Major trends in Hyper-local Industry in 2017

Date:   Friday , March 03, 2017

Starting the year on a positive note; as per a report by Ken Research, India\'s hyper-local market will be a noteworthy one in the years to come, which is anticipated to grow at a considerable CAGR, exceeding INR 2,306 crore by 2020. The Indian market demands and customer behavior has evolved a great deal in the past couple of years. Ensued by rapid urbanization, along with growth in disposable income of the middle class segment in India, personalized services and products made available at their door-steps is on the rise. Likewise, on the other hand, riding on new age technology, the ability of businesses to curate products that appeal to the aesthetic sensibilities or aspirational desires or instant needs of a person has led to the swift growth of hyper-local markets in India.

The Indian hyper-local market majorly driven by increasing number of startups is largely characterized by on-demand services that connect various merchants and customers through a mobile application. Thriving on their best in breed technology, these firms have been able to connect several local retailers with customers in the hyper-local space. Realizing the potential of this domain, the past two years witnessed emergence of several hyper-local players,inducing significant competition in the ecosystem. Other growth drivers identified in the segment during 2015-2016 is, enhanced investment scenario and higher penetration of smartphones in the country, especially in the tier 2 and tier 3 cities in India. Therefore, briefly, the major aspects and trends impacting the segment is technology, penetration in rural market, better logistics services and large scale public investments.

The Indian hyper-local segment is further sub-divided into some categories such as Groceries, Food, and Logistics etc. While the food hyper-local market managed to grab eye balls in the segment in the year 2015, hyper-local logistics segment has intensified recently. While the metro cities saw an early traction from hyper-local business, it\'s the tier 2 and tier 3 cities which showed a remarkable acceptance to the technology based hyper-local services. The use of local transportation such as auto-rickshaws in smaller cities made it possible for the hyper-local segment to flourish.

India\'s logistics hyper-local market anticipates growing further in 2017

The logistics hyper-local segment has grown intensely in the recent years and has aided many new market entrants, budding firms in the e-commerce ecosystem and local retailers to catch up with the growing trend of on-demand service. The ecosystem with large number of existing operational players is projected to add more players in the year 2017. The segment is expected to get diversified as it proliferates into delivery of food, groceries, dairy products etc. Currently valued at USD 300 billion, the Indian logistics market is estimated to grow at a CAGR of 12% by 2020, as per a report by Novonous titled. Logistics Market in India 2015-2020.

Burn driven business models will have a tough time

The new age startups, mainly offering e-commerce and aggregator business backed by technology have been following the principle of Cash Burn to scale up and capture market share. Due to weak entry barriers and easily replicable model, they recourse the discounts and low prices to gain market share. Such business models end up in loss in long run which results in sustainability issue.

One needs to focus on customers who value quality rather than discounts. So many startups are shutting down because they were burning cash to acquire customers instead of focusing on real growth.

Profitable business models will continue to attract investors

A business model which has a viable way of making money and is delivering value not just on paper but in reality as well, will see more investment opportunity. Venture firms are now looking out to invest in startups that have tangible business models and are focused on sustainability and unit economics.They prefer companies that have a potential to provide a return on their investment. The year 2017 will continue to see investments in the startups which have a capability to turn their business model profitable.

Tier 2 and Tier 3 cities will drive most growth

In India, 80% of the total population resides in Tier II and Tier III cities. These cities generate over two-third of the country\'s income and have been found to deliver successful economic growth opportunities in the past decade. In the digital India, non-metros cities will drive the growth as they stand with an untapped asset and wide adaptability to new technology and disruption.

However, any new business or existing business must understand that selecting an appropriate business model and a step towards interactive marketing strategies to gain traction would play an important role in deciding their success.