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The beginning of hyperlocal economies? How India’s online shopping transformed

The pandemic has entirely changed the markets and the way India Inc operated their businesses. In just a few months, the entire retail paradigm has shifted from mega malls and e-commerce to hyperlocal economical units. As the economy plunged during the lockdown, businesses started relying on locally available produce or resources to replenish demand.
 
As a result, everyone from consumers to companies are keen to adopt hyperlocal channels for survival. One such example is of Zomato and Swiggy which forayed into grocery delivery to meet consumers’ demands in collaboration with neighbourhood Kirana stores.
 
What is hyperlocal economy?
 
One simple definition of hyperlocal economy is a business and its operations restricted to the same locality. All mom and pop stores, local haat, vegetable markets are good examples of a hyperlocal economy. However, the new definition of it encompasses more added features to it. The retail and distribution is now administered through GPS locations and mobile apps.
 
The term was first coined in 1991 but it was Mahatma Gandhi who argued for local production and consumption in Indian economy. The Made in India drive was then confined to freedom struggle. However, it appears that businesses now wish to stick to fundamentals during these unprecedented times.
 
The last time the hyperlocal sector in India saw a rise was when the players such as Domino’s and Pizza Hut began food deliveries. Then, other food joints also started home deliveries. The period from 2014 to 2016 can be called as the pinnacle of hyperlocal culture in India when new players like Zomato, Swiggy, Foodpanda took over reigns. According to some media reports, the sector raised more than 50 investment deals with over $500 million during this time.
 
The hyperlocal market in India is currently driven by logistics, food, groceries, pharmacy, horizontal, and concierge. Companies like Grofers, Urban Company, Dunzo, Zopper, Big Basket, Shadowfax, Milkbasket etc also joined the bandwagon and are doing great in it. In 2017-18, the market saw an investment of $2 billion while it clocked $1 billion towards the end of 2019.
 
Proliferation of hyperlocal startups in COVID-19 times
 
Consumers’ behaviour has immensely changed due to the wrath of pandemic. They now want everything with ease and within vicinity without venturing out much. Indian consumers always preferred to shop at their pet local stores due to multiple factors. Reasons for this are primarily related to trust built in years and the comfort of stores being in the neighbourhood.
 
Hyperlocal models hence became very relevant in the current pandemic scenario because these were able to cater all kinds of needs. This in turn accelerated growth of the hyperlocal e-commerce sector with an increasing number of consumers both in metro and non-metro cities. Out of this, most of the consumers transacted on online or hyperlocal app platforms in India.
 
As a user of hyperlocal platforms and as an entrepreneur, Siddharth Marupeddi, CEO at ULearn feels that though the economy is depicting a downward curve, ease of doing business has enhanced the potential of such platforms.
 
The popularity of hyperlocal platforms was evident in the rise of the online orders of Grofers. It saw a 45 per cent rise in orders along with 18 per cent hike in order value with the onset of lockdown. Big Basket and Amazon Fresh also registered similar hikes. Seeing the opportunity, Walmart owned Flipkart started its own hyperlocal delivery service called Flipkart Quick.
 
Earlier, Paytm Mall had also announced to partner with 10,000 local retailers for hyperlocal services. Swiggy in the similar vein, opened its Instamart for consumers in August with 2,500 items in the cart.
 
Challenges in hyperlocalising businesses
 
Despite numerous positive factors surrounding the hyperlocal space, the industry creates a fair bit of challenges as well. The hyperlocal model hence may appear simple enough in theory but is a lot more difficult when it comes to implementation. One of the biggest challenges that a hyperlocal business may face is to keep track of the inventory with local merchants.
 
This would require a dedicated and an open two-way communication between the merchant and the marketplace. Effective and adequate training is another challenge which hyperlocal businesses may face. Training to local delivery boys, mechanics, or service providers is a critical aspect as they act as the face of a company.
 
Having experienced some of the challenges in the space, Bhatt of Ease Your Life says that there are many challenges while dealing with the hyperlocal format. This is because we are committed to delivering the promise of easing people’s lives for our customers. Hence, we are dependent on the delivery person who will help us in fulfilling this promise.
 
He confesses, “We constantly have to ensure that we are delighting customers through our services. It is often noticed that dissatisfied customers switch to other vendors. At the same time, keeping our delivery boys together and constantly motivating them to deliver 100 per cent on their task is also a constant challenge.”
 
Kumar of IamHere highlights another set of challenges. One of the primary challenges is privacy and security of the users while conducting transactions in the hyperlocal environment. According to him, privacy and security is a big constraint for hyperlocal social connect apps such as his.
 
He adds, “It was one of the biggest issues that we had faced. Users connecting to others on our app whether socialising or doing commerce have to share private information. They often don’t want to do that. We hence ensured to provide them a safe private anonymous infrastructure with tech solutions around security.”
 
Next formidable challenge is doing transactions. Naren says that most e-commerce companies allow transactions within their platforms. However, it is not always the case in a hyperlocal business. One can go directly to the local retailer and pay them even if he or she has ordered online.
 
“Just like FB one can place an order on the hyperlocal platform and transact through an outside channel. We also have to adopt the same model such as this by making revenue through the ads,” Kumar informs.
 
The retail industry is more than a trillion-dollar economy in India. While there is a huge shift in retail trends, competition between the players is also on surge. However, the hyper-local economy requires a unique culture for a company to survive. Thus, competition in the space can be a challenge for many players.
 
Future of hyperlocal enterprises in post-COVID era
 
The pandemic has accelerated growth of hyperlocal e-commerce sector with an increasing number of consumers both in metropolitan cities and small towns. Earlier, Ken Research estimated in a report India Hyperlocal Market Outlook to 2020 that Indian hyperlocal market will grow at a considerable CAGR rate, thus exceeding Rs 2,306 crore by 2020.
 
India and many nations across the world saw online outlets as the fastest-growing grocery retail sales channel in over the past six months. Along with this, the first-time e-commerce users also increased during the lockdown. The onset of pandemic also brought out several consumer behaviour changes such as contactless delivery and digital payments.
 
Factors that have worked in favour of a hyperlocal ecosystem are that this platform is a very quick, flexible, and an asset light model. These start-ups usually act as aggregators to connect the local businesses with nearby buyers. The cost of infrastructure is also low as compared to e-commerce firms. With this dynamic combination of online channels connecting the offline vendors to consumers, the hyperlocal model is offering the best of both worlds to consumers.
 
The immense scope in this industry has hence attracted continuous interest from investors from around the world. 
 

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