India’s e-Commerce in Smaller Cities and Towns

When we think of online retail in India, we think of Amazon and Flipkart. Which is why I found this article by Manish Singh so informative:

“Flipkart and Amazon’s displacement is coming from two directions simultaneously.”

 

The first of those are the urban “instant delivery” firms. Think Blinkit, Swiggy’s Instamart and Zepto. The second one are e-commerce sites aimed at the smaller cities and towns.

“Amazon and Flipkart now find themselves squeezed between two models they cannot easily replicate because their expensive infrastructure, designed for catalogue breadth and next-day delivery, proves ill-suited for either 10-minute deliveries in dense urban areas or ultra-low-price commerce in India’s interior.”

 

I won’t spend much time on the instant delivery firms since we (in urban centers) are very familiar with their speed and convenience.

 

I will talk more on the e-commerce sites for smaller cities and towns. Meesho is what few of us have ever used (or heard). Operating in the smaller towns, its average order value is very low. The company (HQ in Bangalore) was founded to cater to those towns, and thus did not have to “adapt models designed for wealthier urban consumers” (unlike Amazon and Flipkart, which have existing models designed for richer urban centers). It “operates a zero-commission marketplace”, relying instead on “advertising, fulfilment services, and data insights offered to sellers” to make money.

“(Meesho allows) sellers to register without mandatory GST credentials. The approach complies with regulations while unlocking access for the countless small, informal businesses that form the backbone of India’s retail economy.”

80% of goods sold are regional, unbranded products, the “mainstay of local Indian markets”. It holds no inventory and owns no logistics infrastructure. How does it even work then? Its algorithms help discover items you want to buy. Or what is called its recommendation software.

“73.18% of all placed orders originated from the platform’s feeds or recommendations, not a search bar.”

Oh, that bit on not owning any logistics infrastructure? Yes, Meesho doesn’t own any of that. But it did create Valmo, its proprietary logistics platform which acts as a central point for those small sellers to find 3^rd party delivery services.

 

Being in small cities and towns, cash-on-delivery is the norm, not payment in advance. This creates challenges unique to Meesho – a larger fraction of transactions don’t get completed because the buyer inspects the item and rejects it, the headache of tracking all that cash, delays in payment to sellers etc.

 

This then is a good summary of India’s e-commerce market:

“Infrastructure optimised for one model struggles to adapt to another, and just as Amazon and Flipkart’s warehouses were poorly placed for quick commerce, established third-party logistics networks found their economics unsuited for the high-volume, low-margin demands of scaled value commerce.”

And:

“Success in India may hinge less on replicating global templates and more on mastering the country’s unique internal complexities. The infrastructure built for yesterday’s model will not serve tomorrow’s.”