Tier II, III cities drive e-commerce in India

Tier II, III cities drive e-commerce in India

Small-town online shopper Ravishanker from Chikkabanavara thinks nothing of buying the latest Samsung TV from an online store through his smartphone (also bought online during a Diwali sale in 2017).

He says, “I don’t have to drive to Bengaluru for an hour and battle the traffic there to get the latest TV. It’s delivered and installed within a few days right here on my farm.”

His wife keeps up with the latest trends in apparel through her smartphone. She does not hesitate to order clothes from a famous retailer in Hyderabad or jewellery from a fashionable brand in Mumbai with just a few taps on her phone.

The availability of inexpensive data plans and smooth connectivity along with safer and easier online cashless transaction apps are driving sales upwards in the e-commerce industry in smaller cities all over India.

Sales from Tier II and Tier III cities are expected to only keep rising in 2018. With more than 2,000 e-commerce hubs spread out through the country, consumers know that they can get their items on time and without damages (data courtesy: redseer.com).

Low-cost data and smartphones

The penetration of internet into every part of the country has helped drive e-commerce sales. Jio, with its inexpensive data and smartphone plans, has helped consumers living far from metros to keep up with the latest trends.

No more postponing your shopping to twice a year when you can get to a metro. Everything is available on low-cost Android smartphones. The burgeoning middles classes in Tier II and Tier III cities have found a convenient way to research and browse for their latest buys with cheap smartphones.

The consulting firm RedSeer estimates that 19 million more online shoppers will be added in 2018 from Tier II+ cities. In contrast, four million shoppers will be added from Tier 1 cities. (redseer.com)

Brick and mortar stores don’t have to invest huge amounts in real estate anymore; instead, they can find a wider audience for their products through e-commerce. With the positioning of strategic hubs in different parts of India, timely delivery keeps them and their customers happy.

Millennials and Gen Z

The trend of shopping online is not slowing down anytime soon. Generation Z and millennials from Tier II and Tier III cities are the driving force behind the upward trend in e-commerce in India. 

These young people are not afraid to experiment and the deep discounts offered online are a great attraction. Even big brands offer great discounts up to 90% on some platforms, so the young, rural buyer is happy to flaunt his his/her branded clothes.

Millenials and Gen Z spend a lot of time online, talking to friends, researching, doing finances and shopping. (Data courtesy: BCG) They are comfortable with online shopping and payments.

Often they shop for their parents and other family members online. Parents, too, are a bit hesitant and leave it to the youngsters in the family to guide them through e-commerce purchases.

Future of e-commerce

It is a fact that the Asia-Pacific area accounts for a 50% share of all e-commerce business worldwide, and undoubtedly, e-commerce is going strong in Tier I cities in India.

Online shopping accounted for $20 billion in the third quarter of 2017. Morgan Stanley estimates that India’s e-commerce will grow to a staggering $200 billion by 2025. This is a jump of 30-40% in growth every year!

With the government formally announcing plans for broader internet reach in rural areas, first-time rural consumers are expected to grow exponentially.

Transactions using Aadhaar number and BHIM app are on a steady increasing in these areas, and by 2020, a huge portion of the rural population is expected to be online.

Currently, 56 million digital shoppers from smaller cities and rural areas are online. Retail businesses in Tier II and Tier III cities are increasingly aware of this momentum, resulting in a shift from retail to online business to tap the potential in these areas.

Small businesses, kirana shops, and other local services are likely to be B2C online businesses in 2018-19. While small businesses will only benefit from their foray into e-commerce, the small town/rural consumer will finally find his place in the sun. A win-win on all sides!

(The writer is CEO & Founder, Palred Online Technologies Private Limited)

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