The writing has been on the wall for some time and it showed up prominently during the festival-season sales last year, when Meesho toppled Amazon to become the second-largest player in order share.
During the sales season, 60 per cent of the orders Meesho received were from tier-4 cities and beyond.
According to a report by consulting firm Redseer, festival-season sales last year were driven primarily by tier-2 and tier-3 cities, with 64 per cent of the shoppers coming from those.
About 125 million shoppers from tier-2 cities and beyond placed orders across platforms in the festival month.
E-commerce in India is witnessing increasing demand, fuelled by a continuing rise in smartphone penetration and digital literacy.
To cater to this growing market, large e-commerce firms like Snapdeal, Flipkart, and Meesho are offering value-focused products.
Value e-commerce essentially refers to offering users quality merchandise at affordable prices.
In most cases the price range for value products is below Rs 1,000.
“Meesho has been a very strong value play since the beginning.
"Our business model is built for accelerating the adoption of value commerce in the country,” Utkrishta Kumar, CXO (Business), told Business Standard.
Around 80 per cent of users on Meesho are from tier-2 and beyond. Kumar said.
“Our mission statement is to democratise Internet commerce.”
While Meesho was conceived with the idea of catering to the small-town audience, many players are now gearing up their play in this segment.
Home-grown e-commerce marketplace Snapdeal has been betting big on the value-retail segment for a few years.
Having moved its focus to exclusively value retail, the company has formed Stellaro, a subsidiary that is creating value-focused brands.
Products under these brands are sold on third-party platforms.
“If we look at the value segment, specifically the value lifestyle segment, it is primarily offline.
"A very small component of this segment is online and within that, most of it is unorganised.
"Moreover, the quality customers get for the price they pay is quite erratic,” said Himanshu Chakrawati, chief executive officer, Snapdeal Marketplace.
Around 86 per cent of users on Snapdeal are from outside metropolitan cities, and almost 72 per cent are from beyond tier-2 cities.
Round 95 per cent of products listed on the platform are below Rs 1,000.
According to management consulting firm Kearney, the value-lifestyle segment was estimated at $4 billion in 2019 and is expected to reach $20 billion by 2026, and $40 billion by 2030.
Launched in August last year, Stellaro acts like a house of brands, caters to value segments, and operates independently of Snapdeal.
Some of its brands have been launched on Amazon, but in another four to six weeks, all the brands will be available across major platforms like Flipkart, Amazon, Jiomart, Ajio, and Nykaa.
Flipkart witnessed 45 per cent of its customer demand from tier-3 cities and beyond while Amazon said the number of sellers receiving orders from tier-2/3 cities on its platform jumped 21 per cent during the festive sale.
Addressing niche challenges
E-commerce firms are looking to address niche challenges specific to this smaller market.
For instance, Kumar of Meesho said their app size was only 13.6 MB, so users with poor internet connectivity could download the app seamlessly.
“Search optimisation is also a big focus for us to get new e-commerce users to transact on the app.
"And we have eight different vernaculars, apart from Hindi and English, along with image and voice search to aid in discovery of hyper Local businesses and hyper local products,” Kumar said.
“Meesho charges zero per cent commission from its sellers, which incentivises them to not only bring in the entire selection of products but also price products very competitively,” he added.
According to Snapdeal’s Chakrawati, customer experience on traditional e-commerce platforms is geared towards metropolitan audiences.
To better target the Bharat market, Snapdeal has reduced the list of sellers on its platform.
This curated list of sellers, Snapdeal says, allows for better-quality products.
“On our platform, the user experience is crafted in a way that makes it relevant for the value segment.
"The language is simple and easy to understand, including product descriptions.
"Our AI/ML tools add another layer of assistance and are capable of injecting audio aids as well,” said Chakrawati.
“Around 70 per cent of our users do not use any search terms or filters, which indicates that customers browse the platform through the home-page feed or the various category buttons.
"This makes the feed vital. Therefore, optimising this aspect is also a key focus for us,” he added.
