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Online shopping portals target Bharat for scale

Last week, Vibhu Agarwal, founder and chief executive officer of streaming service Ullu and TV channel Atrangii, announced the launch of his e-commerce venture Ullu 99, a platform for affordable fashion, footwear, cosmetics, and costume jewelry. Agarwal said the shopping site is for the country’s “janta” (public) looking for small-ticket purchases. His adult content app Ullu is a known brand sitting on sizeable consumer data based on 92 million downloads. This, and the future potential of online commerce in small-town India, prompted the launch of Ullu 99, Agarwal said.

Suddenly, several e-commerce and social commerce platforms are targeting Bharat, or the other India, that does not live in the big metros. DealShare, the startup selling groceries and essentials, targets Bharat’s low- and middle-income households in tier-II,-III and -IV towns. Snapdeal, too, pivoted in 2018 to address the value segment focusing on home, fashion beauty and personal care, addressing the middle-income, price-conscious buyers residing predominantly in smaller cities.

“As the metro-centric segments—relatively prosperous and early adopters of e-commerce—saturate, the growth in the next few years is going to be driven by the affordable segment, largely residing in Bharat,” said Himanshu Chakrawarti, president of Snapdeal Ltd. That the next 200 million new e-commerce customers are likely to be from Bharat explains the enthusiasm for most online businesses to target this growth opportunity, he added.

A RedSeer report estimates online shoppers to grow from 150 million in FY21 to 350 million in FY26. The mid-income buyers will account for 73% of online shoppers by FY26 and will drive the growth of value e-commerce, it said.

A May study by Nielsen, Bharat 2.0, pointed to a 45% growth in active internet users in rural India since 2019. At 352 million, rural India had more internet users than urban India, although 60% of the rural population is still not actively using the internet, leaving ample headroom for growth, it said. Online shopping is still dominated by urban India, it added.

Bharat gives scale to any e-commerce model as it helps to spread the cost over a larger base, explained Anand Ramanathan, partner, Deloitte India. The three major costs are customer acquisition, logistics and people. As you go deeper into Bharat, it gives better returns on customer acquisition spending, the logistics costs are incremental, and procurement costs improve as you have a wider base,” Ramanathan said.

For some, all towns below tier II constitute Bharat. Others find Bharat in low-income, price-sensitive groups in large cities. Some define rural India as Bharat. “But ultimately, Bharat is where you get when you’re focusing on becoming a mass business,” Ramanathan said.

Chakrawarti said the consumers in this market are very sensitive to pricing, but they desire good quality products. “This segment is not as brand obsessed as its metro counterpart and is willing to give a chance to new labels/brands promising quality and affordability,” he said.

This market is underserved and allows multiple players to operate and gain traction. No one is really creating products for Bharat consumers, said Ramanathan. “I think there’s a mass scale opportunity here. It’s happened in financial services with banking products focused on Bharat. But I have not seen it in consumer internet businesses,” he added.

But the market is not without its challenges, the foremost being Return on Customer being low as the volume per customer is lower than in the metros as they are still getting exposed to newer ways of retailing. They’re not very mature in terms of consumption leading to more returns because of an expectation mismatch between what they perceive on the site vis a vis what gets delivered, Ramanathan said.

Besides, they are still getting to know the fin-tech products and ecosystem, which has been one of the biggest drivers of growth in e-commerce. “These consumers do not like to lock in their working capital and put it into an account. They like to own their spending power,” Ramanathan said.

Snapdeal, however, believes that sharp unit economics will play a vital role in addressing this market. It will require transparent pricing (without hidden charges) and an easy to use interface both for ordering and for customer service. “The role of vernacular, voice and video will become increasingly important,” Chakrawarti said.

Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff.

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