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Small towns, big e-markets

business Updated: Apr 24, 2011 22:35 IST
Anita Sharan
Anita Sharan
Hindustan Times
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A fast-growing breed of e-commerce entities spanning travel, fashion, consumer products and consumer services is swearing by small-town India — tiers II and III towns — that is showing strong demand as aspirations surpass availability and disposable incomes get heftier.

Deals are the sweeteners that most e-commerce entities are riding on. Online companies are creating varied models of access and delivery to match typical Indian requirements — such as payment on delivery.

The biggest e-commerce success, spurred in no small measure by small-town India, is travel. According to an IAMAI-IMRB report, online travel is worth around Rs 25,258 crore and expected to cross Rs 37,890 crore by December. This is followed by e-tailing (consumer products) at Rs 2,050 crore currently and projected to close calendar 2011 at Rs 2,700 crore.

When major brands — Coffee Day, Pizza Hut, Reebok, etc — get onto the e-commerce wagon, you know the idea has begun to deliver.

Fashion too is finding big takers in small-town India. Pearl Uppal, co-founder and CEO, fashionandyou.com, said e-commerce models work when they ride on two drivers: access and pricing. “Women’s aspirations in metros and small-town India are similar, but due to fashion access being limited in small towns, online buying options become attractive — 35-40% of our sales are from small-town India.”

Fashion and You has signed over 100 designers for its apparel offerings, has 1.2 million members and people across 300 towns are buying designer wear through it. It also offers accessories, footwear, jewellery, watches, etc. Everyday, at 11 am, new sales go live, with discounts at 20-70%.

Travel is the biggest winner on e-commerce, even out of small-town India. Deep Kalra, chairman and CEO, MakeMyTrip, said small-town India is bringing in serious business. “Deals are a catalyst,” he said. “They become big decision-pushers . Indians aren’t great holiday planners. They don’t plan much in advance. So good deals when a holiday opportunity shows up work well.” He said that for charter packages, MakeMyTrip offers deals that are 20-30% cheaper than if consumers were to put the package together themselves.

A variation to MakeMyTrip is vamoose.com. Launched in January, it is a travel site of the more established TravelMartIndia.com. Vamoose is, it says, India’s first group-buying travel, leisure and vacation web portal. Manoj Gursahani, MD, Vamoose (also chairman, TravelMartIndia), said: “We offer 10-15% better deals than any other online travel service in India. In two years’ time, I expect Vamoose to contribute 50% of the whole business’ revenues. We have more than 20,000 registered users and are seeing a lot of buying from tiers II and III towns.”

Gursahani went for Vamoose in addition to TravelMartIndia because he saw the opportunity beyond big-city India. Precisely the reason why the three-year-old TV home shopping entity Homeshop18 also launched its online avatar recently.

Sandeep Malhotra, founder and CEO, Homeshop18, said: “We launched our online e-commerce site for two reasons. First, it brings in a new generation — the younger age group — and profile of consumers. Second, the site is the catalogue for our TV entity. On TV, you can showcase one product at a time, while online, there is no limit.” He said small-town India is already contributing around 30% to sales online and he expected this to grow with the expansion of internet access.

In competition with the likes of Homeshop18 and local retailers is Naaptol.com, which offers products ranging across mobile phones, laptops, toys, apparel, footwear and small appliances. Discounts can touch 50%. “We ship out Rs 1.5 crore worth of packages a day and our revenue is Rs 5 crore a month. We expect to close fiscal 2011 at Rs 120-150 crore in commission revenues. While 55-60% of our revenues come from metro and tier I India, 25% comes from towns with airports and the remaining from even smaller towns,” said Manu Agarwal, founder and CEO, Naaptol.
Snapdeal.com is rattling through towns such as Coimbatore, Lucknow, Nashik, Erode, Jabalpur and Indore in its expansion across India to touch 50 cities and towns by May-end. “We combine aspirational access with 50-90% discounts,” said Snapdeal founder Kunal Bahl.

While Snapdeal is a bulk buying site, Bahl said it has concentrated on “liquidation of perishable inventory in products and services, including airlines, restaurants and consumer products lying in inventory. We enable merchants to make money on inventory, while we provide consumers with excellent deals. For example, Snapdeal sold 2,000 pieces of Reebok sunglasses in a day recently, at a 70% discount.

Looks like there’s nothing the consumer won’t buy if the price is right. As Malhotra pointed out: “The customer is no different in Delhi or Dibrugarh. However, the pressure on money, on spending, is higher in Delhi since more options exist. In Dibrugarh, the pressure on money is lower and the consumer makes quicker decisions.”