Info-tech

The challenges of e-commerce for tier 2, 3 towns

N Ramakrishnan Chennai | Updated on June 25, 2020 Published on June 25, 2020

Logistics, which was a problem in the hinterland, is no longer an issue as far as tier-2 and -3 towns are concerned   -  istock/brijith vijayan

Buyers from smaller towns are more value and price conscious and prefer cash-on-delivery

E-commerce companies are seeing a surge in orders from tier-2 and -3 towns and the demand is far greater than in metros. Also, the demand from the smaller towns is for non-essential items compared with the cities, where the demand is still restricted to what are classified as essential goods.

Logistics, which was a problem in the hinterland, is no longer an issue as far as tier-2 and -3 towns are concerned and there are enough logistics options available. Over the last two-three years, there are any number of third party logistics providers that have come up, taking care of the last-mile delivery for e-commerce companies.

Unit economics may still be an issue as far as the smaller towns are concerned, but that too is being taken care of by consolidation either by logistics providers or through aggregation of orders. From the consumer end, trust and value are still critical and the challenge for e-commerce players is on how to get the buyers hooked to online buying.

These are some of the points that came up in a webinar on ‘The next wave of e-commerce – the giant India 2.0 opportunity’, organised as part of the Ankur Capital Dialogues series by early-stage venture capital firm Ankur Capital.

The preferred choice

While costly mobile phones and white goods may do well in the cities, buyers in smaller towns are more value and price conscious. They go in inexpensive mobile phones and are ready to spend money on personal care products, garments, ethnic wear and branded shoes.

According to Mani Bhushan, Business Head (E-commerce and Surface), BlueDart, cash-on-delivery (COD) continues to be the preferred mode of paying in tier-2 and -3 towns. Customers prefer to pay only after getting the product in their hands, although more than a dozen pre-paid payment options are available.

The key, according to Bharath Ram, Vice-President – Product, Engineering and Design, Flipkart, is trust. The level of trust will manifest itself when buyers are more open to paying at the time of ordering. Managing the cash, Bhushan pointed out, for COD orders was in itself a big challenge for the companies. For instance, if a person has collected ₹2 lakh in cash, the risk was not only to the cash, but to the person, too.

Sateesh Nukala, co-founder and CEO, BigHaat, an agriculture inputs marketplace platform, the challenge for the company was to create trust and brand loyalty. Farmers were brand conscious, especially for the farm inputs they bought. Typically, the younger farmers took to online ordering of agri inputs and they became the influencers for others. The farmer would prefer to buy a branded product for the inputs, whereas if the purchase was for personal consumption, they were value conscious.

Bhushan pointed out that with the opening up of smaller airports, logistics was no longer an issue in serving the smaller towns and cities. There were quite a few logistics players, including in hyper-local deliveries, that took care of the delivery of goods.

Delivery of goods

BigHaat, Nukala said, initially partnered with India Post to deliver the goods, but in the last two-three years was working with close to 20 partners to deliver anywhere in the country. Due to the lockdown caused by the pandemic, the start-up was seeing nearly a third of orders opting for the pre-paid route.

Flipkart’s Ram said buyers in tier-2 and -3 towns preferred images over text while browsing product categories on the app. They also preferred voice assistance to give a human feel to the app. The e-commerce marketplace was available in regional languages and he expected those using the app in regional languages to outnumber those using English by a margin of 2.5 times.

All the three panellists agreed that there has been an increase in online orders during the lockdown, but would prefer to wait and see if it had become the norm.

Published on June 25, 2020
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