Unveiling India's Economic Renaissance: The Triumph of Tier 3 City Entrepreneurs and FMCG Growth
Lt Col Anirban Das
CSCP? Supply Chain Specialist with expertise in Logistics & Operations Management ? Innovating Scalable Solutions ? Process Enhancer ? Veteran
In the vast tapestry of India's economic landscape, nestled among the bustling metropolises and burgeoning tech hubs, lies a quietly flourishing narrative of growth and opportunity – the story of Tier 3 cities and the visionary entrepreneurs who dare to dream big within their confines. As the sun sets over the horizon of traditional business paradigms, it rises with renewed vigour in towns like Dehri on Sone, painting a portrait of resilience and prosperity.
In my recent journey from the vibrant streets of Kolkata to the serene valleys of Uttarakhand, I stumbled upon a gem of progress in the form of a newly minted hotel in Dehri on Sone. Despite its modest location, this establishment stood as a testament to the indomitable spirit of entrepreneurship that is sweeping across the heartlands of India. Opened just this year, it exuded an aura of freshness and promise, its corridors echoing with the footsteps of a workforce eager to carve their mark on the hospitality landscape.
What struck me most was not just the gleaming fa?ade or the immaculate interiors, but the palpable sense of ambition that permeated every corner of the establishment. With a staff strength of 200, each member radiated a dedication to their craft, embodying the ethos of service and excellence. From the courteous front desk personnel to the diligent kitchen staff, it was evident that this was more than just a job – it was a calling, a collective endeavour to elevate the standards of hospitality in their community.
But this hotel was not an isolated case. Across India, Tier 3 cities are witnessing a surge in entrepreneurial activity, driven by a combination of factors such as government initiatives, infrastructural development, and access to finance. Recent reports indicate that the contribution of Tier 2 and Tier 3 cities to India's GDP has been steadily increasing, with sectors like manufacturing, services, and agriculture leading the charge.
One such sector experiencing rapid growth in Tier 2 and 3 cities is the Fast-Moving Consumer Goods (FMCG) industry. As economic development reaches non-metropolitan areas, disposable incomes are on the rise, leading to heightened demand for FMCG products. McKinsey in a report had earlier projected a substantial increase in households with annual incomes between INR 10-25 lakhs, creating a lucrative market for FMCG companies. Premium brands are seizing this opportunity, exploring new markets and paving the way for further expansion and prosperity, ultimately having a cascading effect in the Tier 2/3 cities. Deloitte's Future of Retail study of 2022 suggests that India was set to add 190 million middle-income households in 2022 and more than 15 million high-income households by 2030. ( Deloitte India's report attributes these projections to the rapid growth of e-commerce in tier-2 and tier-3 cities, which have surpassed tier-1 markets in terms of total orders. In 2022, these cities accounted for over 60 percent of all orders, with tier-3 cities experiencing a remarkable 65 percent growth in order volume and tier-2 cities witnessing a substantial 50 percent growth. Meanwhile, tier-1 cities observed a modest 10 percent growth.) The rapid growth of e-commerce in tier-2 and 3 cities is reshaping the retail landscape.
Moreover, the digital transformation sweeping across India is reshaping consumer preferences and shopping habits. With the increasing exposure to OTT platforms, social media, and rising disposable incomes, consumers in Tier 2 and 3 cities are embracing online shopping through e-commerce platforms and mobile applications. Approximately 20% of e-commerce purchases are non-routine, indicating a willingness among consumers to explore new products……… Retail therapy some may say! This shift towards online retailing benefits FMCG businesses, as they leverage e-commerce for nationwide distribution, with Tier 2 and 3 cities witnessing significant growth in e-commerce orders.
The tech-savvy influence of Gen Z, with their extensive use of smartphones, increasing exposure to OTT, YouTube, other social media platforms and active participation in e-commerce, further catalyzes the growth of the FMCG sector. Customized product innovations tailored to meet the unique needs and preferences of non-metro consumers have also played a crucial role in driving FMCG industry success in Tier 2 and 3 cities. FMCG firms are expanding their distribution networks, investing in robust supply chain infrastructure, and leveraging technology to surmount logistical hurdles, thereby accessing a burgeoning consumer base in non-metro markets.
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Localized communication strategies, tailored to align with local preferences and cultural insights, bolster brand loyalty and foster emotional connections with consumers. Organized retail chains in Tier 2 and 3 cities have significantly boosted FMCG sales, with modern retail outlets offering effective marketing platforms. The surge in omnichannel growth has tripled customer spending for those engaging through multiple channels, indicating the potential for further expansion and growth in the FMCG sector.
As we chart the course ahead, we must recognize the symbiotic relationship between Tier 3 entrepreneurs and the FMCG industry in driving India's economic resurgence. Together, they are shaping the destiny of our nation, weaving a tapestry of hope and opportunity for generations to come. In their hands lies the promise of a brighter, more inclusive future for India – one where prosperity knows no bounds and aspiration knows no limits. in the stories of the young entrepreneurs lies the true essence of India's growth story – a narrative of hope, determination, and boundless opportunity.
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