacture are unique. The Madhubani paintings of Bihar, the pashmeena from kashmir, the chikankari from lucknow, the chanderi sarees from Madhya pradesh, the birdi(meta handicraft) from Bidar, Karnataka, etc. all are unique in a way or other. Usually the reach of these sellers are limited to the customers, who are in their geographical region. Some big retailers from these cities export also. But still there is a huge scope for an artisan from Tamil Nadu to sell to a customer sitting at Kashmir. The new wave of e-Commerce has opened new pathways towards immense opportunities. Big Marketplaces like flipkart, snapdeal, jabong etc are tying up with small city sellers. They encourage and guide them to explore the online marketplace and potential. Few companies like Purplestores are also offering an easy to use and affordable platform to regional sellers, along with continuous guidance to build and expand their businesses online.

Ashraf Hussain sells Bandhini and other handicrafts from Bhuj, Gujarat on Craftsvilla and has employed about 400 artisans. The demand for their products is from almost all corners of India and is not confined to Gujarat only. As per him,  “We are able to sell about four sarees online through craftsvilla.com every month. But, apart from immediate sales, it has enabled us to expand the market for bandhani. Now, we get enquiries and orders from new markets such as Tamil Nadu, Kerala and Goa”. Craftsvilla also given online platform to many others like Brass sellers from Moradabad and handicraft dealers from Jaipur, to expand the reach of each.

Factors driving Sellers from small town go online

As per Manish Maheshwari, VP, Flipkart, “At Flipkart, we have seen a rise in the new crop of sellers from Tier II & III cities, and today, almost 50% of our seller base belongs to smaller cities–Jaipur, Lucknow, Ludhiana, Meerut, Surat, Ghaziabad, Kanpur, Agra, Coimbatore, and Ahmedabad being few of the largest seller hubs”.

Needless to say, that the coming years belong to Tier II and III. Here are few other factors encouraging sellers from small city to go online:

  • The innovation in logistic strategies and technologies will only expand the reach of e-Commerce in India rapidly. The innovation is not only channeled towards buyers, strategies to bring in millions of sellers from tier II & III cities are also underway.
  • Since the most of online shoppers belong to tier II and III cities, it is more viable and feasible for the local sellers to target them

  • All India high demand for region based unique products like fabrics, home decor, handloom etc.
  • Since Tier II and III sees more demand for fashion apparels, luxury products and regional products, the sellers who have taken their traditional business as their livelihood have great opportunities online. As there has always been a high demand for regional products.
  • Uttar Pradesh (UP) has maximum number of 325 handicrafts clusters of the total 2,864 such clusters spread across India. Odisha (268), West Bengal (257), Maharashtra (208) and Gujarat (198) are other top states in this regard.
  • Tier III cities like Coimbatore, Tirupur, Kundli, Pudducherry and Panipat have emerged as major seller hubs for home, apparel and handloom categories.
  • With the emergence of digital India initiative, more and more people are accessing the internet, gaining digital literacy and increased use of mobile phones.
  • Great support and facilities from marketplaces and other startups

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