Indian start-ups counting on rural reach to boost e-commerce

Analysts estimate that the next 100 million people who will participate in e-commerce will be from India's smaller towns

Saritha Rai, Jing Cao
Updated29 Mar 2016, 09:43 AM IST
Photo: iStock<br />
Photo: iStock

Bangalore/New York: Indian entrepreneurs must do a better job reaching small towns and villages at home before setting their sights on international expansion, speakers on a panel at Bloomberg’s India Economic Forum said.

“We haven’t even scratched the surface yet” in India, said Radhika Aggarwal, co-founder and chief business officer of online retail platform Shopclues, citing a very small proportion of Web purchases compared with traditional retail. “We’re very focused on getting into rural India,” and there are multiple things Indian companies can do before they start looking abroad, she said.

Within the last decade, India has gone from having barely any mobile-phone coverage to the world’s fastest-growing smartphone market. The government has helped boost e-commerce by launching high-speed broadband connectivity that will eventually cover the country’s rural nooks.

Hundreds of start-ups

The combination of more phones and faster access has spurred hundreds of e-commerce start-ups, peddling services from selling homes online to delivering gourmet Indian meals—making it one of the most fertile entrepreneurial ecosystems in the world.

Prime Minister Narendra Modi has said connectivity coupled with digital commerce has the potential to propel India from a $2 trillion economy to a $20 trillion economy.

Right now there is a lag between urban India and the countryside, but it’s narrowing quickly, Aggarwal said. The next 100 million people who will participate in e-commerce will be from India’s smaller towns, she said.

Now that access to e-commerce is there, the next step is to boost spending to be able to compare India with online juggernaut China, said Prashanth Prakash, a partner at Accel Partners. India needs to add another $1 trillion to $2 trillion to the economy to really see the China comparison play out, he said.

“The average spending from an e-commerce buyer in India is $250 to $300,” Prakash said. “Eight years ago in China it was $400. So there is a really huge chasm there.”

Hurdles abound

Legacy companies in India shouldn’t be written off yet either, said Raghav Bahl, founder of digital media startup Quintillion Media Pvt Ltd. Unlike in the West, online changes in India are not occurring sequentially to traditional businesses but in parallel, helping e-commerce models evolve in a unique way, he said.

“The end point of e-commerce will be very different from elsewhere,” Bahl said.

E-commerce entrepreneurs will have to be “cognizant of the customers’ journey” to online shopping and “seamlessly hold the customers’ hand,” Accel’s Prakash said. “There will be some very interesting businesses we’re starting to see and fund where offline and online will nicely coexist in this country -- maybe a little bit like what we see in China.”

And despite the government’s professed startup-friendly policies, regulatory hurdles abound, the panelists said.

Prime Minister Narendra Modi has said one of the best things the government can do for the startup community is to stay away from the startup community, Aggarwal said. “It is a great starting point.”

Open for disruption

Bahl lamented the “most complicated structure” for e-commerce business in India, because foreign investors can’t sell directly to consumers.

Still, the government’s focus on startups has helped change perceptions on how the industry is viewed, if even a little bit at a time.

“I see a lot more openness for disruption, a lot more tolerance for new ideas,” said Shashank ND, chief executive officer and founder of Practo Technologies Pvt Ltd, a website for patients to find and book appointments with doctors.

Heavily regulated fields such as healthcare could use more opening up, especially new areas like telemedicine, which could bring access to millions of people across rural India, ND said. “But some of the telemedicine startups I am advising are facing massive push back because there is no clarity and regulation.”

Some things are getting better. In 2011, Aggarwal said it took her six months to get permission to do business in India, whereas now there is an app that gives a company the ability to be registered in a day. Bloomberg

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First Published:29 Mar 2016, 09:43 AM IST
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