Winning Customers Online - The Hyperlocal Approach
This article was written while working for T-Hub
The Indian e-commerce space is touted to be worth $200 Billion by 2026. With an immense market potential, it's not a surprise that an unproportionally large number of Indian startups are in the e-commerce sphere. Though a much more dismal fact is that a significant proportion of these startups shut shop within the first few years of starting out. Common reasons cited for these failures include:
Established e-commerce players with higher funding can often offer steep discounts that cut into the revenue of new companies.
Scaling an ecommerce venture beyond metropolis cities is a challenge for major players in the field and new and upcoming startups alike. The crowded market space in metros makes sustaining an ecommerce business on tier one city sales alone a major challenge.
The e-commerce space has been hit by a crunch in venture capital and other sources of funding that have been largely redirected to other up and coming tech in the promising fields of blockchain, cryptocurrency, medtech and agritech. A simple website and a marketplace are no longer promising ventures for investment in the modern economy. Investments in e-commerce are not focussed on late stage startups and comparatively established players who are looking at reaping benefits and turning profitable in the near future.
In this article we address scalability issues of an ecommerce venture , more particularly in hyperlocal communities that have largely been out of focus and out of reach for even major ecommerce players.
In all fairness, it has been a decade since ecommerce took off in India with the popular rise of Flipkart and the entry of global players such as Amazon and Ebay. A decade ago, the primary targets for any new ecommerce venture were Indian metropolis, tier one cities with huge populations and a higher disposable income than the national average. Though now, with the Indian ecommerce sector maturing, growth has slowed down in tier one cities. While as per a 2018 report in MoneyControl, ecommerce revenue growth is thrice as much in tier two cities. Expanding to tier two and tier three cities is essentially to tap the growing ecommerce user base in these cities. A few points to summarise the opportunities available in the hyperlocal ecommerce space in India are as follows:
Morgan Stanley expects the online Indian customer base to increase form 60 million in 2016 to 475 million by 2026. While urban regions already have an internet penetration of 64.8% as of December 2017, the penetration is dismally low at 18% in rural India. Hence the projection model of Morgan Stanley implies that a major chunk of new user growth is going to come from rural regions in the next decade.
The launch of 4G network in India has brought about a telecommunication revolution, with the cheapest data rates in the world and a bidding war to earn new customers. It has also made mobile broadband available to the general India diaspora ast affordable prices.
Unlike tier one cities, tier two and tier three localities do not have plentiful brick and mortar options to cater to all of their needs, which opens up immense potential for ecommerce based solutions.
Service, delivery and logistics issues in rural regions have opened avenues for ecommerce startups that use brick and mortar stores as fronts for online sales. Indiabuys is an assisted startup launched in 2017 with support from Amazon that aims to bridge the availability and delivery divide between rural and urban regions through its 'phygital' model of operation.
Many ecommerce ventures have identified the potential of tier two and tier three townships of India and have attempted to venture in the untapped market, though more often than not with limited success or heavy losses. Grofers , a major market player in e-commerce groceries had to close its operations in 9 tier two Indian cities due to logistical issues and unsustainable losses. Bigbasket is also struggling to manage losses in hyperlocal communities despite having deep pockets. Despite their hold on markets in metros, startups have struggled in hyperlocal communities as they fail to adopt to new challenges.The following points hold key solutions to scaling in hyperlocal communities in India:
Unlike a large proportion of internet users in metropolitan cities, users in tier two, tier three and rural regions are more likely to have started internet usage in the last two years, as per Morgan Stanley. This directly affects their navigatibility and usage comfort on websites and in mobile applications. This upskilling in tier one cities is largely because of increased exposure to technology rather than any concentrated up-skilling initiative. Hence, before expanding to hyperlocal communities, e-commerce ventures must ensure that their platform is easy to use and navigate.
The Government of India, in its 2018 budget, allocated INR 10,000 Cr for the development of telecom infrastructure. However, currently, many businesses are making 'Lite' versions of their apps to suit the needs of tier two and tier three markets and work within their internet speed constraints. Ola Cabs has one such 'Lite' app that doesn't use as much internet data by minimizing the load on GPS and maps.
India has immense vernacular diversity, and although English is largely accepted as a means of communication for online purchases and transactions in urban metropolis, the same cannot be said about tier two and tier three cities. To truly reach out to such hyperlocal communities, making one's platform available in local languages is sure shot strategy that guarantees returns and also puts one miles ahead of competition.
In continuation with the platform's ease of usage, optimisation for smartphone's is essential as an overwhelming majority of users in hyperlocal communities access internet through their mobile devices. This can be achieved through websites designed to render on smartphones and mobile applications available for download.
India has 30.86 million credit cards and 880 million debit cards as of 2017, while the debit card penetration is high, it's usage still remains dismally low in rural regions for online transactions. With the launch of Unified Payments' Interface (UPI) and increasing popularity of mobile wallets that are easier to control and operate, e-commerce ventures should ensure that they provide multiple payment options to cater to a wide variety of customers and ensure that the payment process is in their comfort zone.
Despite a fast developing financial infrastructure, high debit card penetration and the launch of UPI, trust remains low in online transactions for users based in hyperlocal communities. The absence of Cash on Delivery as a payment option often ends up being a dealbreaker for online purchases, hence, an e-commerce startup looking to scale in hyperlocal communities must accept Cash on Delivery as a mode of payment.
More often than not, company warehouses, local offices and servicing headquarters for e-commerce firms are located in large metropolises; this results in delayed delivery of product, comparatively poorer customer service and experience for customers from tier two and tier three cities. E-commerce ventures must ensure that measure are taken to ensure that customer experience for non-urban regions remains at par with metro cities.
An e-commerce venture launching in hyperlocal communities much model its inventory to suit the requirements and demands of local customers. Continuous modifications, upgradations and stocking of the inventory based on user feedback and demand assessment will enable an e-commerce firm to properly gauge and respond to local interests.
Innovations such as 'Style Studio' - Myntra's virtual trial room, Lenskart's 3D Try On among others aim to bring the experience of shopping online as close to real world experiences as possible. Such methods instill a sense of familiarity and comfort in users, especially first time users who are hesitant to spend online. Any new venture in e-commerce must look at technologies such as 360 degree AR/VR, 3D modelling among others to bring their inventories as close to the real world as possible.
- Tech in Asia - Connecting Asia's Startup Ecosystem, Tech in Asia, www.techinasia.com/insights-from-25-failed-startups-in-india-2016.
- "Acute Urban-Rural Divide in Internet Penetration in India: Report." The Economic Times, Economic Times, 20 Feb. 2018, economictimes.indiatimes.com/tech/internet/acute-urban-rural-divide-in-internet-penetration-in-india-report/articleshow/62997468.cms.
- "India Had 30.86M Credit Cards, 880.03M Debit Cards in May 2017." MediaNama, 5 July 2017, www.medianama.com/2017/07/223-india-credit-cards-debit-cards-may-2017/.
- N, Sushma U. "Morgan Stanley Explains Why India's e-Commerce Market Is a Hot Investment Opportunity." Quartz, Quartz, 29 Sept. 2017, qz.com/1089559/morgan-stanley-explains-why-indias-e-commerce-market-is-a-hot-investment-opportunity/.
Winning Customers Online - The Hyperlocal Approach