Rise of Tier-II online shoppers reshaping India's apparel market

The Indian e-commerce landscape is undergoing a significant shift, with a rise in online shoppers from tier-II cities and beyond. This trend presents a massive opportunity for apparel businesses, particularly those catering to value-conscious consumers in these regions.

Market potential and growth drivers

A Nielsen report estimates only a quarter of India's 720 million online users (as of Dec 2022) actively transact online, highlighting the vast potential in Tier-II markets. Investors are backing companies like Rozana and Floryo, which focus on serving the value-conscious customer base in these regions. Funding for such ventures is on the rise. Rozana, for example, secured $22.5 million recently. A KPMG study, in collaboration with Facebook India, projects a staggering 12-14 per cent annual growth rate for the fashion market in Tier-II cities by 2022, driven by internet proliferation and growing aspirations. Similarly, as per a RedSeer Consulting forecast the online fashion market in Tier-II cities will reach a size of $7-9 billion by 2023.

A recent Unicommerce report (2024) highlights a significant rise in online kidswear sales, with Tier-II and Tier-III cities contributing a whopping 118 per cent order volume growth. This trend can be attributed to increasing brand awareness and a growing focus on online shopping for children's clothing. In fact, there is growing demand across categories like menswear and womenswer.

Demand for both value and premium segment

The Tier-II market caters to a diverse range of consumers with varying preferences. A significant portion of Tier-II shoppers are value-conscious. Platforms like Citymall and Dealshare have witnessed success by offering everyday essentials and groceries at competitive prices. This segment is likely to be receptive to budget-friendly and private label apparel brands as they are open to exploring new brands with unique propositions

While price sensitivity exists, there's also a growing demand for premium apparel brands in Tier-II cities. Increased disposable income and exposure to fashion trends are driving this growth. This segment presents an opportunity for established brands and new D2C players offering high-quality and trendy clothing.

Interestingly, in Tier II markets both branded and unbranded products can find a place. Established brands can leverage existing brand awareness through social media and online advertising, Tier-II consumers are increasingly seeking established brands. This trend is likely to continue, creating a market for both domestic and international apparel brands.

Unbranded products on the other hand can compete on price and cater to specific needs. They still hold a significant share in the Tier-II apparel market, particularly in the value segment. However, the demand for branded products is expected to rise as consumers become more brand conscious.

Offline market's role in online growth

The offline market plays a crucial role in supporting the online apparel market in Tier-II cities. The presence of physical showrooms and experience centers allows Tier-II consumers to touch, feel, and try on clothes before purchasing online. This builds trust and confidence in online shopping.

Online retail also flourish as they partner local kirana stores or establish pick-up points in Tier-II cities. This facilitates convenient delivery and return options, encouraging online purchases.

Indeed, the rise of Tier-II online shoppers is a significant development for the Indian apparel industry. By understanding the specific needs and preferences of this market, brands and online retailers can develop targeted strategies to capture a share of this growing market. The key lies in offering a variety of products across sectors and segments, catering to both value-conscious and brand-driven consumers. Leveraging the existing offline market infrastructure will further propel online apparel sales in Tier-II cities.