Ecomm Biggies Setting up Homes Along Country Roads

Amazon piloting a small town, rural distribution model in Tumkur; Flipkart did a similar experiment last year to sell Motorola phones
In Tumkur, an industrial town 70 km northwest of Bengaluru, the world’s biggest ecommerce firm Amazon is seeing exciting growth, thanks to a month-old pilot. A dedicated `rural’ ecommerce distribution centre manned by local youth in Tumkur has now crunched the delivery time from over a week to 2-3 days.Doddaiah, 22, native of the nearby Koratagere village, rides on his Honda motorcycle every day , and is himself amazed to see the growth. “Unlike big cities where ecommerce delivery guys spend hours on the road carrying heavy packages, life is much more simple here -I can deliver 12 packages in a couple of hours,“ he said.

Not just Doddaiah, even companies such as Amazon and Flipkart are seeing smaller towns emerge as the big opportunity .

Started last month with an average of 10 packages daily , Amazon now ships around 150 packages in and around Tumkur. Other tier-II towns such as Davangere and Hosur in Tamil Nadu too are part of the pilot. Rival Flipkart is in hot pursuit. Last year, it piloted a plan to sell Motorola phones to rural consumers by setting up local networks of entrepreneurs who marketed the product, placed orders with Flipkart and delivered the item to the buyer. Mohan Kumar, who had ordered an HTC smartphone worth ` . 14,969 on Monday , was pleasantly surprised to get delivery of the product the very next day .

“It’s really fast now; my daughter will be thrilled,“ he said, receiving the shipment from Doddaiah.The phone was shipped from Amazon’s Hosakote warehouse located on the outskirts of Bengaluru city the same day it was ordered online.This was made possible by the local distribution centre in Tumkur.

“We are trying to create a rural urban bridge,“ said Madan Padaki, the founder of Head Held High, a skills development and employment company which runs these centres in smaller towns and rural India for various ecommerce companies. “These centres will provide distribution, customer acquisition, lead generation and sales as a service to ecommerce companies,“ said Padaki.

The demand from small towns and rural India can no longer be ignored as growing smartphone penetration and aspiration levels lead to a surge in online buying.Amazon, for instance, gets more than 50% of its orders from beyond the top eight metros. In Sira in Tumkur district, Padaki found that out of 224 people surveyed, 57% accessed internet on their smartphones -like Mohan Kumar, the HTC customer -but only 4% had used it for ecommerce, quite unlike Kumar.“That’s a huge opportunity . Essentially , you have people with internet on the phone. The next logical thing is to use it for commerce,“ said Padaki. For Indian ecommerce companies locked in a battle for supremacy , the battle for the rural consumer has just begun.

While the urban population has been growing rapidly , nearly 70% of India still lives in rural areas.Spending growth in rural India outpaced urban spending in 2012 for the first time, according to data from the National Sample Survey Organisation. Between the fiscal year 2010 and 2012, spending by rural India was Rs 3.75 lakh crore, or nearly 20% higher than in urban areas.

Retailing in rural India, however, has its own challenges. For instance, Hariyali Kisaan Bazaar, the retail arm of DCM Shriram Consolidated, had to restrict sales only to fuels in 2013 due to unpredictability of demand and losses.

“Now companies only have very loose control over the seller distribution system in rural areas.So they will have to set up completely new models of distribut ing,“ said Siddharth Singh, associate professor at Indian School of Business. “The time-lag in the current distribution systems are too big,“ he said.

While Amazon has tied up with India Post to service 19,000 pincodes, Flipkart has been beefing up its delivery staff in over 1,000 cities. Flipkart has also been tweaking its mobile app to work under poor network conditions.

“Going forward, we foresee smaller towns becoming key participants in online shopping as people in general are getting comfortable with the concept,“ said Ankit Nagori, chief business officer of Flipkart.

Many of the new sellers on ecommerce platforms are also expected to be from small towns. “Today , close to 35-40% of our sellers are from smaller cities and areas,“ said Nagori. The company currently has 30,000 sellers and wants to add nearly 1 lakh sellers by the end of 2015. It is also planning to launch training programs in towns including Erode, Salem, Baddi and Kurnool. “Nearly 50 of our cataloguing and packaging partners are scaling up their business in smaller towns to support sellers in villages and taluks,“ said Nagori. There are challenges of course, especially in terms of retaining trained manpower. “For many , Bengaluru is dangerously close -the charm of big city , high rewards too tempting,“ said Siddha, a delivery boy .

Source: The Economic Times
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Author:

Neeraj; an entrepreneur & a visionary in the field of Railway, Defense & Automobiles, is a graduate in commerce and a Harvard Business School Alumni. He’s an expert in govt. liasoning & contracting and has an exceptional network & connections at both local as well as global level. He’s an expert in Market Strategy & Planning and has served number of overseas companies as an advisor/consultant. He takes a profound interest in upcoming startups & is very receptive towards ground-breaking ideas & innovations. He likes to brainstorm those ideas and if the values & philosophies matches; he is even ready to invest his resources, serve as a mentor or act as an incubator to futuristic businesses.

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