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It is estimated that the rural e–tail market is capable to present US $10b-US $12billion opportunity for e-commerce firms in the next four years. This can be attributed to the rising household incomes leading to an increase in consumption expenditure, diversified income sources from non-agricultural activities, positive agricultural outlook, increase in internet penetration, high propensity to spend and rising number of nuclear families in rural India, according to a new EY report, Rural e-commerce: The untapped potential.
The report states that demand in rural India is geography specific and would require considerable localization. Further, while rural customers are aspirational and desire to own branded products, they also price sensitive. Hence, companies need to create the right balance in their product mix comprising both value-for-money, unbranded items and branded products, which cater to their aspirations.
The report also highlights that to gain traction in the rural markets, companies would be required to rethink their business models and focus on demand generation, supply and services innovation.
Here is what the companies should do:
- Offer an easy line of credit by partnering with financial organizations that help with micro-lending will enable spending both from businesses and rural customers.
- Leverage on existing social structure and infrastructure to create awareness and trust among the customers.
- Ensure product curation and rationalization across geographies while identifying the right category–product mix with the share of unbranded, branded goods and comparable private labels, which would help improve the unit economics of serving to the rural customers.
Experts Note
Ankur Pahwa, Partner and National Leader – E-Commerce and Consumer Internet, EY India, says, “Rural online retail opportunity is clear and present for aspirational rural India; however, success will come for e-commerce companies that continuously innovate to engage consumers, especially with those users who are online but are not transacting on the internet or are limited to only using online channels for availing specific services only. E-commerce companies will need to innovate on distributed logistics, building trust with aspirational rural consumers and providing them with right category-product-mix through product curation and rationalization.”
