Small-Town Sellers, Once Against Online Retailers, Have Now Joined Them

“Online sales have doubled, and now account for a larger chunk of my business,” Goyal said.

India’s small traders have lobbied hard for curbs on large online retailers, alleging they’re eating into their business through exclusive tie-ups, private labels and predatory pricing. While cheap data and half-a-billion internet users were already prompting businesses to go digital, one of the world's harshest Covid-19 lockdowns made it clear it would be difficult to survive without embracing e-commerce. These merchants are now becoming part of a digital economy that the government expects to grow fivefold to $1 trillion in five years as Amazon.com Inc., Walmart Inc.-owned Flipkart Group and Mukesh Ambani’s Reliance Industries Ltd. vie for a larger share.

The pandemic has fueled a shift to e-commerce in smaller cities and towns where consumers so far resisted shopping for groceries and cosmetics to medicines online. E-commerce platforms in India have already seen record levels of interest from smaller sellers.

Flipkart saw a growth of 35% in its seller base, 60% of which come from Tier II and III towns. Amazon, too, said in a statement that a record small and medium business took part in its festive sales. Snapdeal, with 5 lakh registered sellers, added 5,000 manufacturers and about 75,000 new sellers before the sale season.

Shiprocket, which provides logistics services, has seen the number of sellers using the online channel for delivery more double to 1 lakh this year.

Those already online reaped gains. Pradeep Chandwani, 27, from Sagar, Madhya Pradesh, saw online demand almost double in the post-pandemic period, driven by orders from smaller cities.

Chandwani, who sells electronics and grooming products on Snapdeal, Flipkart, Amazon, Paytm Mall and other platforms, said the sale of personal care products has jumped threefold over pre-pandemic levels, becoming biggest category for him.

Online demand also helped him expand reach outside South India to smaller towns in Uttar Pradesh and Bihar. And he has stopped selling offline altogether.

While one reason for going online is because of muted offline demand, according to Satish Meena, senior forecast analyst at Forrester Research, new sellers don't have to spend to acquire e-commerce customers since they are already shopping online.

Keshav Bansal, 23, from Haryana received orders on Amazon and Flipkart from northern India for coolers and water heaters. Online channel helped him net customers across the country after the lockdown. Bansal, a distributor of Hindware appliances, said sales jumped twofold during the online sales season. Demand has jumped from 500-600 units in a day previously to 1,000-1,200.

Not just smaller merchants, bigger traders have also gained from shifting online.

Naveen Prasad’s business took a hit after the lockdown. Things didn’t improve even afterwards for the Bengaluru-based distributor for footwear, copper water bottles and Casio keyboards. “My sales were down 30% after the restrictions were eased,” he said. In June, he opted for Flipkart to sell footwear—a segment that accounted for 80% of his revenue. Five months later, the distributor for brands including Fila, Action, Liberty and Campus said online sales have made up for business lost offline as he touched Rs 4-4.5 crore in monthly sales.

“My annual turnover was Rs 50 crore, but Covid-19 has pushed customers to shop online and I expect it to reach Rs 75-80 crore,” Prasad told BloombergQuint, adding that in the festive period alone, he sold footwear worth Rs 60-70 lakh in five days on Flipkart.

Prasad is now looking to start selling on Myntra and other platforms and even set up a warehouse to expand his reach. “We’re no longer restricted to selling in Karnataka anymore.”

The government, meanwhile, has allowed nearly all economic activities. But the disruption of the lockdown — that has caused a rare recession in India — was so widespread that businesses will take more time to recover and India's GDP is set to contract for the first time in decades.

Retailers don't see offline business to be the same anymore — surely not for some more time.

“Footfalls are down by 30% at our store, compared to pre-covid, but it’s improving,” said Bharti Sharma, an apparel retailer from Una, Himachal Pradesh. Sharma plans to move part of her business online. “I was certain that I wouldn’t move online, and can manage offline, but I guess I should give it a shot,” she said, adding that a customer today has a lot of options to buy everything from the comfort of their homes.

For Goyal, while e-commerce drives the bulk of his sales, margins are higher in offline sales that are slowly returning to pre-pandemic levels. But the online shift is here to stay, he said. “I want to sell my own, branded products online.”