E-commerce booming in India's Tier-2 and Tier-3 cities, says Amazon India's Vivek Somareddy

E-commerce is experiencing remarkable growth in India's Tier-2 and Tier-3 cities, according to insights shared by Vivek Somareddy, Vice President, India and Emerging Country Seller Fulfilment, Amazon India.

Amazon's multi-channel fulfilment

In a recent interview with Business Today, Somareddy discussed various facets of Amazon's operations in India, shedding light on the company's Multi-Channel Fulfilment (MCF) initiative and its implications for the evolving e-commerce landscape

MCF is the third-party logistics solutions provided by the ecommerce giant, which enables sellers to leverage Amazon's fulfilment network, irrespective of them being sellers on the platform.

He noted that Amazon currently serves 100 per cent of India's serviceable pin codes, encompassing over 20,000 pin codes. This extensive reach, coupled with the growth of the digital economy, has spurred significant e-commerce activity in smaller towns and cities beyond India's metropolises, Somareddy highlighted.

Challenges of D2C e-commerce in India

The top Amazon executive further noted that many sellers across India face significant challenges when it comes to selling Direct to Consumers. Amazon’s latest initiative– Multi-Channel Fulfilment (MCF), is an attempt to solve this issue, he added.

He said, "While launching a Direct to Consumer (D2C) business may be relatively simple in the tech-driven world today, scaling it and ensuring sustained growth pose significant challenges, especially given the intensifying competition in the e-commerce sector."

"MCF is Amazon's response to these challenges. The program enables sellers to fulfil e-commerce orders from various sales channels, regardless of whether they sell on Amazon or not. By leveraging Amazon's extensive logistics network, MCF provides a seamless order fulfilment process, enhancing the overall customer experience," Somareddy added.

Somareddy also explained that via MCF, Amazon is attempting to build a level playing field for all sellers. "MCF lowers entry barriers for smaller sellers, with costs as low as Rs 59 per order. This affordability empowers a wide range of sellers, from established brands to startups, to participate in India's thriving e-commerce ecosystem," he explained.

E-commerce interest in Tier-2 and -3 cities

Speaking of the spread of e-commerce in India’s Tier-2 and -3 cities, Somareddy noted that the interest is not just on seller side but also from the side buyers.

"Customer demand patterns have been shifting toward tier 2 and tier 3 cities. These cities have witnessed a significant uptick in new customers and orders,” he said.

An increasing interest in e-commerce from India’s Tier-2 and -3 cities has been observed recently. According to a report by Unicommerce, these cities cornered a greater share of India’s e-commerce market in 2022, with easy access to large assortments of products prompting shoppers in under-penetrated markets to turn to online purchases.

E-commerce market share of Tier-3 cities grew from 34.2 per cent in 2021 to 41.5 per cent in 2022, while that of Tier-2 cities rose from 19.4 per cent to 21.4 per cent during the period. At the same time, market share of Tier-1 cities dipped from 46.4 per cent in 2021 to 37.1 per cent in 2022, the report added. Unicommerce analysed data from over 500 million orders that were processed in the last two years.