Reverse Migration: A Boon to E-commerce

During the festive season in October 2020, two of the largest online retailers in India reported a surge of new shoppers from smaller cities in the first two days of festive sales.
Reverse Migration: A Boon to E-commerce
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Amongst the many disruptive trends that emerged due to the pandemic, one of the most prominent has been reverse migration. According to some estimates, the Covid-19-triggered reverse migration was the second-largest mass migration in the recorded history of India, after the Partition, where more than 14 million people were displaced. These were predominantly daily wage earners and people who contributed to the informal sector in the urban areas. However, due to remote working and online teaching, many young professionals and students who had moved to the cities to pursue their careers or education also moved back to their hometowns.

Having lived in urban ecosystems and acquired conversance and comfort with using apps for shopping, these reverse migrants carried their online shopping habits home with them. In some cases, their disposable incomes increased automatically as they began boarding and lodging with their families and no longer had to spend on rent and other living expenses. They contributed to a pick-up in e-commerce, especially boosting online buying from Tier 2, 3, and 4 cities. 

The surge in online shopping

During the festive season in October 2020, two of the largest online retailers in India reported a surge of new shoppers from smaller cities in the first two days of festive sales. In fact, they both witnessed sales more than doubling in the first two days of their annual ‘festive sale’ compared to the 2019 edition. They attributed this to discounts and credit facilities and also largely to reverse migration of metro customers. While one online retail giant revealed that 91% of its new customer base came from Tier 2 cities and beyond, the other said that almost 65% of its new customer base was from smaller towns and cities.

This trend delivered benefits to all stakeholders, beyond online retail platforms, which supported multi-product online sales. Lakhs of small retailers who were sellers of products ranging from smartphones, consumer electronics, and large appliances to fashion, cosmetics, and even furniture and home accessories, benefited from the rise in online consumption.

Clocking millions of app downloads in the run-up to the festival sales, consumers also enjoyed faster delivery of their purchases, as sellers from small towns jumped on the online bandwagon, making products more promptly available at thousands of newly serviced pin codes across the country.

Interesting takeaways that emerge from this new trend

Firstly, it appears likely that this trend may only be partly reversible as many employing enterprises begin to perfect and prefer the work-from-home model, and educational institutes, faculty, and students become comfortable with distance learning. While there will be some proportion of reverse migrants returning to metros and tier 1 cities, they will probably have transferred the online shopping culture to their hometown network of friends and family, especially among the youth.

Smaller sellers, who have experienced the convenience of online sales, wherein everything from cataloguing to logistics and payment gateways is arranged for by online retailers, are unlikely to ignore this sales channel, going forward. They will perhaps become comfortable conducting part of their business online, and partly offline. Where e-commerce platforms are concerned, the next big frontier will be exploring engagement in Hindi and regional languages as the vast and diverse tier 2, 3, and 4 markets open up.

Last, but not least, financial and lifestyle inclusion will get accelerated as online channels, especially larger e-commerce players, offer credit to customers as part of their online deals.

There are of course other favorable factors supporting the growth of rural consumption and rural e-commerce. Back to back good monsoon in the last two years and expectation of a normal monsoon this year have helped the agricultural economy in a big way. The Agri commodity prices are also at a record level leading to all-time high farm income. Apart from the above, various schemes of the Government of India have benefited the rural economy over the last couple of years including during Covid-19 induced lockdown of many parts of the economy.

Overall higher income in rural India and changing online habits will help e-commerce in a big way.

All these developments suggest a fascinating future for the e-commerce sector, small and large online sellers, and customers in small towns and villages across the country.

About the author: Sudip Bandyopadhyay
Sudip Bandyopadhyay
Sudip Bandyopadhyay is currently the Group Chairman of Inditrade (JRG) Group of Companies. He sits on the Boards of a number of listed and unlisted companies. His area of expertise includes equity, commodity and currency markets, wealth management, mutual fund, insurance, investment banking, remittance, forex and distribution of financial products. During Sudip’s 16 years stint with ITC as Head of Treasury and Strategic Investments, he managed investments in excess of $1.5 billion. He was responsible for the acquisition of strategic stakes in EIH, VST and several other companies, by ITC. Post ITC, he was the Managing Director of Reliance Securities (Reliance Money) and also on the Board of several Reliance ADA Group companies. He was instrumental in leading Reliance Anil Dhirubhai Ambani Group’s foray, amongst others, into Equity and Commodity Broking, Commodity Exchanges, Gold Coin Retailing, and Money Transfer. Afterwards Sudip was the Managing Director and CEO of Destimoney, promoted by New Silk Route, with over $1.4 billion under management. Sudip has significant presence in business media through his regular interaction on leading business channels, business newspapers and magazines.Author can be reached at [email protected]

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