Two third of ‘rural super consumers’ are looking for products that either improve their lives or make it easier, mimicking their urban counterparts
But the rural consumer’s demands are still being met by local kirana stores that depend on an inefficient supply chain.
Rozana with its rural-focussed ecommerce platform and hyperlocal delivery model is looking to remedy this
The digital divide between rural and urban India is dissolving fast. Thanks to flagship programmes like Digital India, internet penetration in rural India grew 37% YoY in 2021 compared to a 2% YoY growth in urban cities, an ICUBE study said. And with data plans and mobile handsets getting cheaper, the rural numbers are set to go much higher.
However, it was the onset of the Covid-19 pandemic that proved to be the tipping point, at least for the retail sector. As the brick-and-mortar businesses shut shop, the country turned towards online shopping for safety and convenience. Rural India with its estimated 905 Mn population, was no exception.
But the socio-cultural trends that form the sinews of rural consumption — thus defining rural ecommerce — are different. Rooted in their interdependence, rural communities are like big families where local networking and word-of-mouth play a significant role in a brand’s reach and impact.
To serve this segment, a rural DNA with the ability to recognise the opportunity and tap into the market, is a mandate. This is where Rozana.in, a rural-focussed ecommerce platform with a hyperlocal delivery model, has found its niche.
Despite well-known challenges like market development and supply chain inefficiencies, the startup is servicing rural consumers’ needs by designing new distribution channels.
In a one-to-one chat with Inc42, Rozana.in’s cofounder & CEO, Ankur Dahiya, revealed the hurdles, opportunities and differentiators of rural ecommerce as a significant sub-sector of mainstream online shopping. Edited excerpts:
Inc42: What was the trigger behind launching a startup targeting rural India? After all, as reports suggest, 63% of rural Indians still do not have internet access.
Ankur Dahiya: Let me wind back the clock a bit.
While building our previous startup, Routier (a B2B truck logistics company later acquired by a NASDAQ listed corporation), we travelled to rural India several times and consulted the local governments to understand the local dynamics. We realised that consumer demand is still being met by local kirana stores that depend on an inefficient supply chain. The local kirana was also not placed inside the village, they are usually situated on the main road which is easily 2-5 kms. Thus many villagers walk 4-10 kms up and down to bring regular products. For specialised products like books, shoes, etc they have to travel 30-50 kms. There was clear indication that the rural buyer is severely underserved.
Also, consider the sheer volume. Half of India’s GDP comes from rural India, and 70% of the population still lives in the countryside. But most don’t have access to online shopping or any form of organised retail establishments.
We took the plunge to tap into this vast market through our venture, Rozana.in.
Inc42: What about competition? We have companies like Amazon, Flipkart and Meesho in this space. Plus, most ecommerce players are now expanding to the hinterland.
Ankur Dahiya: You may find the presence of ecommerce in some pockets but there is no rural-focussed ecommerce company.
People tend to confuse Tier 2 and 3 cities with rural India but despite some overlap, rural India covers more regions than just these cities. Tier 2 and 3 cities could mean Lucknow, Kanpur, Nasik and Rohtak, but these places are far removed from rural India.
Rural India remains a massive untapped opportunity, and Rozana is at the forefront of it.
Big ecommerce companies face a fundamental challenge when catering to rural India. Their supply chain and product portfolio are designed for the urban populace. And most of the ecommerce companies primarily focus on acquiring the top 15-20% of consumers.
We have developed our strategies and offerings in sync with the rural mindset. The vast experience of our founding team in AI, deep learning and neural networks, further helps us understand rural consumers better and design and deliver products to ease their lives.
Having said that, there is enough scope for many companies to co-exist as offline retail is also unorganised here, unlike urban India.
Inc42: Tell us a little about the consumption patterns in these areas and how you are tapping into it?
Ankur Dahiya: Rural consumption has been witnessing a surge even as urban area volumes in the FMCG sector were flat.
We are excited about this growth and are improving our supply chain to help us cater to the growing demand. Since the beginning of September, we saw a 20-25% rise in consumption, especially in discretionary spending.
We have also noticed that this consumer base is spending more on cosmetics and personal care categories and we’re looking to enter this segment by the end of this year.
Furthermore, it is heartening to see that thousands of families have started using sanitary napkins bought through Rozana, making it one of the highest selling products from the platform.
Aspirations of rural India are truly amazing and inspirational.
Inc42: You have expanded operations to 4-5K gram panchayats in rural Uttar Pradesh and Haryana since Rozana’s launch. What were the key challenges you faced, and what have been your learnings from the journey so far?
Ankur Dahiya: Despite our years of experience in setting up and managing robust supply chains, we faced many challenges in setting up a supply chain that could positively impact this segment.
The major among those is the fact that trained supply chain experts are virtually non-existent in rural areas and setting up village-specific supply chain networks and warehousing capabilities with the help from locals is challenging.
Then there were issues with payments and banking hours. Many households do not have enough cash to pay when the items arrive and the banks in these areas close early. Slowly but surely, we are educating and helping our customers switch to online payments to avoid the hassles of COD.
Inc42: Who are Rozana’s peer partners? How do you encourage microentrepreneurship and ensure your peer partners have a steady flow of income?
Ankur Dahiya: Rozana procures all products directly from the brands and delivers them to peer partners, thus eliminating all intermediaries. Our peer partners are village locals carefully chosen to help us reach a wide consumer base. They can be Anganwadi or ASHA workers (trained for children’s welfare and rural healthcare, respectively).
This allows us to operate on an asset-light model by keeping minimal inventory and providing maximum margins to our exclusive agents. It is a win-win for all, as producers get better gate prices and peer partners earn a 4-8% commission on each delivery.
Inc42: Could you detail out the impact of Rozana in its serviceable locations so far?
Ankur Dahiya: While there have been quite a few, what excites us most is that we are empowering women to be more independent.
For instance, now women don’t have to walk 5-10 kms to buy essentials or depend on the men of the family for those purchases.
Women simply browse our app and/or website, scroll through the products and make purchases as per their budget. This is very helpful, unlike in a kirana where the retailer is usually very curt of a consumer who wants to window shop or inquire about products.
Inc42: You’ve raised nearly $4 Mn from marquee investors such as 3one4 Capital and IEG Investment Bank. How have you utilised the funds and how do you envision the future of the company?
Ankur Dahiya: We are utilising these funds to expand, mainly in North Indian districts. We’re also working towards making a few of our districts profitable.
Additionally, we’re investing in technology, warehousing, automations and expanding our product portfolio. This will help make the supply chain and operations more efficient and very importantly, up our sustainability quotient. In fact, Rozana is eyeing an ARR of INR 500 Cr+ in FY23.
We are also planning to introduce more categories and products designed for rural India including cosmetics, stationery, sports products like cricket bats, volleyballs and table tennis, among others as we’re seeing a huge demand for them. And to keep ourselves close to all the action, we’ve already set up Rozana’s headquarters at Dariyapur, Uttar Pradesh.
Inc42: What is the road ahead for India’s rural ecommerce industry?
Ankur Dahiya: In my opinion, that is best answered when we have a look at what experts are saying about the growth of the rural economy.
As mentioned, our rural-focussed ecommerce platform is built on the principle of trust through local networking and word-of-mouth.
According to Bain & Company’s Innovation in India’s Rural Economy report published in March 2022, India’s rural GDP/ecosystem has grown about 10% per annum over the last five years and still has strong headroom for growth.
Additionally, the number of female active internet users grew a whopping 61% in the last two years compared to male users, who grew at 24%, a Nielsen’s Bharat 2.0 report shows.
Another Nielsen report, titled ‘Rise of India’s Rural Super Consumer’ shows that 2/3rd of ‘rural super consumers’ are looking for products that either improve their lives or make it easier. In fact, they’re mimicking their urban counterparts in terms of liking a city-like lifestyle and trying new products.
Thus, along with the rising smartphone and internet penetration, information about brands and alternatives is becoming richer and is reinforcing the need to cling to known names, which bodes well for this space.
