E-commerce is eyeing the Northeast. Tough terrain, big rewards await.

“Reverse logistics for returns are double as costly outside the Northeastern cities. The purchasing power is also concentrated in the larger cities. The confluence of all these factors had limited investments to the larger cities only," said Madhur Singhal, managing partner, consumer and internet at Praxis Global Alliance, a management consulting firm.

The most important change is the perception of risk, said Singhal, adding that now “companies are not hesitant in creating infrastructure, hiring talent and tapping the latent demand that exists there."

Yet, structural constraints explain why the region was difficult in the first place, and why expansion still won’t be easy. “It is considered tough because of the vast and difficult terrain with low demand, therefore making the fulfillment costs higher and non-viable," said Gupta of Kearney. Climate risks further push up costs.

“This is exacerbated by lower population density, which means that unit level costs are much higher, sometimes even double of what it is in cities. Road connectivity has improved significantly, but the distances and density continues to challenge economics," said Singhal.

Read more at Mint: E-commerce is eyeing the Northeast. Tough terrain, big rewards await.