How Rural India Is An Untapped Market For Ecommerce
The Rural-Urban classification for Census 2021 classifies all areas below a minimum population of 5000 persons as rural. The common man calls them villages and India has 6.4 Lakhs of them, all adding up to a population of 83.37 Crores. Of these 6.4 Lakhs, less than 1 percent qualify as semi-urban.
According to World Bank reports, the rural population was reported at 65.53 percent in 2019, and if we go by what one has seen over the past few years, the rural population in India is only going to grow.
This is corroborated by reports that say that private expenditure on food and grocery in rural India, today, accounts for $400 Billion off the $650 billion food and grocery retail market in India. Rural markets grew 14.2 percent year-on-year in the December 2020 quarter for FMCG makers; top metros reported a 0.8 percent year-on-year growth in the same period, Nielsen said in its December quarter assessment of the sector.
One of the major drivers of this trend is the influx of internet and mobile telephony, and more recently, reverse migration of the workforce. A study by IAMAI-Nielsen 2020 says that rural users out-numbered urban areas by 10 percent, thereby eliminating the digital divide that had existed earlier. With the pandemic last year, one will not be surprised if the numbers have grown to much larger pro-portions.
As an untapped market, this is a jackpot waiting to be claimed. Brands are looking for avenues to get to the heartland, and start-ups are gearing up to fill this supply chain gap
What does this mean to us those making and selling goods? Just that consumer-ism and changing demand in the country is no longer restricted to the urban cities and towns. Those living in rural areas are as exposed to the rest of the world as those living in urban cities and towns. In 2021, Nielsen reported that the rural markets accounts for 39 percent of FMCG sales, and that it showed huge potential for growth. With consumers switching from unbranded, loose products to branded ones, demand has been consistently higher than sales over the last few quarters.
But the road to our villages is not as smooth and easy to navigate as the national highways. Despite the fact that the reach of the FMCG distribution network in India is a global case study, we are still struggling to reach a majority of the 99 percent of villages with a population of less than 5000.
These villages are usually serviced by "kirana' stores usually not more than 1 or 2 who stock up on goods from the nearest town. In most cases this will be the owner of the kirana store doing this personally, on a two-wheeler. As a result, residents are often restricted to purchasing what is available. Pre-pandemic, things were still manageable - most families either had someone living or working in cities and towns. With work from home and the fear of infection, that route too is now not as easy.
As an untapped market, this is a jackpot waiting to be claimed. Brands are looking for avenues to get to the heartland, and start-ups are gearing up to fill this supply chain gap. E-commerce players are expanding their reach with the help of local logistics players. And start-ups like VilCart are revolutionizing rural ecommerce with solutions like last mile connectivity, local language apps for consumers and retailers, credit management, digital payments. Large brands like ITC, Britannia, Wipro, as well as local brands like Goodlife, Godesi are already making headway into the villages with these start-ups.
It will not be long before consumption in India breaks all barriers and divides and maybe, with it we will see more families staying together, more parental homes with the younger family members living with them.