DAIKIN

How To Make Rural E-Commerce Work

The untapped potential of rural e-commerce is getting clearer with the level of digital adoption we’re seeing; the next wave of internet users that are coming online are in rural areas from the current 18 percent penetration in rural areas, it is expected that, by 2021, internet penetration will be as high as 45 percent. These enablers will mean a much higher CAGR for rural e-commerce than urban, and it is estimated that this market is likely to be a USD 10-12 billion opportunity in the next 4 years.

While the anticipation of what can be basis the enabling trends and improved macro trends for this segment is encouraging, the factors that can enable effective penetration and success would be driven by the following:
Mobile-first vernacular adoption will drive greater reach and engagement: As much as 88 percent of the Indian population is non-English speaking and, therefore, the availability of regional language content is a critical factor in increasing internet acceptance in rural India. It is anticipated that 85-90 percent of the 300-million-plus new internet users that will get added by 2021 will be local language users. Customizing applications to interact with rural customers in their own vernacular language across different touch-points such as mobile apps, service and call centres is crucial for establishing trust and encouraging customers to transact online. Likely innovation around use of conversational intelligent platforms in regional languages and voice-to-text adoption will also fundamentally help engage this customer base.

Logistics and distribution effectiveness: To serve this market, companies will need to adopt asset light models that leverage existing infrastructure and assets that will not only lower costs but also de-risk asset ownership and investments. India Post has been leveraged by some players, given the cost and coverage it has, and is an effective way to reach the last mile in rural areas. Distributed logistics including using a pool of local people to be used as delivery agents is also an effective access and cost management strategy. Effective supply chain planning including multiple procurement points, especially for unbranded products closer to distribution areas, helps to address cost of logistics. In the near future, we will see alternate delivery models such as use of crowdsourcing platforms to connect business to non-professional couriers who can deliver goods instantly. This “urbanization” model likely suits rural markets, which lack logistics network.

Assisted commerce: While mobile-first is a good strategy, given the proliferation of smartphones in rural areas, it cannot be the only strategy to serve rural markets where lack of trust and knowledge are the biggest challenges for transacting online. Some players are already reaching rural markets and there is existence of a large demand in categories like consumer electronics and appliances. An appropriate Omni-channel strategy would be required depending upon the product categories to serve this market. It is not feasible for all companies to open physical stores in rural India due to high capital requirements and sparsely populated geographies. Generating orders though use of digital catalogues and samples and fulfilling orders through kirana stores, cooperative banks, Telco offices, etc, could serve as enablers for assisted commerce in these markets. Also, the offline-to-online model would help alleviate some challenges faced by rural customers, such as low digital literacy and lack of trust on the digital platform.

Micro market relevant product curation: Product curation specific to rural markets is vital. Since rural customers have lower disposable incomes, price point plays a major role in the decision to buy a product. The rural demand differs based on location and, hence, serving varied rural customers through the same catalogue is not an effective strategy. Maintaining the right mix between unbranded products, which offer high margins and low ASP, and branded products, which cater to the aspirations of rural customers, is critical. Players need to run continuous analytics and curate a product catalogue based on their past buying behavior. This will help alleviate customer experience for rural people by creating the right category product mix and address the issue of poor internet connectivity by displaying limited items on the applications that can load easily.

Effective use of the right technology: Technology will be an important lever in serving this market but it’s important to keep the digital literacy of the segment in mind before deploying and using technology. While AI, AR/VR are is being used to reasonable effect by some players in urban areas, the proliferation of the same to rural areas will take some time; similarly, while use of drones has worked effectively in some countries, this specific market segment requires more time for adoption, notwithstanding the operational challenges of lack of digital addresses. Technology that provides operational effectiveness (data analytics, buying aids, recommendations) or build trust and transparency (block chain, IoT, payments) are the ones that require more attention in the short term.

E-commerce players are piloting different strategies to reach rural consumers as the opportunity to grow along with aspirational India is huge. However, success will come for the companies that continuously innovate to engage consumers, especially the non-transacting and service transacting users. — The Financial Express

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