Hyperlocal Ecommerce Businesses Are Coming of Age

If people have always bought hyperlocally, why won't they now?

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Especially in developing countries, where the retail trade almost entirely was hyperlocal, ecommerce giants had a tough time persuading people that things could be done another way. And just when they seemed like they might succeed, the new wave of well-funded hyperlocal ecommerce businesses have emerged as a threat.

What Are Hyperlocal Ecommerce Businesses?

These online retailers have great physical proximity to the customer. While a large nationwide grocery retailer might require you to order today so that they can deliver tomorrow, a hyperlocal grocery seller would ensure that you receive the grocery with an hour or two.

Hyperlocal ecommerce businesses will deliver food, medicine, consumer goods, and services to you. A special characteristic of this is that their entire supply chain is located pretty close to the buyer as well as the seller. As a result, the sellers are themselves retailers or smaller traders. For instance, Starbucks does not home deliver its beverages in most countries. Some countries have evolved a hyperlocal delivery model where one can order anything from one's vicinity. So one could order hot Starbucks coffee from a hyperlocal ecommerce business.

Hyperlocal Businesses Are Fast and More

Because these businesses operate within your vicinity, they are invariably faster than non-hyperlocal businesses. But that is not all. Though hyperlocal businesses usually do not have as strong a brand as a large online retailer, they often evoke a greater degree of trust. This can be explained by the fact that the customer feels quite in control of the entire supply chain, i.e., the customer knows where the product is being sourced from, where it's present location is, and as a consequence when it will be delivered. It's noteworthy that hyperlocal ecommerce brands often piggyback on the brands of local retailers. For instance, it is not uncommon for a hyperlocal player to permit users to select the specific retailer they want the goods to be picked up from. In this case, the hyperlocal business is acting merely as a logistics provider.

Though logistics is crucial for all kinds of ecommerce businesses, it is all the more so for hyperlocal businesses. It would not be too much of an exaggeration to state that hyperlocal ecommerce is primarily about order booking and delivery. It's important to note that delivery and logistics do not mean the same thing for hyperlocal ecommerce businesses as they do for broader ecommerce plays. Long distance transportation, warehousing, and many other legs of logistics just do not affect the hyperlocal guy. The much-famed last-mile logistics is the only logistics that the hyperlocal business needs to worry about. For the rest, they piggyback on other retailers in their locality. Given that the business operates within a limited area, even reverse logistics is not as big as deal as it could have been otherwise.

Benefits and Challenges of Hyperlocal Ecommerce Businesses

  • Though getting off the ground is easier, scaling is tougher as one has to replicate the same model repeatedly in different localities.
  • Many western countries have not been traditionally hyperlocal in their retail business. So countries developing their own hyperlocal ecommerce industry do not have a model to learn from.
  • Given the small geographic spread of a hyperlocal business, marketing spends are usually quite efficient as there is little wastage.
  • Word of mouth can spread pretty fast.
  • As hyperlocal businesses replicate themselves in multiple territories, they feel the strain of the customer's expectation of rapid delivery.
  • The suppliers of hyperlocal retailers are often other retailers. As a result, controlling quality and inventory can be a challenge in several cases.

Hyperlocal ecommerce businesses are here to stay. But the rules of the business are still being written.