Small towns: New address of premium goods

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India’s small towns are now big buyers. From fashion to packages foods, lifestyle accessories to eating out, there is a steady consumer demand across a range of products and services that are deemed as premium, reports The Economic Times.

The spending trend has also prompted retailers to focus on the markets that are labelled as tier-2 and tier-3. The growth corroborates the theory of aspirational demand taking roots in these markets, ease of payments and the impact of the ubiquitous social media.

What’s most remarkable is that the growth of consumption in smaller cities and towns come against the backdrop of the top 10 cities losing marketshare.

Ashok Sonthalia, chief financial officer of Titan Company said, “The contribution of top 10 cities has declined 4-5% and gone in favour of tier-3 and tier-4 cities – that long-term trend is indisputable and every retailer has to pay attention to these markets.” The group sells watches, jewelry brands, fragrances and saris. He said that their products are witnessing robust sales from the smaller cities and towns.

Prominent brands such as Nestle, Domino’s, McDonald’s have all reported higher sales of premium products from tier-2, tier-3 and even tier-4 markets. The rise in sales started even before the dramatic drop in retail inflation recently.

The rise of the new markets is also substantially due to the fact that new platforms such as Instagram and YouTube have triggered busy sales activity across a diverse range of products.

A report by consulting company Redseer and Plural (a digital payments company) has said the Indian e-commerce market might touch Rs 9 lakh crore by 2025-26. And tier-2 cities are expected to fuel most of this growth, said the report.

There would be a virtual explosion of online buyers in the country. They would grow by 50% over the next three years, said the report.

Proliferation of smartphones and the internet with expanding bandwidth have turned every user into a potential buyer.

“From bustling cities to remote villages, digital payments are on the fast track to change the way users transact,” the report from Redseer and Plural said.