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E-Commerce Companies See Business Growth in Smaller Cities

By SiliconIndia   |   Thursday, March 22, 2012
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Bangalore: With rising Internet penetration and adoption of mobile devices across the country, companies selling products and services through websites are looking at smaller cities for expanding business.

"Non-metros play a vital role in the growth of e-commerce segment in the country primarily due to ease of purchase...The convenience of shopping online and access to the best international brands is driving this growth among non-metro markets," says Mukesh Bansal, Founder and CEO, Myntra.com, an online shopping portal.

According to eBay Census 2011, a study on the Indian e-commerce landscape released last year, as many as 3,311 Indian cities shopped online between July 1, 2010, and June 30, 2011. Of this, over 1,267 were non-metro cities.

"Metros have a dominant share of purchases, with Tier 2 and 3 cities catching up fast. Metros contributed 51 per cent of all e-commerce transactions, while Tier 2 and 3 cities contributed about 40 per cent and rural India 9 per cent," the survey said.

While consumers in the metros buy products and services mainly because of convenience, those in the non-metros buy due to non-availability of products.

Big brands don't find it viable to open shop in small towns and e-commerce is the perfect route to deliver their products to those whose can afford from non-metros, it said.

Echoing similar view, Siddharth Puri, Senior Marketing Manager Fetise.com, an online shopping community for Men said, "Fetise get 500-700 orders a day on an average of which about 150-220 are from the non-metros."

Online shopping portals expect the number of orders coming in from these areas to go up further helped by rising Internet penetration, growing purchasing power and adoption of mobile devices.

"Use of mobile Internet and smart phones has definitely given a push to this sector as the access is available to the consumers on their fingertips," Puri said.

According to a Google report, over 70 per cent of search happened in non-metros and over all 50 million people logged on to the Internet from mobile phones in 2011.

Valyoo Technologies, which runs three e-commerce site - Lenskart.com, Bagskart.com and Watchkart.com, online shoe store Fashos.com and consumer durables selling website Greendust.com get around 50, 70 and 28 per cent of their business from non-metro cities respectively and have plans to scale their business in these area.

However, logistics in non-metro cities and towns is an area of challenge for these companies and a major differentiating factor vis-a-vis the metro cities.

"The market size of online stores in India is about over Rs 2,000 crore and is expected to grow to about Rs 7,000 crore by 2015. The only challenge for an e-commerce organisation is logistics; last-mile-delivery and consumers still being hesitant to use debit or credit cards online" Puri said.

E-commerce firms still expect their business to boom once broadband connectivity across country as planned under National Broadband Plan is delivered and ecosystem for broadband on mobile is developed.

"Broadband connectivity is still a major hurdle for adoption of e-Commerce. Once we figure out foolproof mobile shopping and payment system,I believe more people will use it for shopping than laptops or desktops." Tradus.in MD Krishna Motukuri said.

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