The last few months have bought in a paradigm shift in the consumer buying behaviour and the general feel is that this will continue to stay even if there are improvements in the restrictions. The businesses, on the other hand, have to survive this phase and this can happen only if they are agile and willing to innovate. Hyperlocal systems will become a way of life with more and more users adopting and embracing this platform and technology.
Hyperlocal: What does it mean?
The term ‘hyperlocal’ refers to ‘a small area’ or ‘very specific demography.’ It actually refers to a market that caters to the need of a very limited geographical area. While 4-5 Km is typically taken as a benchmark in terms of the area, we are seeing cases of this geography getting extended to more than 10-15km as well.
While talking about Hyperlocal marketplace as a whole, one of the misconceptions is to limit this to a food or a grocery delivery only. But that’s not the case. Companies who are involved in delivering personal care, house care services, medicines will also fall under this.
Hyperlocal systems typically have three players:
1. A Customer
2. A Business or a Store
3. A Hyperlocal startup which acts as a facilitator and more importantly provides the technology platform to enable the entire process in a seamless and efficient manner
Why Hyperlocal systems have become so popular?
The hyperlocal marketplace model is a perfect example of how the technical advancements can amalgamate with the age-old favourite shopping methods and come up with a unique formula for success. This is a model which helps the local offline businesses to reach out to their customers and ensure delivery of goods/services happen in the shortest possible time. The popularity of this model cannot be attributed to one single factor. Some of the keys are:
Shift in Consumer Behavior
We are in the era of on-demand or and more and more customers are looking for an instant gratification of the products they are wanting to buy or some services they want to experience. A 2-day delivery which was considered as a “wow” few years back has lost its steam and they want deliveries to happen in few hours. In short, customers are looking for Speed, convenience and safety. This I believe is the foundation.
Cell phone/Data Penetration
In 2013, while we did see a lot of players coming up in the hyperlocal space, things really picked up after 2016 when mobile data became cheap and consumers had access to mobiles at lesser cost. The advent of payment gateway channels during this period have also triggered the growth.
Kiranas and offline stores wanting to be more agile and resilient
Over the past few years, we have seen a large number of traditional business houses wanting to change and move from their traditional style of business. The recent pandemic has infact accelerated the transition from offine to online. As per the latest EY report, 20% of the kirana store owners across metros and non-metros have started leveraging online platforms to get a steady supply of goods and assistance in deliveries. Kirana’s have proven themselves to be both agile and resilient, being able to bear the brunt of an unforgiving pandemic. Lacking other means, they have created a simplified online journey using chat apps as a medium of taking orders, providing contactless delivery and then receiving payments through digital platforms.
How Hyperlocal systems are going to change in the new normal?
COVID-19 has drastically changed consumer behaviour. With physical retail coming almost to a standstill over the past couple of months, there has been a surge in demand for hyperlocal delivery, specifically for essential goods. In the initial phase of lockdown, demand for hyperlocal delivery of essential goods rose up to nearly 3-5 times.
Offline to Online
This holds good for both consumers and some of the traditional business houses. With consumers spending more time at home, we can see an increasing demand for such services. This trend will not only be applicable for the essential goods but will get extended to non-essential products as well
For the business houses, this transition is more to do with their intention to survive. The local kirana shops will find ways to digitize and collaborate with some of the hyperlocal partners to cater to larger customer base. Plus there are possibilities of them acting as “hubs or warehouses “for some of the larger e-commerce players.
Similar trends are seen in large traditional FMCG companies like ITC and Hotel Chains like Marriot, Taj who are also moving to online channels.
Convenience over Cost
The recent pandemic has also seen a small hike in the delivery charges. This is attributed to the limited supply plus the additional cost that the hyperlocal companies had to bear towards safety norms like PPE and contactless deliveries. Having said that, with safety becoming a very high priority, consumers would want to place safety and convenience over cost.
It’s estimated that the Hyperlocal business in India is more than 2300 Crore and this literally means that the pie is really huge and there is an equal opportunity for a large number of players to survive rather than compete with each other. We will see a lot more companies collaborating with each other to bring efficiency in cost and also with an aim to provide a better experience to the end customer.
Customers want transparency and access to real-time data when they use any online platform. Right from the time they decide to place an order till the time the order gets delivered at their doorstep, the customers have the right to know what is happening to their order. This seamless flow of information between different players and at multiple stages can happen only with technology. Manual intervention is a recipe for disaster. There has to be a clear focus on real-time visibility, dynamic routing, driver allocation by the hyperlocal players. Technology should also help in understanding which products are selling more, which areas have more demands and use this information to bring in efficiency.
This article has been authored by Mithun Srivatsa, CEO and Founder of Blowhorn, an intra-city logistics provider headquartered in Bengaluru. All views expressed are of the authors own.