Amazon's Rural Udaan
How the ecommerce giant is
going deeper into the hinterland with a gambit it hasn't used anywhere else in
the world -a unique offline-online blend
Till last month, Mohammed
Naved was lead ing a contented life. The 20-year-old was making the most of
what any college student would crave for: his under `5,000 smartphone was
working well, a slew of apps like WhatsApp and Facebook was keeping him
engrossed, and an internet speed of 8 megabits per second (Mbps) was nothing to
complain about.
By early September, there
were better things on the village horizon. Naved bought a costlier Redmi 4G
VoLTE smartphone, took a Jio connection because he wanted 14 Mbps internet
speed, subscribed to video-on demand Voot to watch movies, and downloaded the
Amazon app for deals and offers.
“I wanted a phone with a
fingerprint sensor,“ says Naved, explaining his move to dump his old phone.
“This phone is also good for selfies,“ he adds, flaunting his dual-camera phone
that he bought from Amazon through a Vakrangee out let in his village. “If
anything goes wrong with my phone, I won't let him (the shopkeeper) run the
store,“ laughs Naved, who travels 15 km every day to attend his college in
Bijnor.
Saifar, who runs the
Vakrangee store, is not bothered. “I will return it on Amazon,“ he grins. Umri,
a village in Bijnor district of Uttar Pradesh, is just one manifestation of
change in the way rural India shops. No, they are not gravitating towards
online, harbouring a healthy lack of faith in etailers. They are perhaps more
comfortable with storekeepers like Saifar, who handholds villagers by assisting
them to buy from Amazon from his laptop and gets the products delivered at the
store from where they are picked up. “Cash-on delivery is a potent way to build
trust,“ he says. Amazon, he lets on, has understood the psyche and is helping
villagers shop online.
Started in May 2015, Amazon
rolled out Project Udaan to expand its reach in rural and semi-urban areas by
tying up with offline partners such as kirana, medical stores and mobile
shopping outlets so that local entrepreneurs could assist the uninitiated in shopping
online. What started with just two partners, including business correspondent
Vakrangee, which also acts as a last-mile link to villages, and 15 stores
across two locations in Maharashtra and Rajasthan has now penetrated deeper
into the hinterland. (A business correspondent is authorised to collect small
deposits and extend credit on behalf of banks.)
Wooing the Village
Udaan now boasts 18
partners, 6,000 stores, delivery in 1,700 pin codes across 650 locations in 21
states and union territories. The target for next month, before Diwali, is to
scale up to 10,000 stores. The results are beginning to show: some 75% of new
customers for Amazon come from tier III cities and smaller towns and villages. That
share can only grow once Amazon rolls out one-of-its-kind exclusive outlets
with assisted ecommerce platform StoreKing in rural Karnataka. (Tier-II, -III
and -IV comprise semi-urban centres, and tier-V and -VI rural centres.) Through
Project Udaan, reckons Amit Agarwal, country head of Amazon India, the etailer
has extended its geographic reach to the hinterland. “Udaan is not just an
assisted shopping initiative. It is much beyond that,“ says Agarwal, who was
elevated to the rank of senior vice-president at Amazon.com earlier this year. Udaan,
he adds, is as much about providing digital access, opening self-employment
opportunities and encouraging entrepreneurship as it is about transforming the
buying experience for everyone irrespective of age, gender, location and
socioeconomic stature. “It is about levelling the playing field for everyone.
Udaan is playing a key role in our effort to make Amazon accessible within a
few minutes to everyone,“ says Agarwal, adding that the American ecommerce
giant's vision in India is to transform the way the country buys and sells. This
transformation, asserts Agarwal, will be impactful only by cutting across the
rural-urban divide.
It's not hard to figure out
why Amazon is betting big on its unique offline-online blend. Rural users will
constitute about half of all internet users in India by 2020. Cheaper mobile
handsets, spread of wireless data networks, and evolving consumer behaviour and
preferences will drive rural penetration, said Boston Consulting Group (BCG) in
a report titled, “The Rising Connected Consumer in Rural India“, which was
released in August last year.
The study said connected
rural consumers would increase from about 120 million in 2015 to almost 315
million in five years. Rural growth will significantly outpace growth in urban
centres and, by 2020, rural users will make up 48% of all connected consumers
in India, BCG highlighted in the report. While most of the focus has been on
urban users, much of the action will be in rural areas -home to some 870
million people -for the rest of the decade, the study asserted.
Sridhar Gundaiah, founder
of assisted ecommerce platform StoreKing, doesn't have an iota of doubt about
where the action lies: Bharat. “Rural India is a goldmine waiting to be
tapped,“ he says.
StoreKing, one of the 18
partners that Amazon has tied up with, works with 44,000 retailers in 2,300
towns and 1.4 lakh villages in 10 states. Last month StoreKing rolled out
exclusive Amazon outlets in tier-IV and -V towns in Karnataka. “The location of
these outlets are such that it serves all the bordering villages,“ he says,
adding that such stores can now be a pick-up point for all Amazon orders,
assisted order placement for customers and easy collection of cash.
Every exclusive store has
been equipped with a trial room for the “try and buy“ experience. “Building
trust among rural users takes time,“ says Gundaiah, stressing the reasons that
keep users in the hinterland away from online shopping: fear of getting
scammed, lack of knowledge in accessing apps, and challenges in payments and
logistics. The rural Indian's sceptical mindset, he lets on, yearns for that
“physical touch“ of products. “Bharat is at the cusp of online shopping
explosion,“ adds Gundaiah.
Kishore Thota, director of
customer experience and consumer marketing at Amazon India, has been doing his
bit to reduce the rural barrier so that more shoppers can come on board. “More
than 7 of every 10 new customers on Amazon are not from the metros but from
tier-II and below towns,“ he claims.
Udaan, maintains Thota, helps
in roping in those segments of users that don't trust or have a comfort level
in directly assessing Amazon during the initial phases. Working with local
businesses that already have an established trusted relationship with such
users helps in achieving the objective. “We have expanded 3x this
festive season compared with last year,“ says Thota, declining to share the
units sold per store.
Add Small Town to the Cart
The ecommerce giant has
also been rolling out a slew of programmes to reach out to sellers from the
hinterland and smaller towns. Take, for instance, Seller Cafe. An on-ground
support channel, sellers can walk into cafes, set up Amazon seller accounts and
receive basic guidance. While the company opened 24 cafes last September, it
plans to set up 45 more this festive season, with focus on smaller towns. Thota
says it is time we did away with the stereotypes about aspirations and
purchasing power of rural India and smaller towns. “The smaller towns and hinterland
are as aspirational as urban India,“ he says, pointing out that demand for
premium brands such as Under Armour, Michael Kors and Tissot have increased by
about 6x from almost nothing in smaller regions of India. Ladapura village in
Bijnor bears testimony to what Thota claims. Rajat Sharma, 25,
wanted a pair of Adidas shoes. The village didn't have any store and the shoes
were not available in the city as well. “My friend recently bought a pair
online,“ says Sharma, who finally shopped from Amazon through one of the
Vakrangee stores rather than from the app in his own smartphone. “It's
convenient to return to the store if the size is not right,“ he smiles.
Amazon is not alone among
etailers wooing rural users, and marketing experts reckon that Bharat will
determine the winners. Ecommerce players, maintains marketing expert Jessie
Paul, are doing what the Unilevers and Pepsis of the world have done in India:
going deeper into rural India to reach out to the bottom of the pyramid.
Unilever or Pepsi, she contends, sought to cover not just all the metros but
even villages without a road, because they are scale players who operate on
large volumes and slim margins.
“India and Bharat reward
players who can survive on tiny margins and scale,“ says Paul. The strategy
makes sense for those willing to make `1 per transaction on a billion
transactions. As aggregators, it's not easy for online marketplaces to have fat
margins in a hyper-competitive space. While Amazon is working hard on gaining
mindshare at the mass level, its next big task will be to convert that into
market share and profits, adds Paul.
For the fiscal year ended
March 2016, Amazon India's loss soared to `3,572 crore as against `1,724 crore
in the previous fiscal year. Revenue during the same period jumped to Rs 2,275
crore from Rs 1,022 crore.
Ashita Aggarwal, head of
marketing at SP Jain Institute of Management and Research, reckons that Udaan
might turn out to be the silver lining for Amazon. “It might
be the jinn that Amazon has been trying so hard to find in India,“ she says.
With cities getting saturated and the same set of consumers being targeted by
multiple ecommerce players, it's the hinterland that may be the promised land.
“The mantra is just to dig deeper and hang on for the next few years.“
|
Rajiv
Singh | Umri, Bijnor, UP
|
ETM17SEP17
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