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Rural market presents $10 - 12 bn opportunity for e-commerce firms

Updated: Nov 20, 2018

Internet penetration in rural India will be as high as 45% in 2021 compared to the present figure of 18%

The rural e-commerce market in India has the potential to be at $10 billion to $12 billion in the next four years on the back of increasing internet penetration, rising household income and the government’s push on digital in rural areas, said a report from market research firm EY India.

Diversified income sources from non-agricultural activities, positive agricultural outlook, a high propensity to spend, and the rising number of nuclear families in rural India are some of the other factors driving this growth.

The potential highlights a huge opportunity for e-commerce firms to tap into rural demand. The rural population contributed to $359 billion which forms 57% of the total retail market in 2017. The report, Rural e-commerce: The untapped potential ,states that the number of internet users in India using local languages is estimated to reach 536 million by 2021, exceeding internet users using English. Internet penetration in rural India will be as high as 45% in 2021, compared to the present penetration of only 18%.

This rising demand would require localization from e-commerce companies. Hence, companies need to create the right balance in their product mix comprising both value-for-money, unbranded items and branded products, which cater to the aspirations of rural customers who are price sensitive.

“Success will come for e-commerce companies that continuously innovate to engage consumers, especially users who are online but not transacting or are limited to using online channels for availing specific services. E-commerce companies will need to innovate on distributed logistics,building trust with aspirational rural consumers and providing them with

right category-product-mix,” said Ankur Pahwa, partner and national leader, e-commerce and consumer internet, EY India. “Effective use of vernacular languages and assisted commerce will help drive the large rural online opportunity for e-commerce firms looking to accelerate growth beyond the favourable industry metrics,” he said.

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