As a result of increased internet penetration and adoption of mobile devices across India, online retailers prefer smaller cities to expand their business.

According to eBay Census 2011 study, a number of 3,311 Indian cities have made online purchases between July 2010 and June 2011, with 1,267 of them being non-metro cities. Metros have a dominant share of purchases, with Tier 2 and 3 cities catching up fast. Metros contributed 51 per cent of all e-commerce transactions, while Tier 2 and 3 cities contributed about 40 per cent and rural India 9 percent.

Research has indicated that while consumers in the metro cities purchase products and services mostly because of convenience, consumers located in the non-metro cities buy as a result of non-availability of products. Large retailers do not think it is convenient to open shops in small towns thus e-commerce is a good method to offer their products in non-metros.

Online shopping portals expect the number of orders coming in from these areas to grow as a result of rising internet penetration, growing purchasing power and adoption of mobile devices.

According to a Google report, over 70 percent of internet browsing has happened in non-metros and over all 50 million people logged on to the internet from mobile devices in 2011.

The eBay study has also shown that logistics in non-metro cities and towns represents a challenge and a major differentiating factor from the metro cities.

India’s online retail industry is expected to jump to USD 1.43 billion (INR 70 billion) by 2015. The main challenge for an e-commerce business is logistics; last-mile-delivery and consumers still reluctant to use debit or credit cards online.