E-tailers log on to low-income group to tap biz opportunity

Rehan Yar Khan, founder of VC firm Orios Venture Partners, is on a new investment spree. After funding 14 e-commerce firms, Khan is on the lookout for online firms that cater to the largely untapped lower middle-class.

“A peon or a security guard can’t afford an Ola cab or Zomato or Flipkart, which are considered sites for the upper middle-class. The opportunity in the low-end segment is 1,000 times the middle income group,” says Khan.

Khan is part of a breed of investors and entrepreneurs encouraging e-commerce ventures aimed at the lower middle class. For example, the Will Poole and Dave Richards co-founded Unitus Seed Fund is jumpstarting start-ups targeting low-income populations. It has already invested in 13 such start-ups, including online education firm Hippocampus and auto-rickshaw aggregator mGaadi.

Availability of low-end smartphones, rising education, high exposure to television and cinema are driving internet consumption even in this segment. To tap into this opportunity, several companies such as ShopClues, Paytm, OyoRooms, Yumist and Autowale are trying to offer services and products at a lower price.

For example, Delhi-based food portal Yumist provides meals below ₹60. Similarly OyoRooms and Chennai-based StayZilla allow travellers to find rooms below ₹900 in metros.

Says online marketplace Shopclues’ co-founder Radhika Agarwal: “The low income group is getting aspirational. The smartphone is definitely a reason behind this as we see about 50 per cent of traffic coming to our site through low-priced mobile phones. The income level has also gone up.”

While the emerging trend of ‘Low Income Value Explorers’ (a Nielsen term) is good news for e-tailers, the biggest challenge is the lack of awareness about using technology.

Delhi-based mobile commerce firm Paytm is educating several auto-rickshaw drivers and small retailers on the usage of mobile wallets for online transactions.

This segment, says Sushant Bharti, Founder of Pune-based consultancy firm 366Pi, is driven by value for money in every purchase. “A customised offering creating a pull factor is the magic potion to reach it.”

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