The Rural E-com Shop
INTHREE, StoreKing, eHaat and RubanBridge. They are not household names like Amazon, Flipkart, Snapdeal or ShopClues, say. But these are e-commerce companies nonetheless, which are trying to build significant businesses by tapping rural demand in India. Some of them like RubanBridge are still small, while others like StoreKing are significant in size. StoreKing clocked revenues of `1,200 crore last year, and expects to double that this year. All these companies have figured out that the rural consumption story is quite robust, despite the vagaries of the monsoon, and sluggish growth of rural wages in the past four or five years. StoreKing estimates that the rural retail market (physical) constitutes over half of India’s total retail market, which is likely to be $650 billion, and growing at 13-14 per cent annually. So, the size of the potential market is quite big.
Of course, setting up a rural e-commerce company is even more complex than setting up one focussed on the urban and semi-urban markets. Logistics of delivery are more complex. Customers often do not have smartphones or computers or Internet connections which would help them access and order goods from the e-commerce company. There are other hurdles as well, including payment. However, entrepreneurs focussed on the rural market are betting that if they build strong networks and significant size, they will continue to dominate the market even when Amazon or Flipkart wants to directly service rural customers themselves. Now, the larger e-commerce companies such as Amazon are piggybacking on rural e-commerce firms to reach remote locations.
The fast-moving consumer goods and consumer durable companies have long known that size of the rural market is quite significant. Hindustan Unilever, ITC, Dabur and other FMCG players derive a significant amount of sales from villages as do auto companies like Maruti, Mahindra & Mahindra, Hero MotoCorp and the Tatas as well as consumer durable players like LG, Samsung and Whirlpool. In fact, rural demand for consumer durables and automobiles has prompted several consumer financing companies to set up shop there as well.
There is also anecdotal evidence that rural consumers want much the same things as urban consumers, and do not want shoddy, obsolete stuff. They are attracted by strong brands, and also have a strong sense for value for money offerings. However, servicing these markets have always been a challenge for many companies, especially the mid-sized ones or those dealing in specialised products. The rural focussed e-commerce players are stepping in and building the bridge between the company and the rural consumer.
With the government focussing on rural infrastructure and improving farming incomes, size of the opportunity could become bigger even as the logistics of tapping the customer and servicing him becomes easier. I suspect that pretty soon, a lot more companies will crop up to build businesses and the eco system around this opportunity.