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October 24, 2016
Alnoor Peermohamed, Business Standard
Bengaluru, 24 October 2016
E-commerce
companies in India are exploring the idea of setting up offline stores
in smaller towns as they look to grow their customer base and improve
logistics in the unmapped areas.
Rather than investing in their
own stores, e-commerce marketplaces are partnering with local merchants
who can assist offline buyers in purchasing goods online. Amazon began
its assisted commerce programme, Udaan, in 2015 while rival Flipkart is
mulling doing the same now. “Project Udaan is going to play a key role
in our effort to make Amazon accessible within a few minutes to all our
customers. We believe that the initiative has the potential to be a
game changer for Amazon in India,” said the US retailer in a statement.
The
move to tap offline stores in small towns comes as e-commerce
marketplaces begin seeing a larger chunk of their sales coming from
outside the six large metros. During its five-day Big Billion Days sale
earlier this month, Flipkart said over 65 per cent of its orders came
from Tier-II and below towns.
Amazon claims it sees a similar
percentage of sales coming from non-metro cities and rural areas. The
company said it received orders from 90 per cent of all
serviceable pincodes in India during its five-day festive sale, during
which it sold 15 million items on its platform. Udaan is present in 18
states across 188 locations and services over 700 pincodes, according
to Amazon.
It has partnered with sellers as well as hundreds of
local stores. Amazon trains store owners to help customers browse its
website on a PC and buy products online.
Flipkart declined to comment for this story.
“Consumer
goods sales are concentrated in bigger cities. This is why it still
makes economic sense for a retailer to set up stores in bigger towns
even though there’s a lot more competition. But it (online-to-offline
retail) is feasible, because you don’t have products sitting in small
markets locked away there,” said Devangshu Dutta, chief executive at
consulting firm Third Eyesight.
The efficiencies that
e-commerce bring in could finally open up India’s rural markets to
retail, but there’s still a looming question of whether there is
actually any demand here. Dutta adds that a critical mass needs to be reached where availability of products pushes demand and vice versa.
Flipkart
and Amazon might be the largest e-commerce players to be exploring
taking the offline retail route to enter India’s hinterland, but they
aren’t the only ones doing so. Storeking, an e-commerce firm focusing
on serving India’s rural areas, has partnered with large players
Amazon, Flipkart and Snapdeal to bring online buying to rural areas.
Storeking
says it has partnered with over 25,000 offline stores across 100
districts and services around 10 million customers a month. Apart from
facilitating commerce, Storeking also gathers intelligence on customer
needs in each region, helping it reach brands and cut exclusive deals
with them to serve rural customers.
Xiaomi, one of the largest
smartphone manufacturers in the world, has partnered with Storeking to
bring its Redmi 3S+ smartphone to offline stores in small towns and
villages.
E-tailers are not the only ones pushing retail
offerings to customers in rural India, with the government being one of
the biggest advocates of this. By lending a hand to e-commerce players
by giving them store access at its many e-Mitras, the government is
looking to kick-start rural commerce and create more employment.
When
Amazon signs up a merchant as a partner for Udaan, it trains him and
shares a commission for every sale. In turn, merchants act as a
front for customers in small towns and villages to shop online, while
their stores act as delivery and pickup points, making it much easier
to sell goods.
(Published in Business Standard)
