In a short span of time, e-commerce has made great waves, servicing consumers across India. But a noticeable lacuna has been rural India, which, due to a lack of internet penetration, still remains majorly off the e-commerce grid.

As per ‘Internet in India 2017’, a report by Internet and Mobile Association of India and market research firm IMRB Kantar, there’s a wide gap between urban and rural India when it comes to internet penetration. As per the report, internet penetration in urban India stood at 64.84% in December 2017, while for rural India, it was a dismal 20.26%.

Clearly, there’s a long way to go to bring the rural populace of the country into the e-commerce fold. This is especially significant given that the rural retail market in India is booming. According to information and data measurement company Nielson, the consumer goods consumption market in India will grow 10-11% in 2018. In fact, the rural market has already shown 1.4 times higher growth than the urban market in the first quarter of 2018. “For a long time now, Indian rural markets have clocked higher growth than urban markets mainly because the headroom for growth is bigger for the rural space, and affordability and awareness are growing,” said Sameer Shukla, executive director, retail measurement services, south Asia, Nielson, in a recent report.

The way forward is to capitalise on this growth with the help of information and communication technology. And this is exactly what some start-ups are doing with the help of assisted e-commerce, an e-commerce ecosystem in which multiple parties, connected through the web, aim to provide multi-purpose transactional services to the end consumer. Simply put, assisted e-commerce is a hybrid of traditional and online retail. This is how it works: assisted e-commerce platforms get in touch with local shopkeepers, or rural retailers, in villages, enlisting them to act as middlemen between them and rural consumers. They provide rural retailers detailed catalogues of products that can be bought and also sometimes a connected device to place these orders. A consumer walks to the store, selects a product from the catalogue, places an online order with the help of the rural retailer and makes the payment there or later (in case of cash on delivery). The product arrives at the customer’s doorstep or at the store, from where the consumer can then collect it.

For every product sold, the rural retailer benefits from a ‘transaction commission’—the amount increases if the retailer is able to acquire more customers and generate a greater percentage of sales.

These assisted e-commerce players are targeting the 6,50,000 villages in India, of which more than 6,500 are inhabited by a total of around 400 million consumers. These consumers make up for about 30% of the total population, contributing significantly to the country’s GDP.

Bridging aspirations

From beauty care products and household items to electronic appliances and smart gadgets, assisted e-commerce platforms are now making available a variety of products to the rural consumer. Take, for instance, Bengaluru-based start-up StoreKing. Founded in 2012 by tech entrepreneur Sridhar Gundaiah, StoreKing has partnerships with 53,000 rural retailers in 10 Indian states such as Gujarat, Madhya Pradesh, Kerala and Tamil Nadu, among others. “In order to capture the uncovered markets, we have established partnerships with rural retailers who have not only been trained by us to act as intermediaries between us and customers, they have also been technologically enabled with company-provided smart gadgets,” shares Gundaiah.

In place of a physical catalogue, StoreKing provides rural retailers access to its app, through which rural consumers can browse the inventory of products, which includes FMGC goods, electronics, household items, etc. StoreKing also works with brands that don’t have their own supply chains, supplying their products to rural retailers. “We are the highway to rural India for big brands,” affirms Gundaiah, adding that they see a high demand for aspirational products, such as smartphones, home appliances and personal care products.

Interestingly, there’s also a great demand for products from rural women. “From (buying) sanitary napkins to BB creams, women in rural areas are aware consumers nowadays,” says Tripti Chatterji, a Mahila Samakhya (social service) officer, who has been working with women in the villages of Uttar Pradesh, Bihar and Rajasthan for close to three decades now. Earlier, Chatterji says, these women hesitated to even uncover their faces, let alone talk about mensturation. Today, however, there’s a great demand from them for various beauty, skincare and sanitary products. This, Chatterji says, is a result of being exposed to advertisements on television, as well as other media.

Apart from StoreKing, another assisted e-commerce player working in the space is Bengaluru-based 1Bridge, which aims to deliver an urban consumer experience to ‘ruban’, or ‘rural-urban’, consumers. 1Bridge’s model integrates the online and offline worlds. It basically enlists the services of handpicked local village youth to act as intermediaries between them and the rural retailers. Referred to as ‘1B Entrepreneurs’, the youth generate awareness among rural consumers about brands and products. “Instead of relying on a distribution-led push into the rural market, our products and services are curated based on the demands of rural consumers, which are conveyed through a trusted network of local entrepreneurs,” shares co-founder Madan Padaki, who created 1Bridge in 2016 when he realised that there
is a huge aspiration among the rural population for better-quality goods and services. “At 1Bridge, we use outreach activities and technology—to make customer engagement easier for our associates—combined with convenience of doorstep payment and delivery,” informs Padaki, adding that 1B Entrepreneurs have revealed a growing demand for smart gadgets, two-wheelers and home appliances such as washing machines, refrigerators, microwaves, etc.

1Bridge currently services 1,000 villages across seven districts—Tumkur, Mandya, Shimoga, Raichur, Chitradurga, Davangere and Hassan—in Karnataka, with efforts on to establish a foothold in other southern states such as Tamil Nadu, Kerala and Andhra Pradesh as well.

Big fish also bite

Even as consumption patterns in rural areas are slowly changing to resemble that of urban areas, the problem of accessibility and outreach remains a major impediment. In some regions, the biggest challenge for rural consumers is availability of quality products and services at the right price, rues Padaki of 1Bridge.

It’s not surprising then that the big online retail players are also focusing on reaching this untapped market with the help of assisted e-commerce. As per an Amazon India spokesperson, the online retail giant started venturing into the hinterlands of the country—widely covering tier II, III and below geographies to encourage digital inclusion—in 2015. “With an aim to address the needs of rural customers, we invested heavily in infrastructure, technology and India-specific innovations by piloting a multi-dimensional programme internally coined as ‘Project Udaan’ mid-2015,” shares the spokesperson.

Project Udaan, which integrates skill development and self-employment with assisted shopping, has enabled rural customers to benefit from the emerging digital commerce opportunity. Since its launch, Udaan has expanded to 21 states, covering as many as 1,700 pincodes across India, working with assisted e-commerce partners such as Vakrangee, Linq, IndiaBuys, etc.

The company, which recently announced that it has customers in 100% of the serviceable pincode areas in India, has also expanded its own delivery network into regions such as Meghalaya, Tripura, Jharkhand, Lakshwadeep and Leh-Ladakh. “With this expansion, Amazon now has 350 service partners (wherein local entrepreneurs act as Amazon’s local distribution network providers and create the last-mile delivery footprint) across 320 cities in India, which is a 40% growth compared to last year,” shares the spokesperson, adding that this expanded network has enabled deeper penetration into tier III and IV locations across India, including regions such as Agartala, Nagercoil, Allepey, Havelock Island, Shillong, Porbandar, Lonavala, Faridkot, Jind, Haldwani, Bhilai, etc. A major shortcoming, however, remains that Amazon doesn’t yet provide the option of cash on delivery for expensive appliances and gadgets.

In the short span of e-commerce in India, rural penetration has encouraged more and more customers to join the online retail ecosystem even from far-flung places across India, affirmed a spokesperson from Flipkart, who declined to answer other questions from Financial Express. Even though the company has its own distribution channels to cater to both urban and rural retailers, as confirmed by the spokesperson, the rural presence of Flipkart can be gauged through its partnership with mobile manufacturers such as Vivo and Honor to sell their flagship phones in the hinterlands. In a way, the companies have applied the assisted e-commerce model for the sale of mobile phones even in rural markets by tying up with Flipkart.

Speaking a new language

Even though the initial focus of e-commerce companies was on their English-speaking audience, they have to diversify their content now in order to reach the next wave of internet users who are dependent on vernacular languages. According to a study by KPMG India and Google last year, India’s local language internet user base increased at a compound annual growth rate of 41% between 2011 and 2016 to reach 234 million users. The forecast also says that the non-English-speaking user base will grow to 536 million by 2021.

To cater to this demographic, the user interface (UI) of companies such as StoreKing has been built to accommodate—apart from English—Kannada, Tamil, Telugu, Malayalam, Hindi and Marathi users. Operating through these vernacular languages has helped the company clock in close to 80,000 transactions a day, engaging both sellers and buyers in a more inclusive way.

1Bridge, on the other hand, has a dual-UI approach—in Kannada and Telugu for users, and in English for 1B Entrepreneurs, reveals Padaki.

Interestingly, e-commerce giants such as Amazon and Flipkart, which are also trying to tap the rural markets, have not yet adopted any local language. This could be because re-cataloging products in vernacular languages is a challenge for established companies due to the huge size of their product inventory. It’s here that third-party natural language processors (NLP) come in. NLP technology includes programming computers to process and analyse large amounts of language data. It helps in understanding the context, correcting spelling mistakes, translating from other languages and cross-translating for sellers, retailers and buyers.

All this begs the question: are we going to witness e-commerce wars in rural India now?