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E-Commerce in Rural India: Tapping the Untapped Market

The rural Indian market is an untapped potential that most e-commerce businesses would like to venture into, and their marketing strategy can be expected to see some major changes in the recent future.

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At 451 million active internet users, India ranks second in terms of the number of internet users, as per IAMAI. This number is split almost equally among urban and rural users. The number of internet users is further set to rise, with initiatives such as Digital Village providing internet access to more people. This provides a massive opportunity for e-commerce players, especially in tier 2, tier 3 cities and rural areas. During the 2019 festive sales, e-commerce platforms such as Amazon and Flipkart generated sales worth Rs 190 billion with much of it coming from tier 2 and 3 cities, according to a report by RedSeer. This shows the rising importance of this segment in the e-commerce landscape.

The majority of the shoppers from tier 2, tier 3 cities and rural areas engage in value-based shopping on e-commerce sites- shopping for a wide variety of products that are affordable at the same time. This affordability is due to initiatives such as discounts, EMIs, and cashbacks. Further, options such as cash on delivery, and replacements have created trust in the mind of the consumer regarding the online shopping process. The two biggest e-commerce players, Amazon and Flipkart have also launched their platforms in Hindi with a view of onboarding new customers. This gives the consumers the comfort of shopping in a language they prefer, creating a better experience.

According to an Accenture report, rural customers increasingly aspire to buy branded products. This is perhaps the biggest draw of e-commerce platforms for these customers. The number of brands available in India’s smaller cities and towns is relatively low in brick-and-mortar shops. E-commerce platforms meet this need by providing access to a wide variety of brands, and also information regarding these brands by means of product ratings and reviews. This gives consumers not just low prices but also more value in terms of features, aesthetics, and trends, thus pushing up the number of customers willing to shop online.

The 3 dimensions which categorize the rural consumption behaviour are Aspiration, Connecting, and Value Seeking behaviours. Product segments which meet these factors generally do well in building trust among the rural masses, which is one of the major factors in driving the growth of consumption during online shopping festivals. We need to look at the performance of the Electronics segment in order to better understand the above 3 dimensions which helped Flipkart gain an edge over Amazon in terms of GMV. In the electronics segment, mobile phones were once again major drivers, followed by smart devices like Amazon’s Echo and other electronic products. The exceptional contribution of 55% of Gross Merchandise Value ($3 Billion, Source: RedSeer Consulting) by mobile segment is noteworthy, even though it was predicted that “willingness to buy” would fall down this year to 40% compared to 55% last year by RedSeer Consulting. Major gainer from this frenzy among rural users is Flipkart which exploited rising internet usage across rural cities by entering into a partnership with Xiaomi, Apple and other mobile manufacturers. Though Internet penetration in India is at 36% with 0.45 billion active users, it is further expected to add 0.3 Billion more by the end of the year (35% rise in rural users from last year, Source: ICUBE ‘18). Increasing sales of mobile phones in Big Billion Days and Great Indian Shopping Festival point to this trend as customers found value for money they are paying and discounts also helped in generating enthusiasm. One of the other important product segments is retail products, where rural customers trust brands more than local products (59% trusted brands more source: Accenture) and these shopping festivals which were held during the auspicious time of Dusshera and Diwali helped customers meet their needs as 55% of rural users generally buy products only when need arises.

To devise the e-commerce strategy in rural India, we need to first understand the consumers of rural India. According to a report by Accenture, today’s rural customers are becoming more aspirational, selective about brands, value-seeking, and connected. It also mentions that more than fifty per cent of the customers are willing to use digital channels. The only barriers that can stop them from converting them to e-commerce customers are trust issues and logistics problems. Catering to these issues while still providing a competitive price point to the price-sensitive customers is the key to expand into the rural market.

ATL marketing activities, like television and radio advertisements in regional languages, need to be emphasized as customers in this segment still rely on these mediums for information. One also needs to invest in digital marketing as with easy availability and affordability of smartphones and internet connectivity, the rural Indian market is gradually stepping into the digital world.

Apart from Facebook, another social media platform that is increasingly gaining popularity within the Indian rural market is TikTok, as more and more users are increasingly creating content with it. E-Commerce sites can use these channels to market their products, using the local language. The marketers not only need to create content relevant to the rural populations but also need to engage the audience with the same. Often content that educates the users about various features of the product can help to drive the product growth. For example, GSK India is connecting with rural registered medical practitioners and chemists using its digital media, to educate them. Creating interesting content that the audience finds entertaining is also another way to connect to the audiences, as Hindustan Unilever Limited did with its legendary ‘Kan Khejura Tesan’ model, much before today’s age of rapid digitisation.

Earning a customer’s trust is also very important here. The customers from the rural parts of India are price-sensitive, have relatively low disposable income, hence they can’t afford to buy a product, only to find that it is not something they really wanted. Omni-Channel strategy in a few towns can be of good use here, as then the customers can actually touch and feel the product at the nearest physical store before buying them at a discount from an online store. This can also assist in logistics and supply chain issues in rural marketing.

Understanding the local culture, and offering discounts during special occasions like local festivals, will help not only to drive sales but also to create a customer-centric approach for e-commerce sites. For a more personal experience, the e-commerce sites can send the customers a ‘Gratitude Letter’ in the regional language, with their name printed, during the festive offers. Also, effective consumer grievance addressing cell in regional languages will help to establish e-commerce websites as more customer-friendly.

Looking forward, it can be said that the rural Indian market is an untapped potential that most e-commerce businesses would like to venture into, and their marketing strategy can be expected to see some major changes in recent future.

By Shravya Rao, Abhishek Vellanki and Ankita Saha - students of PGP-2, MBA course 2nd year students of IIM Calcutta

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