The rural e-commerce market in India has the potential to be at $10-$12 billion in the next four years on the back of increasing internet penetration, rising household income and the government’s push on digital in rural areas, a report titled “Rural e-commerce: The Untapped Potential” released by audit and consultancy firm Ernst & Young (EY) has said.
According to the report, diversified income sources from non-agricultural activities, positive agricultural outlook, a high propensity to spend, and the rising number of nuclear families in rural India are some of the other factors driving this growth.
The potential highlights a huge opportunity for e-commerce firms to tap into rural demand. The rural population contributed to $359 billion which forms 57% of the total retail market in 2017.
The report further states that the number of internet users in India using local languages is estimated to reach 536 million by 2021, exceeding internet users using English. Internet penetration in rural India will be as high as 45% in 2021, compared to the present penetration of only 18%.
To recall, last year the Indian subcontinent had stood at 36th rank, globally, when it comes to internet inclusion based on factors such as availability, affordability, relevance and readiness.
The growing internet penetration can be attributed to several government nd private firms working to make the internet available to remotest of villages in India such as Reliance Jio, which has cut down the cost of mobile internet to considerable cheaper prices. REcently, Indian space agency, Indian Space Research Organisation (ISRO), had also announced that it will launch three communication satellites to provide high-speed bandwidth connectivity to rural areas as part of the government’s Digital India programme.
Coming back to EY report, it added that the demand in rural India is geography specific and would require localization from e-commerce companies. Hence, companies need to create the right balance in their product mix comprising both value-for-money, unbranded items and branded products, which cater to the aspirations of rural customers who are price sensitive.
“Success will come for e-commerce companies that continuously innovate to engage consumers, especially users who are online but not transacting or are limited to using online channels for availing specific services. E-commerce companies will need to innovate on distributed logistics, building trust with aspirational rural consumers and providing them with right category-product-mix,” said Ankur Pahwa, partner and national leader, e-commerce and consumer internet, EY India.
“Effective use of vernacular languages and assisted commerce will help drive the large rural online opportunity for e-commerce firms looking to accelerate growth beyond the favourable industry metrics,” he said.
A 2018 report by IAMAI and Kantar IMRB said that 205 million new internet users would come online if content is available in Indian languages, which will be key motivation of using internet for people who are not using it.
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