India, Sept. 5 -- Thirty-seven-year-old Ujwal Sutaria, founder at TDV Partners, an early-stage venture capital firm, is surprised to see his retired parents readily adopt quick-commerce, given that they live in Vadodara, a tier 2 city in Gujarat. He didn't expect his mother to download Blinkit and Instamart and use it freely for last minute shopping of gifts and sweets for parties and festivals. Sutaria, well-versed with India's online retail sector having built a portfolio of more than 30 start-ups, says quick-commerce which became a norm in the metros is proliferating in tier 2 cities. Latest numbers in the Deloitte-Ficci report back his comment. Quick-commerce is already operating in more than 80 cities and growing at an exponential 70-80%. A part of e-commerce, q-commerce focuses on ultra-fast delivery of goods, usually under 30 minutes. Of India's total retail market, online retail (including quick-commerce) is projected to double its share from 7% to 14% and touch $260 billion by 2030. Interestingly, tier 2 and tier 3 cities are at the forefront of this leap as they now account for over 60 per cent of all e-commerce transactions. Anand Ramanathan, partner and consumer industry leader at Deloitte (South Asia), says e-commerce will surge as Indian consumers move from unbranded to branded goods. Unorganised sector products are difficult to sell online as there's no quality assurance, he says. "Online shopping will expand as Gen Alpha (born after 2010) joins the consumption class. Already, India has the largest youth population in the world with 65% people under the age of 35 who are digital-savvy," he adds. In India, supply creates demand. E-commerce transactions in small towns have grown on the back of product availability and attractive online discounts, Ramanathan says. E-commerce sites and marketplaces expanded the options for people living tier 2 and tier 3 cities. "Offline stores offer limited choice. Merchandise stocked in a particular branded store in Mumbai and Delhi is different from what's available in the same brand in Vadodara or Nagpur. Online changed that," says Sutaria. Radhika Ghai, founder of Kindlife, says 60% of e-commerce transactions happening in small cities are consistent with their own experience. "The surge is driven by both consumer pull and platform push. Consumers in smaller towns are highly aspirational and increasingly shop online for authenticity and convenience. Platforms, meanwhile, have improved logistics, vernacular content, and delivery times in these regions," she says. Online beauty platform Kindlife offers curated Korean, Japanese, and international beauty brands to Gen Z and millennial consumers. "The metros aren't saturated, but the incremental growth story of Indian e-commerce is now firmly centred around tier 2 and 3 towns," Ghai says, adding that nearly 40% of Kindlife's new customers come from smaller cities and quick-commerce is among its fastest growing channels. In quick-commerce, Sutaria expects the next wave of growth to come from "verticalization" or platforms specializing in specific product categories. "I see 4-5 quick-commerce companies coming every week for funding in the fashion and lifestyle space. Other possible vertical categories are the kids' segment or pet care," he says. However, whether they will work or not remains to be seen, he adds. Ramanathan says, going forward, verticalization is one possibility and the other is for the horizontal quick-commerce platform to start specializing in a few verticals, like, say, kitchenware or gifting. "Some of these categories will drive margin expansion for quick-commerce companies. Besides, to travel beyond the 80 cities, q-commerce services will need to invest in infrastructure as it is a capital-intensive business. To be sure, rural India has been slow in adopting online shopping. Ramanathan says rural consumers behave differently and you need to understand rural demand for online shopping. He adds there is opportunity for rural specialists in e-commerce. Ghai believes that online adoption in rural India is growing but infrastructure, payments, and logistics still constrain penetration. "Where networks are in place, we see meaningful spikes in demand. Over the next few years, rural India will shift from being an 'untapped' audience to a high-growth segment, as trust in digital commerce deepens," she says. Sutaria, meanwhile, is content to see small towns participating in digital commerce. "People I met in Patan in Gujarat are using Flipkart and Meesho. So, while rural markets may take some time to adopt online shopping, India's tier 3 and 4 towns are getting on the bandwagon."...