Tale of India’s Tier II cities: Retail therapy the new high
02 August 2023, Mumbai
The rise of Tier II cities is not a new phenomenon in India as the overburdened Tier I cities are already groaning under over-population, high cost of living, and infrastructure that wasn’t built to sustain such a large population.
As India’s economy grows and new manufacturing and service hubs spring up, Tier II cities have their own growing talent pool and are delivering work at par with their Tier I city counterparts.
A great bonus is that professionals living in Tier II cities have a higher disposable income in many cases due to the lower living costs associated with these towns.
Commercial real estate developers riding on the quest for retail spaces in these cities poured in and up came the malls.
And then e-commerce unlocked the craze for “shop until you drop” with its never-ending variety, access, robust pricing, and favorable return policies. E-commerce hit the right spots and let people flock by the droves, a delight for smaller brands with pan-India ambitions.
Growing retail among Tier II consumers
Data has it that residents of India’s Tier II cities and beyond are spending 2 hours 25 minutes per week shopping online, totaling 124 hours a year per individual (women tend to spend 149 hours annually).
Of course, Gen Z shoppers lead the consumer segment shopping online with 51 percent whereas millennials are at 47 percent.
CyberMedia Research (CMR), a technology market research and advisory firm, conducted a consumer study in May, with a sample size of 3,000-odd consumers across eight Tier I and II cities.
Aspirational
The survey titled ‘CMR Consumer Aspirations and e-Commerce in Bharat’ revealed these figures. The research also revealed how deeply Amazon and Flipkart have penetrated household in these cities with 72 and 70 percent of purchases being made on these two platforms.
Meesho is a distant third at 30 percent whereas JioMart and Reliance Retail take up the last two top-five slots with 20 and 14 percent respectively.
The two top drivers prompting online shopping sprees are at 57 per cent – attractive prices and convenient exchange and returns. Irresistible offers and deals clock in as the third most key trigger at 49 per cent.
Clothes and accessories are the leading categories of online purchases by residents of Tier II towns with 62 per cent of share of wallet whereas personal electronic gadgets and devices come in as second with 54 per cent.
Surprisingly, beauty products occupy the fifth position in the top five with 21 per cent whereas groceries and health & personal care come in third and fourth respectively, with 33 and 23 per cent.
On the back of this report, CMR issued a statement that in a large, diverse market such as India, both online and offline retail will continue to coexist. As consumers continue to gain digital fluency, the e-commerce boom will also significantly benefit small business owners. This will contribute to the rise of India’s trillion-dollar internet economy.
E-commerce valued at $ 325 billion by 2030
While the value of India’s e-commerce was a mere $70 billion in 2022, it is projected to grow into a $ 325 billion sector by 2030, as there seems to be no slowdown in buying things online – as per Deloitte India report ‘Future of Retail’.
The report states retail penetration is projected to grow at an extraordinary rate and it would outpace offline retail by 2.5 times in the next decade – the key drivers of this phenomenal growth may be attributed largely to residents of Tier II cities and Tier III towns.
