The new age of consumer-centric supply chain management highlights the benefits of placing the consumer at the core of strategy development and operations design. Recent e-commerce shifts translate into opportunities beyond online sales for all types of retailers, enabling retailers to meet the needs of diverse customer segments. Meanwhile, broad knowledge of e-consumer behaviour and delivery service demands has been developed based on scientific and operation insights from urban or broad, non-differentiated settings. As a consequence, the current e-consumer culture in urban settings, particularly in developed e-commerce markets, is heavily shaped by speedy deliveries, innovative delivery solutions, and a broad range of services, which is not fully applicable to rural e-consumers.
On the other side of the residential type spectrum, rural e-consumers appear to be one of the fastest-growing e-commerce customer segments, a phenomenon fueled by growing internet access, poor accessibility, and scant brick-and-mortar outlet variety. With an estimated 3.5 billion people living in rural areas by 2025, continuously spreading internet access and increasing economic capabilities, rural e-markets are turning into a promising venue for various e-retailers. From the market perspective, newly appearing consumer groups from the rural areas promise e-retailers and associated service providers new sources of revenues, while rural communities gain an opportunity to improve their life quality through extended product and service accessibility.
Studies show that rural consumers often choose online shopping for different reasons than do urban e-consumers, namely, geographic isolation, long travel distances, and a sparse range of products and services in proximate physical outlets. This makes rural e-consumers dependent on e-retailers’ offers and associated services to a much higher degree than urban e-consumers. Meanwhile, e-consumers from different residential-area types assumably have different service needs and expectations. The dearth of knowledge on the diversification of e-consumers’ requirements and perspectives by residential-area type is a major gap. This contributes to a vicious circle for service-level fitting: poor understanding of various demands and responses of e-consumer groups leads e-retailers to offer the same service range to consumers from different residential areas (or no delivery services at all). This causes logistics service providers to experience workload and cost disbalances when servicing urban and rural residential areas, resulting in higher costs for some operations (e.g., servicing failed home deliveries). This can negatively affect consumer experiences and satisfaction in segments without appropriate service offerings (e.g., rural residential areas), particularly in developed e-commerce markets. Delivery service offers for rural markets often fall into the service categories of either “no deliveries to rural areas” or “same delivery offers as the urban areas” where the first is potentially problematic for the consumers and the second one places a cost inefficiency risk on the delivery service providers.
The rising social sustainability challenges and the emerging business opportunities have led the shift in academic and industry attention toward the rural setting. Initial studies have provided insights into the delimitations and possibilities of rural e-commerce and supply chain management. While the evidence on consumer needs, expectations, and behavioural responses is extremely limited, we now have statistically supported evidence that there is, in fact, a deference between the rural and urban e-consumers. Specifically, our comparative study conducted in Sweden showed that variety in the delivery options and the ability to choose the service leads to a higher satisfaction and retention among urban e-consumers. However, this does not apply to the rural e-consumers. Their satisfaction and loyalty towards the e-retail delivery services are not dependent on the ability to choose delivery service and having multiple options. This implies that e-retailers can differentiate their service range for urban and rural consumers, without jeopardizing e-consumer satisfaction and loyalty. At the same time, offering more targeted and limited services for rural areas enables optimization of the logistics operations.
To fit services and operations to the rural environment means that one has to: 1) rely on the needs and capabilities of the supply chain actors and stakeholders where the consumer plays a critical role, and 2) rely on the rural eco-system features, such as the geography and infrastructure, social dimension, political dimension, cultural dimension, and economic dimension. Accepting a holistic systematic perspective implies complexity and inevitable differences between the urban and rural settings. This outlook involves both challenges and opportunities for different market actors, but inevitably targets the sustainable development of social and financial dimensions for communities and businesses.
Text by Yulia Vakulenko, Centre for Retail Research
These articles offer more insights on the topic:
Does delivery service differentiation matter? Comparing rural to urban e-consumer satisfaction and retention; Vakulenko, Y., Arsenovic, J., Hellström, D., and Shams, P. (2022). Journal of Business Research, 142, pp. 476-484.
Rural supply chain management: a multidimensional framework for future research in Europe; Prockl G., Williger B., Tampe M., Vakulenko Y., and Hellström D. (2021). Journal of Business and Systems Research. 15(6), pp. 701-26.