Why should you unleash the power of tier-2 cities and eCommerce to scale up business

Tier 2 cities are becoming an important market for premium products due to several factors. The rising disposable incomes and changing lifestyles of consumers in tier 2 cities have led to an increase in demand for premium products. People at tier-2 cities have been deprived of international brands, despite having greater exposure to it recently. Family here have grown their income significantly and have good buying power. According to a report by McKinsey & Company, the number of households with annual incomes between INR 10-25 lakhs ($13,500 - $33,700) in tier 2 and 3 cities is expected to increase from 80 million in 2018 to 140 million by 2025. This presents a huge opportunity for premium brands to tap into this market. This makes it a #1 reason to start focusing on tier 3 cities to scale up your business, especially if you are so far available in tier-1 and metropolitan cities only.

Secondly, ecommerce has played a significant role in enabling premium brands to reach consumers in tier 2 cities. With the increasing penetration of smartphones and internet connectivity, consumers in tier 2 cities are increasingly shopping online for premium products. According to a report by RedSeer Consulting, the ecommerce market in India is expected to reach $111 billion by 2025, with tier 2 and 3 cities accounting for a majority of the growth.

One Forbes reports indicates new D2C brands have very deeper and faster reach in tier 2 cities.

Here are some statistics:

• According to a report by Nielsen, premium products are growing at a faster rate in tier 2 and 3 cities compared to tier 1 cities. In fact, premium products account for 28% of the FMCG (fast-moving consumer goods) market in tier 2 and 3 cities, compared to 22% in tier 1 cities.
• A report by Deloitte suggests that ecommerce is expected to drive the growth of luxury brands in India. Online luxury sales are expected to grow at a CAGR of 29% between 2020 and 2025, with tier 2 and 3 cities accounting for a significant portion of the growth.

Considering the above, you need to quickly review and revise your 3rd P of marketing plan (Place), and plan a dedicated marketing mix to leverage this great opportunity at lesser cost.

In the end, it will be the survival of the fittest.

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