Low ticket sizes make e-selling in small town India a lot harder

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August 30, 2021 4:00 AM

As Arpit Mathur, partner at Kearney, points out there are differences of ticket sizes, language and behaviour that need to be addressed and all of which call for alternate strategies.

The smaller ticket sizes make the returns less attractive. Strategies like discounting and online advertising that typically work for a big city don’t do as well in a small town.The smaller ticket sizes make the returns less attractive. Strategies like discounting and online advertising that typically work for a big city don’t do as well in a small town.

Small town India is increasingly taking to online shopping, fuelling the growth of e-commerce. But e-retailing in these parts of the country isn’t going to take off in a big way anytime soon. Given the relatively small ticket sizes, the unit economics is less favourable. If companies want to reach out to consumers here, they need to come up with differentiated strategies. Influencers, for instance, are increasingly becoming a part of the buying process.

As Arpit Mathur, partner at Kearney, points out there are differences of ticket sizes, language and behaviour that need to be addressed and all of which call for alternate strategies.

As of now, e-retailing in these parts of the country is limited to a few key categories like apparel and electronics. From a share of 20-25%, small towns could account for a share of 30-40% of the apparel and electronics segment in about three to four years. Other categories where a bump is expected include personal care; today online sales of products in this space are almost negligible but this could go up to 15% in the next few years.

The smaller ticket sizes make the returns less attractive. Strategies like discounting and online advertising that typically work for a big city don’t do as well in a small town. “Such methods become uneconomical when you go to a tier three town and beyond as the return on investment will not be the same. A metro city consumer will spend enough money for a company to recover the customer acquisition cost,” Mathur explained.

As such, models like social commerce come into play. For instance, Flipkart recently forayed into the space with Shopsy, an app that enables small sellers across fashion, grocery and home categories to sell online. Users of Shopsy can share the product catalogue over social media and other communication apps. Nearly 70% of Flipkart’s customers come from tier two towns.

Again e-retailers are using the vernacular, voice assistance and videos, to help consumers navigate the app. “Physical retail has its limitations in terms of offering a broader product selection. Online retail provides more options. In small town India, there is a sizeable number of people who have the aspiration and the ability to purchase,” said Shyam Unnikrishnan, partner at Bain & Company.

Flipkart has already rolled out language support in more than 10 Indian languages, added video content on the app besides launching voice search and a voice assistant for grocery. Amazon’s Prime Day 2021 saw more than 70% of new member sign-ups from tier two, three and four cities.

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