Exponential rise in internet usage through smartphones and increase in the income levels are two biggest driving factors for e-commerce websites. As penetration of both internet and smartphones is on a rise, e-commerce websites are now fetching higher revenue shares from tier II and III cities.
leading online stores such as Flipcart, Snapdeal, ebay, Olx .in and Shopclues claims that almost half of their sales come from tier-II and III towns and cities. According to recent report by eBay, 50 per cent of its businesses come from tier II and tier III cities. This is attributed to the growing Internet and smartphone penetration, rising income levels which are helping the small cities in India to rise on the e-commerce roadmap.
“India is experiencing tremendous growth and the potential it has is very promising. We are seeing almost 50 per cent of the business coming from tier II and III cities,” said eBay India Managing Director latif Nathani.
“We got tremendous response to our initial campaigns, and saw strong traffic from tier-1 cities of Delhi, Mumbai, Chennai, Bangalore, Hyderabad, and Kolkata. As the brand awareness increased, and ‘Bech De’ began to resonate with people, we started seeing traffic from tier-II and III cities as well,” OlX.in CEO Amarjit Singh Batra told The Pioneer.
The traffic to OlX from these cities grew at 700 percent in 2013,” he added. When asked about the targets they have set for this year Batra said, “In the coming year we hope to consolidate our market share from 65 percent to 80 percent.”
like others, Snapdeal.com is also registering significant sales from these cities. Amit Maheshwari, Vice President (Fashion Merchandising) for Snapdeal.com said, “We get over 50 per cent of our sales from tier II and III towns and cities.”
Snapdeal was founded in 2010, three years after Flipkart, by Bahl and his partner Rohit Bansal. It started as a daily deals site selling meal and spa vouchers but morphed into an online marketplace in 2011, now offering an assortment of 4 million products from over 20,000 sellers.
Recently, the world’s largest digital marketplace eBay also invested $134 million of nearly Rs 830 crore in Snapdeal.com.
Another leading online marketplace, ShopClues also has reported that of the total orders received, 42 per cent orders came from tier I cities like Delhi, Mumbai, Bangalore, etc, while the remaining 58 per cent orders came from from tier II and III cities. Myntra.com also says that smaller towns and cities accounted for 55 per cent of its overall sales last year.
A recent study by Google India reveals that 51 per cent of traffic during its ‘Great Online Shopping Festival’ held in December last year came from outside the top four metros. E-commerce in the country grew 128 per cent year-on-year last year, with 25 per cent traffic coming from places outside the top 20 cities, it says.
One factor driving online shopping in smaller cities is the rising number of people using mobile phones to access the Internet. Google says currently, 30 per cent of all shopping queries in India come from mobile phones.
Research firm Forrester estimates that India’s e-commerce market will touch $8.8 billion in 2016, though some say it could be as high as $16 billion by then. The country’s internet users have risen to 200 million with over 20 million of them transacting online.