In the past decade, the e-commerce industry has emerged as one of the fastest growing sectors in India. There have been numerous business models that have been tried by e-commerce brands, including marketplace and hyperlocal. As this upward surge continues, ‘hyperlocal’ is witnessing wide adoption and emerging as a new trend in the e-commerce space.
The Hyperlocal Model
The word ‘hyperlocal’ implies a specific local area where everything, be it product or service, is sourced from, thereby focusing on connecting the consumer with local offline supplier or seller. Many start-ups today are adopting the hyperlocal business model, a city-based model focused on a geographical location catering to the demands of local buyers by creating an ecosystem of local sellers.
A wide range of services are already being provided by hyperlocals. These services range from delivering furniture to grocery delivery to handyman services.
Importance of Hyperlocal
According to a recent news report, “Hyperlocals, services-based or inventory-based, are largely an urban India phenomenon. Services are hyperlocal by their very nature, driven by locality or communities. When moving into a new city, for example, people would like to stabilise as quickly as possible and here, such services step in”.In fact, one of the main requirements of anyone moving to a new city is setting up their home which includes buying furniture and designing homes. Thus, a continual demographic shift taking place in the country highlights the importance of going hyperlocal in this space called furniture and home decor.
The key advantages of this model to buyers are quicker delivery, avoidance of in-transit damage, local warranty and billing, local deals and availability of huge quantities.
From a seller’s perspective, it helps them build their local buyer network besides enabling faster sales settlement. Local buyers can extend their network of local shoppers, beyond the existing base.
Timely delivery of orders with minimal or no in-transit damage is a key challenge for most e-commerce companies today. This is especially true of the online furniture industry. The average delivery time ranges from 10-15 days and the in-transit damage is high. This is where the hyperlocals step in to solve the problem. As these are connected through a community of local sellers, they are able to offer their services to the locals and address the much talked about issue of last-mile connectivity.
Looking at the growth and potential of the hyperlocal start-ups, investors are opening up their wallets and the funds are pouring in.
Across India, venture capital firms have invested $270 million in more than 45 hyperlocal start-ups over the nine month period till October 2015, according to a MintAsia research.
We, at MebelKart realized the importance of going hyperlocal and are fast moving towards a model wherein our majority revenues come from the hyperlocal model rather than the national one. Our efforts are towards nurturing a local seller ecosystem. It benefits the local sellers by providing them a wider customer base. It also ensures lower costs and lesser damages because of local logistics which we can pass on as price benefit to the customer. Hyperlocal model is a win-win for every stakeholder, the sellers, customers and us.
Hyperlocal market: Growth Scenario
According to a report by Tracxn* released in July 2015 titled “Hyperlocal Delivery – India: Start-up Landscape”, more than $130 million was invested in 110 start-ups across 28 rounds in the six months preceding October 2015. The top funded segments were groceries, food delivery and horizontal B2C delivery.
As per a report by Ken research released in March 2016 titled “India Hyperlocal Market Outlook to 2020 – Driven by Surge in Number of Startups and Series of Funding”, the revenues in the hyperlocal market space have grown by 41% in comparison to 2014. It further says that the hyperlocal market in India will exceed Rs. 2,306 crore by the year 2020.
This fast growing segment is constantly gaining momentum in the Indian retail sector as it has the potential to create new demand and is able to cater to evolving consumer needs, something which was not possible earlier. However, there are some significant challenges which the hyperlocal companies including the ones in the online furniture space will have to overcome in order to sustain in a competitive market.
Firstly, training becomes very important. In a hyperlocal model, when somebody goes to a customer to provide a service or deliver a product, he/she is representing the brand. Therefore, the ability to handle customers in a professional manner becomes the key. Investment in technology, logistics and quality of services,therefore, becomes imperative.
Secondly, while hyperlocal companies have their strengths in the local market, they also face stiff competition from large and established e-commerce companies that have the strength to pump in huge amount of capital to promote themselves in the local markets.
Thirdly, it is important to have a robust ecosystem of sellers that can provide a range of solutions to the buyers. This is a huge challenge since industries like furniture primarily comprise of unorganized players.
Lastly, scaling up will continue to be a significant learning for hyperlocal companies in the longer run. Since these companies function within a limited geographical area, it will be crucial on how they scale up and expand the business while maintaining consistency in quality of offerings.
The coming years will likely see the emergence of a number of brands in this category offering niche services to customers. The ability to overcome these challenges and adapting to changing environment will be a deciding factor between leaders and laggards in the space.
By; Rahul Agrawal, Co-Founder & CEO, MebelKart
Source: Hans India