Bringing Ecommerce to Rural India
None of the big etailers be it Flipkart, Amazon or Snapdeal have managed to enter rural market in a big way. On the other hand there are start-ups like Ipay, Inthree – BoonBox, Storeking, Mvikarsha and eDabba that have managed to break this barrier by solely focusing on rural markets. How are these players cracking it? What’s the secret of their successes?
To find answers for the same, IndianOnlineSeller spoke to Mr. Krishna Lakamsani, CEO of iPay Tech India and Mr Ramachandaran Ramanathan, Founder & CEO of Inthree Access Services. They spoke about the journey of their respective companies, shared amazing insights about the common challenges and a lot of interesting & valuable things related to rural ecommerce.
The base principle of most rural ecommerce models is selling rural consumers through ‘trusted’ local retailer, institute or individual. This touch point can be a local kirana shop or an NGO. But getting these trusted and credible sources involved in the distribution channel is highly imperative in a rural ecommerce model.
Typically it works like this –
these small retailers or touch points assist buyers to select desired products, places the order on their behalf and accepts cash payments from the buyer. The ecommerce company informs the seller, gets the product delivered at their warehouse, checks the quality and then dispatches it to the rural retailer. Then the retailer hands over the product to the buyer.
iPay was founded when Mr. Lakamsani realised that although ecommerce in India is booming, the customer base who buy online is limited. He decided to explore the unexplored i.e. enter rural ecommerce. Lakamsani stated,
“People who don’t have internet or have internet but have inertia to purchase online, they are very comfortable purchasing at local stores because they know them from decades. That’s what I wanted to bridge. In India I believe relationship, trust and assistance are more important to do commerce.”
Inthree founders Ramachandaran Ramanathan and Karthik Natarajan sensed a huge opportunity after spending years on consulting projects selling consumer durables relevant to the rural market such as solar lamps, smokeless chulhas and Titan Industries, Nokia, Heinz Foundation and Eureka Forbes companies’ products.
“About a year back we realised that rural market is getting aspirational. Now we can widen our basket of products and move to a business model, which is driven by what, the consumers want rather than what we want to sell. And ecommerce is a way to go as it gives customer a wide choice.”
And that’s how Boonbox came into existence. The fact that top ecommerce sites don’t deliver beyond 3000 cities/areas worked in Boonbox’s favour.
He added, “It works on a hybrid model because rural customers would not click as broadband connectivity and credit/debit card penetration is very poor.”
Major challenges in rural area and overcoming it
“There is a new challenge every day”, Mr. Lakamsani stated bluntly. He added,
“Educating sellers and on-boarding them (biggest challenge), because we don’t want anyone and everyone and it’s not free. Their skin should be in the game.”
According to him, second biggest challenge is creating technology in a rural area where there is no 3G. Also reducing the cost of internet charges for retailers while building technology that works seamlessly.
He said, “We have spent a lot of time, energy, money in reducing cost without losing the quality of images. These are challenges and solutions we find out on field.”
On the other hand Inthree’s founder is of an opinion that “Working the rural market can be akin to churning the ocean really.” Elaborating further Ramanathan said, “The major challenges revolve around logistics. It is a huge problem for sure. Lack of structure in the last-mile reach as rural market is unstructured. We have to be inventive and use lot of native intelligence.
He added, “Another challenge is post-sales service which we have cracked due to back-end tie-ups for in-warranty and out-of-warranty service. We are rare ecommerce providers where it is a critical part of our DNA to be with the customer even after sales. And actually provide them top class buying and post-buying experience which the urban customer is getting used to now.”
What kind of products sell?
If you think people from villages are only interested in solar products and kerosene stoves then you are completely wrong. Also keep in mind to not treat villages as a dumping ground for inferior products because you won’t last long.
When asked what kind of products sell in rural areas, Mr. Ramanathan said, “Interesting array of products such as refrigerators, LED televisions, camera, stove, wet grinders, electronics, sarees, personal accessories and baby products. The biggest problem is we look at a rural market from urban flavour and from patronizing eyes. The buying power, what pace they can buy, buying preferences, everything changes with district to district. But overall they are aspirational customers. Not very different from urban buyers.”
iPay’s Lakamsani shared, “In the urban market ecommerce companies are selling mobile phones (gadgets mainly) the most. But here we are seeing something different. Items that can be used in Home and Kitchen such as mixers, pressure cooker, choppers, bed sheets, curtains, dining sets, and washing machines are hot selling products. Women are coming to kirana shops and not men. So whatever women want is getting sold the most.”
Taking sellers on-board
“Online sellers, wholesalers, distributors, manufacturers who hold inventory can come to us and list their products on our platform which is similar to listing products on Flipkart or Amazon.
We have created a marketplace where sellers win, retailers win and customers win. Seller can be from anywhere in India. But right now we prefer local sellers from Hyderabad only. And sellers who are outside of Hyderabad like Gujarat, they keep their stock with us as it is not possible for them to ship it directly to the retailer (kirana shop) we are catering to as no courier companies go there. This to ensure seamless shipping.”
We asked Mr. Ramanathan if they list only branded products or are they open to non-branded ones too. He said, “There are categories where brands are very critical. For instance for television they definitely want Samsung, LG or Philips. There are categories where brands are not sought after for instance cookware where semi-branded products are fine.
For products such as clothing and personal accessories, this is one area where our company is open to bring in private label. Contact details are on our site; sellers can call or mail us anytime.”
Future plans and funding
Both the companies are in the market to raise money for Series-A funding.
iPay has so far been a self-funded company. About the future plans, Lakamsani said, “My target is 1.27 percent of the existing market, that’s all! We are building a Walmart without having any shop or inventory.” As of now the company has presence in Andhra Pradesh and Telangana, and plans to start operations in Tamil Nadu, Karnataka, Kerala, Odisha, Gujarat and Maharashtra.
On the other hand Indian Angel Network (IAN) had invested in InThree last August, which helped the company to move to ecommerce model (Boonbox) and create top notch technology, social and logistics, warehousing team. The company that operates in Tamil Nadu and Karnataka plans to expand further. “We have already opened our office in West Bengal. We will move to Rajasthan and Uttar Pradesh over the next 3-4 months”, Ramanathan revealed.
Future Scope of rural ecommerce
The opportunity is huge. Nearly 68% of our 1.26 billion population live in rural areas. More players can play on this ground. Even the existing players admit that there is room for a lot of players but many of them don’t work because they fail in execution. Execution is the most important thing as there is so much complexity involved in terms of understanding and satisfying the customer.
A blanket strategy can’t work in such areas as infrastructure, customer choice, buying capacity and buyer profile changes from region to region. Only people or companies who can devote time, energy, money and manpower to develop business in rural areas can make it work. Plus pure online buyers are very less. Existing traditional retailers should be involved and the success of hyperlocal ecommerce model is a proof of that.
Once government takes concrete measures to develop rural infrastructure and broadband connectivity, this growth will accelerate even further.