After making a strong base in metros, high-street fashion brands have all been gearing up for entering the greener pastures in tier III and IV cities and towns
While walking down the streets in a small town like Ludhiana in Punjab or Jabalpur in Madhya Pradesh, it is not unusual to come across branded outlets of apparels, pre-schools, salons etc. During the last few years, mushrooming of big brands in the small cities and towns pan India has witnessed an upward trend. After making a strong base in metros, high-street fashion brands have all been gearing up for entering the greener pastures in tier III and IV cities and towns.
Coming across an Arrow or a Trends outlet in a Tier III town was an unusual sight till a few years ago. However, now not seeing a branded outlet is an unusual thing while travelling across smaller towns. Moreover, according to a recent analysis by the Boston Consulting Group, the retail sector in India is expected to reach a whopping US$ 2 trillion in value by 2032. Our nation is on the way of becoming one of the most promising and developing marketplaces in the world. Nearly 60 shopping malls encompassing a total retail space of 23.25 million square feet are expected to become operational during 2023-25. If these figures are to be believed than these malls would be coming up in small cities and towns as India is on the verge of saturation in terms of malls in metro cities.
According to a report by consulting firm Kearney, released last year, tier-2 and -3 cities are hotbeds for growth, opening up opportunities for retailers to expand. These markets indeed promise lot of opportunities to retailers with growing aspirational value and market base. As the Kearney Research points out, shopping trends in metro cities have influenced the consumer behaviour in tier 2 and 3 cities resulting newer retail formats.
Industry Stalwarts Voice their Opinions on Prominent Brands coming in Tier 2 & 3
It was earlier believed that big businesses can only be successful if they are located in prime locations. However, in reality, smaller cities and towns hold more potential for business’ growth. Even big brands have moved to smaller cities to expand their businesses. This is due to factors like availability of resources, affordability, costs involved in setting up the business, easy market penetration, etc. Let us find out what the stalwarts of the Retail, Service as well as gifting sectors have to share on this.
KG George, Senior Vice President, TTK Prestige said, “Opening up in Tier 2 and Tier 3 towns is a smart move for brands as it helps them expand their reach and tap new consumers. These towns are seeing a rise in disposable income and a growing middle class, which makes them attractive to businesses. Additionally, with increasing internet penetration and the rise of e-commerce, consumers in these towns have more exposure to branded products. Moreover, post pandemic, many people have moved away from large cities to smaller towns and cities. This has further increased the potential customer base. Overall, the trend of prominent brands opening in Tier-III and Tier-IV towns reflects the evolving economic landscape and growing importance of these towns as key markets for businesses.”
On the same lines Pushkaraj Shenai, CEO & Wholetime Director, Lakmé Lever shares, “The digital economy has practically dissolved the gaps between metro and non-metro cities. Tier 2 and 3 cities have contributed exponentially to the economic growth of the country. Additionally, entrepreneurship is on a rise in India, especially in non-metro cities. Lakmé Salon has given enterprising individuals, women and professionals like CAs, MBAs, corporate employees, engineers, experienced salon experts, etc., an opportunity to become a franchise partner in smaller cities and towns.”
Anil Sharma, COO Retail and Franchising FNP (Ferns N Petals) said “Today with increasing purchasing power and rising disposable incomes, consumers in smaller towns and rural areas are seeking better quality products and shopping experiences. Retail brands are taking notice of this demand and are keen to tap into these markets. Also with the increasing availability of internet services and the rise of e-commerce platforms, consumers in smaller towns and cities are becoming more aware of the latest trends and are seeking access to a wider range of products. Companies are keen to cater to this demand by opening stores in these areas. Another important factor is the lower real estate costs in smaller towns and cities which makes it affordable for brands to set up stores thus reaching a wider consumer base without incurring exorbitant costs.”
Why do Big Brands Prefer Smaller Cities?
However, few other factors that attract entrepreneurs and brands towards tier 2 and 3 cities & towns can be as follows:
Sectors Prospering in Metros as well as Tier II&III Towns
Retail is one industry which works wonders wherever it starts, whether in small towns or metros. One prominent reason is consumers both in A as well as B and C towns are updated about fashion and ongoing trends. Moreover, higher disposable incomes, changing demographics and improved agri-produce realisation have made smaller cities and rural areas as the hotbeds of growth. Therefore, Indian retailers are being attracted towards this big, untapped growth opportunity. Reliance Trends, a part of the Reliance fashion retail has stepped up recently to focus on small towns. Continuing its focus on what is calls “democratizing fashion in India”, TRENDS is strengthening its reach in tier 2-3 towns and beyond. As per the Company statement, “TRENDS is truly democratizing fashion in India, by strengthening its reach & connect with consumers in India – right from Metros, mini metros, to Tier 1, 2 towns and beyond.”
In addition TTK Prestige, a home retail brand has also grown leaps and bounds in the last few years, not only in metros but also across small towns. Today, there are more than 675 Prestige exclusive stores across 375 towns, with 489 being in Tier 2 & 3 markets making TTK Prestige the largest kitchen retailer in the country. Sharing his views, KG George of TTK Prestige said, “The brand expanded significantly in 2016 with the acquisition of Horwood, UK. With the acquisition, TTK Prestige introduced popular brand - Judge to the market. With that, we recognised the untapped opportunities for growth that lies in Tier II and Tier III towns in India. These markets were initially dominated by unorganised players of no brand recognition. However, they aspire to live a higher standard of living with branded products that are value for money. With the launch and rebranding of Judge by Prestige and its range of superior products, this latent market now has access to quality kitchen appliances from a reputed brand. These appliances range from traditional pressure cookers to next-generation mixer grinders and induction cooktops, all at great value. The brands provide the consumers of Tier II and Tier III markets with a range of premium products fulfilling the demand for premium products in these markets.”
The specialty retail sector has also grown exponentially in smaller cities and towns. With Ferns and Petals (FNP) leading the bandwagon, many retail brands have set up outlets in tier 2 &3 cities. However, FNP is still leading with over 400 stores in more than 130 cities across India. On this Anil Sharma (FNP) says, “As the purchasing power increases in smaller towns, people are more likely to spend on gifts for family and friends. They are becoming more aware of the latest trends and are looking for more unique and personalized options. This is leading to a rise in demand for gifting solutions which often offer a wide range of options to choose from including customised gifts and experiences. For any brand to succeed it has to adopt an omni channel approach. With our digital platform along with over 400 physical stores, we provide both online & offline services to our customers. With the help of our elaborate franchise network we can deliver any listed products in more than 250 cities in the country in two hours window. And of course physical stores create a strong brand recall value as they are positioned at very prime retail spaces in not only Tier 1 cities but also in Tier 2 and 3 towns”
Beauty lies in the eyes of the beholder is an old adage but at present times the facial beauty of a person matters more. So beautifying oneself is essential. Beauty salons are needed both in metros as well as small towns. Earlier local salons and parlours used to fulfill the needs of the customers in small towns but due to globalization now- a-days everyone wants the best for themselves. Therefore, branded salons can easily be seen in small cities like Ballia and Batala, which was impossible to think about a decade back. In addition, with more people from Tier 2 and Tier 3 towns using the internet, the prevailing online wellness industry is close to an entire digital makeover. Regarding the popularity of Lakme Salons, Pushkaraj said, “Making world-class beauty available to every Indian consumer is a huge part of our brand’s promise to ‘Beautify the Future’. Lakmé Salon has always operated in tier 2, 3 and 4 towns successfully. We have scaled to over 470 salons across 160+ cities. These cities have been an integral part of our growth and expansion plan. Lakmé Salon is already present in Tier 2 cities like Kanpur, Ludhiana, Ahmedabad, Amritsar, Ballasore, Nashik, Faridabad, Gwalior, Guwahati etc., to name a few. We have also expanded our presence in Tier 3 cities like Batala, Ballasore, Ballia, Chhindwara, Chiplun, Dankuni, Dharmapuri, Etawah, Gaya, Guntur among other cities across the country.”
Another retail sector which is unaffected by big and small cities is the jewellery industry. There was a common misconception earlier that only people of metros have an interest in branded jewellery. However, according to experts, the people in small towns and rural areas are more likely to contribute to the jewellery business in the country as they purchase more ornaments compared to people living in the metros. In rural areas, people are buying jewellery as a means of investment and also for marriage purposes. However, in the metro cities, people are holding back their money waiting for the prices to go down. Due to this there can be a huge opportunity in a metro like Mumbai, and even a bigger opportunity in a small town like kudal in Ratnagiri district. Therefore a brand like Tanishq by Titan is simultaneously souping up the big stores in Delhi-NCR and also setting up stores in places like Ballabhgarh. The brand has deeply penetrated in Haryana with outlets in Ambala, Hissar, Panipat, Rohtak, Yamuna Nagar, Karnal, Ballabhgarh, Faridabad etc.
One more sector which has shown immense success in tier 2 towns particularly in the last few years is the Preschool sector. People residing in unheard small towns like Parbhani, 400 km from Mumbai can now send their toddlers to branded pre-schools. This concept of sending toddlers to playschools has started with brands like EuroKids International which spotted local entrepreneurs in small towns and gave them the opportunity of being franchisees of successful brands. This explains presence of EuroKids’ franchise in markets like Akot, Angangaon in Maharashtra and Navsari and Nadiad in Gujarat among hundreds of other preschools in tier 2 and 3 towns. With the untapped tier II and III cities showing a phenomenal 40-45 percent growth in the $16 billion Indian franchising industry, the decision was surely the key to success.
It is not just the education service providers and retailers as even travel operators and FMCG companies are hording lesser known towns and cities to find franchisees in local entrepreneurs.
To conclude it can be said around 26.4 trillion of household income in India is concentrated in tier 2 and 3 markets as opposed to 800 billion in India’s big 8 metros. Thus, there is a huge market waiting in small towns for all sectors in the franchise industry. The potential of these towns are proving an irresistible lure for all franchises.
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