In 2012, 56% of the India’s online shoppers came from tier-II cities, towns

Today the festival Makara Sankranti and Pongal are being celebrated in Karnataka, Andhra Pradesh, Tamil Nadu. Makara Shankranti is the harvest festival. The festive Wishing you all a happy Sankranti & Pongal (this resembles the statement issued by our Chief Ministers, Prime Minister!). Rangoli is an Indian art practiced a lot in South India.

Rangoli for Sankranti by artist Anisha Raghu

Rangoli for Sankranti by artist Anisha Raghu

It was good to read an article completely focused on Tier-II internet users in India (Tier-II India fueling ecommerce in India). Ecommerce has been pretty much the flavor VCs in India have embraced.  With the funding of ecommerce portals having reached a saturation now everybody is concentrating on revenues, profitability.

The study done by India’s leading VC Accel throws light on growing usage of ecommerce from Tier-II towns of India. With ecommerce industry talking about Tier-II I am sure they will get more coverage in the media. Some highlights from Accel’s ecommerce  report,

  • 56% of the country’s online shoppers came from tier-II cities and towns.
  • With ecommerce brands spending on digital media (read TV) residents of Tier-II towns are aware of ecommerce.
  • India’s e-commerce, or more specifically e-tailing market, crossed $800 million in 2012 (without online travel)
  • Women accounted for 21% of the online shoppers, almost doubling their share since 2011.
  • Comscore data showed that the percentage of unique visitors to e-tailing sites grew 362% for apparel, followed by 119% for consumer goods and 98% for home furnishings in the one year period
  • Almost 59% of the Indian online shoppers are below 25 years. Their numbers are set to raise with 22 million Facebook users in India aged between 18 to 22 years expected to join the workforce within five years
  • For e-commerce, COD (cash on delivery) transactions are upwards of 60%
  • Fewer women have access to Internet in India [source nextbigwhat].

Why Tier-2 towns are important in India?

  • Middle India, defined as cities and towns with a population between 100,000 to 1 million, has driven value growth for the fast moving consumer goods industry.
  • Middle India contributed INR 287 billion in FMCG sales in 2010 (don’t worry about the current exchange rate, conversion etc – it is a LOT of money). This translates to 20% of all India FMCG  & 30+% to all urban sales.
  • Middle India is home to more than 910,000 FMCG stores. This translates to 11% of all FMCG stores in India, 30% of all urban stores.
  • Annual per capita FMCG consumption over INR 2800. National average stands at INR 1200, metros breached INR 2800 in 2009.

This shows Middle India cannot be ignored, rather Tier-2 towns of India will give the much awaited and needed push to the internet eco system in India.

When will internet penetration in India resemble China?

 
India
(2012)
China
(2007)
China
(2012)
Internet population137m111m538m
Internet Penetration8%8.4%38%
Online buyers20m (including travel)
13m (without travel)
22m227m

The above table shows India is yet to witness a heavy usage of internet. But if you look at the past we seem to have improved a lot. I am assuming these numbers are for desktop internet only and doesn’t include the every growing mobile internet user base.

The good news is there is a lot of room for growth of internet penetration in India. Portals such as our Oneindia that have concentrated on Indian languages are going to see a huge growth in our traffic (and revenues).

  • Infibeam says Tier 2 & 3 drive 50% sales

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