Think e-commerce and the first thing that comes to mind is convenience, discounts, and of course a number of websites. But what escapes the mind is the crucial service that this kind of platform is providing to the nation. It serves as a social bridge connecting rural India with urban India. Like a thread, it ties the digital divide in the country.
Vineet Pandey, chief general manager, business development, department of posts, explains this phenomenon. “The Digital India initiative and internet boom have bridged the digital divide. Riding on this wave, e-commerce is bridging the rural-urban divide. Availability of products at the doorstep is tremendously changing the landscape, especially in cases of women and childcare products.” Products which were earlier restricted to only metro cities have now become easily available for the rural masses.
Sharing a small incident, he recalls, “Our minister [communications and IT minister Ravi Shankar Prasad] once visited a branch office in Hapur. A girl was waiting for a parcel delivery there. The minister asked, ‘What have you ordered?’ The girl replied, jewellery.” This shows the change in the mindset of people in the tier II and III cities. The suspicion that online products could be fake and unreliable is slowly fading. “A girl from the hinterlands is now ready to trust that the jewellery which she has ordered is authentic,” adds Pandey.
Acting as a social connector, the e-commerce boom in India is growing at a faster pace in the tier II and III cities than the urban and metro areas. There is a huge demand for clothes, mobile phones, electronic gadgets, and competitive books from these areas. As per PHD Chamber of Commerce and Industry, roughly 50-60 percent of the total e-commerce business comes from these areas.
In fact, in 2016, the gross value of Indian e-commerce business crossed '4,000 crore till March. And roughly 17 percent of the growth was due to the involvement of the middle class.
Aruna Sharma, secretary, department of electronics and information technology (DeitY), feels that today various government programmes are also helping in promoting rural e-commerce. “As infrastructure is being built under Digital India – BharatNet, Aadhaar, common service centres (CSCs),” she says, adding that it is being envisaged to develop them for promoting rural e-commerce.
But what are the factors that are contributing to the growth of this industry in the hinterlands?
India Post shows the way
It is one of the key players responsible for establishing e-commerce in rural areas. Currently partnering with over 900 e-commerce players, India Post is one of the most successful e-commerce facilitators in the country.
The institution’s reach in the remotest corners of India has helped it become a brand name, especially in rural e-commerce. It has access to more than 19,000 pincode areas across the country, which also serves as delivery points. Each pincode is connected to a post office, which is known as the last-mile departmental delivery post office. This is further mapped to a rural post office, also known as branch office or gramin dak sewa.
“This branch office can be a single-handed branch where the postmaster is both the carrier and the delivery man. So every place is mapped and there is no location where a product cannot reach,” explains Pandey.
With an average of 40,000 parcels being circulated on a monthly basis, the department transports various goods and packages across the country. “In our last independent survey, conducted a few years ago, India Post was first in terms of handling parcel traffic and second in terms of parcel volume/quantity,” says Pandey.
He points out that the USP of the department is its reach or accessibility to the remote areas. “This facilitates both the department and the government in reaching out to several far-off areas including some in Karnataka and Kerala,” adds Pandey.
India Post has also partnered with many private e-commerce players, especially for providing logistic services. Amazon is one of them. Samir Kumar, VP, category management, Amazon India, says, “We have partnered with India Post. It is one of the prime carriers that Amazon India uses as a delivery channel. Through India Post’s extensive network, we are able to service all the serviceable pincodes through 1,40,000 post offices across all 35 states and union territories in India.”
Involving rural folk
Along with the postal department, the government has also pushed the growth of e-commerce by using common service centres (CSCs) as delivery points. Dinesh Tyagi, CEO, CSC-SPV, says that through the CSCs, the government is including village level entrepreneurs (VLEs) in e-commerce in several ways. In the first method, the VLE can buy the product from any e-commerce site either for himself or facilitate the purchase for others. The order is then integrated with the CSC’s system and the goods are delivered.
In the second method, a VLE can set up his own e-commerce platform to help the local population. This kind of platform will facilitate sale and purchase of local goods in local areas only. “This kind of model can be seen in Andhra Pradesh,” says Tyagi.
CSCs are also involved with many government e-commerce websites like ekisan.com and pumpkart.com. Besides this, adds Tyagi, there is an attempt, on a pilot basis, to source local goods and supply them all over the country through e-commerce websites.
Explaining how CSCs are involved in multiple stages of the e-commerce process, Kamal Kakkar, a consultant with CSC-SPV, says, “We are taking orders and getting the goods delivered at various CSCs as their location is known via GPS. The CSCs then deliver the goods to customers as they are in the same locality.” In this way a CSC acts like a delivery point and delivery person.
Steps are also being taken to integrate various e-commerce companies with the CSCs. This helps companies like Amazon in achieving their last-mile delivery goals. The CSCs not only act as the last-mile delivery centres for these companies but also provide warehouse facilities, whereby the companies can store their goods at the centre for future delivery.
The CSCs also organise VLE bazaars that helps many unknown artisans to sell their handicrafts. “We are engaging VLEs as agents to aggregate these artisans to come to this platform. We are making them comfortable so that they can come and sell through the CSC network,” explains Tyagi.
“We have done several workshops with Snapdeal for aggregating these artisans. We have signed an agreement with Flipkart for seller aggregation and assisted selling through this platform. We have tied up with ShopClues to sell their products across India through CSCs,” adds Tyagi.
CSCs in return receive several benefits and incentives for carrying out their work. “For every product they sell and buy from ShopClues, they get two percent,” informs Kakkar.
A system of CSC wallet is also in place to help the customers who are not able to pay online. Here the government can take cash from the customers who cannot pay online and top up their CSC wallets.
Though on one hand CSCs have contributed a lot to the growth of e-commerce, they themselves have reaped benefits too. Dr Ajay Kumar, additional secretary, DeitY, says, “I am aware that a lot of CSCs are doing handsome business through e-commerce.” Giving examples of a few CSCs, he says, “Some are earning a monthly revenue of '50,000 through e-commerce.”
A VLE, in Manipur, recently bought a bicycle from the profits he earned from the e-commerce business, informs Dinesh Tyagi.
The private touch
The three big players of e-commerce in India – Amazon, Snapdeal and Flipkart – are targeting rural and semi-urban areas as a lucrative market. Samir Kumar of Amazon India confirms this fact when he says, “When we started our operations in India, we saw a very healthy traction and demand coming from tier II and III cities. Currently, over 65 percent of traffic comes from these markets. In fact, on Diwali last year, we saw 30 percent traffic coming in from tier-III-and-below geographies.”
But it is not an easy task for private players to tap the rural markets. For instance, Amazon had to put together a vast delivery network in the country to enable fast and reliable delivery in far-off corners. “We expanded the Amazon logistics footprint by three times in addition to having launched several new initiatives to improve coverage; like the service partner programme that uses the local distribution network provider to reach remote villages and set up rural distribution centres. In addition to the Amazon pickup points (which were scaled up considerably in 2015), we have built a thriving ecosystem of over 7,000 pickup points across India with a majority being in tier II and III towns,” explains Kumar.
The company has launched Project Udaan that makes e-commerce not only a means of employment but also a route for skill development. Udaan integrates skill development and self-employment with assisted shopping, thus enabling the ‘digitally underserved’ to benefit from the emerging digital commerce opportunity.
“We started piloting Udaan in June 2015 in Erode in Tamil Nadu. Today it has spread to other states including Maharashtra and Rajasthan. At present, we are working with three key partners including Vakrangee, Smart Buy and Rajasthan government’s RajCOMP Info Services Ltd. (RISL) that operates and manages 35,000 + e-mitra stores across the state,” says Kumar.
Cash on delivery
One of the main reasons for the success of e-commerce in the tier II and III cities has been the concept of cash on delivery (COD). In the Indian context, trust has been a major factor and COD has helped a lot here. “COD is a modern version of our product value payable parcel (VPP). Once the product was delivered, whatever was the price was delivered back to the seller. COD is especially significant in the tier II and III cities because the payment systems still have to evolve there,” says Pandey.
COD is a very important aspect of the e-commerce sector. By February 2016, the total value of COD products with India Post had crossed '1,300 crore, says Pandey. The fact that this figure was only '500 crore in 2014-15 indicates an element of trust. In the case of tier II and III cities, the postman literally becomes a moving e-KYC, authenticating the receivers’ identity, he adds.
The concept of COD has also helped private players in boosting their sales. “There is still a large section of population that is hesitant about making purchases online. Amazon has launched all modes of payments including cash on delivery since its launch in June 2013. We were the first e-commerce player to pilot deliveries with India Post for COD back in 2013,” says Kumar.
As more and more people from tier II and III cities trust the virtual world, the digital gap is slowly filling in. And as e-commerce continues to boom, and both a resident of Delhi and that of Hoshiarpur order the same mobile phone, the gap between the rural and the urban reduces. n
(The article appears in June 16-30, 2016 edition of Governance Now)