Opportunities and Challenges Enabling Hyperlocal Commerce in India
‘Hyperlocal’ is perhaps one of the very few words that have managed to rattle the fast-scaling eCommerce giants in the last few years. While the media and the retail landscape of the country was abuzz with praise for virtual businesses, a certain breed of innovators emerged surreptitiously and created a solution for the unobtrusive pain points that existed in the way e-commerce was functioning. This breed comprised hyperlocal entrepreneurs who tapped into the potential that locally-relevant businesses offered. They understood that physical retailers situated in the same area as consumers could offer something that large horizontal players couldn’t: faster deliveries, perishable merchandise, easier returns and often a face to their transactions. This has led to the hyperlocal commerce boom in the country and with the way things are shaping up this trend looks like it’s here to stay.
Hyperlocal commerce essentially involves technology-backed firms that are able to connect local retailers with consumers in their vicinity. These retailers can leverage the benefits of virtual commerce such as lower logistical and negligible storage costs and deliver convenience to a wider market. These retailers are also able to save on marketing and advertising costs as these are taken care of by the hyperlocal marketplace. For consumers, of course, this feels like an extension of tech-powered convenience they have become increasingly used to. They are able to enjoy doorstep deliveries of products that are usually needed quickly such as groceries medicines, laundry, food etc. Many innovative start-ups are also using the hyperlocal model to offer services of local plumbers, carpenters, gardeners and even Pilates’ instructors to customers in their vicinity.
But besides just convenience, there is another benefit that consumers enjoy with hyperlocal ventures that of relevance. Hyperlocal firms are in a better position to customize their content and offerings based on the location they are in. Each locality typically houses a certain kind of customer demographic. Hyperlocal firms can capitalize on this unique advantage they have to create a personal equation with their target market.
For instance, in a particularly upmarket area of the country such as Bandra or Gurgaon, hyperlocal retailers have the opportunity to cultivate immense loyalty with their markets by curating products that appeal to their aesthetic sensibilities or their aspirational desires. A grocery retailer can offer ingredients that are required to whip up sushi or udoon noodles. The moment the customer decides it is the night for some Japanese cooking, all she has to do is tap a few buttons on the mobile device and fresh exotic ingredients are delivered to her doorstep within hours. The kind of personalised affinity that such interactions can spur will hardly ever be matched by anything a giant retailer present across the country can offer and therein lies the unbridled potential and opportunity that only hyperlocal eCommerce holds today.
It is because of disruption of this nature that hyperlocal online firms are also attracting eyeballs of investors with great speed. The bandwagon of such hyperlocal portals includes PepperTap, HouseJoy, SpoonJoy and many others. They have, in fact, surpassed other eCommerce companies in raising funds from institutional and angel investors in recent times.
Back-of-the-envelope calculations suggest that by May 2015, these firms had garnered over a fourth of the total $252-million PE/VC investments by way of angel, seed and Series A round financing. The reason behind this is their ability to offer on-demand services, a seamless mobile-first experience and instant gratification, quite literally.They cater to the young, tech-savvy and demanding Indian populace and have managed to organise a space that has hitherto been in disarray to a large extent.
Like any other business model, however, that of hyperlocal eCommerce is also riddled with enough challenges. First is competition. Having understood their vulnerability in this scenario, many large e-commerce retailers are trying to build up a hyperlocal wing with express deliveries, all guns blazing. The pioneers will continue to have the edge in terms of a focused approach and strong on-ground tie-ups with local retailers. Their first-mover advantage will also reflect in the way they have understood consumer preferences at a personal level, something that will be hard for a pan-India giant to carry out but not impossible thanks to their large marketing teams and big budgets.
Additionally, in order to be successful and to sustain themselves, hyperlocal start-ups have to be very careful about unit economies and per-order profitability. If they are looking at expanding geographically, they need to ensure consistent quality in local partners and delivery staff. Investing in technology, data and processes to make their services and apps more intuitive is another imperative.
Challenges apart, there is no denying that this rapidly growing convenience oriented segment has exponential scope. There is a possibility of consolidation over the next few years as the number of players emerging in this space is immense. Survival of the fittest will be the dominant force that will eventually determine the leaders in the segment. There is no disputing the fact, however, that those who find the right niche to operate in, find the most efficient local partners and deliver seamless services will make their mark and find a permanent spot in the minds and smart devices of consumers.