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    Premiumisation wave sweeps across India's small towns

    Synopsis

    The Indian ecommerce market is expected to reach ₹9 lakh crore by FY26, with customers from tier-2 and smaller cities driving most of the growth, consulting firm Redseer said in a report on Tuesday, released in collaboration with Plural by Pine Labs, a digital payments firm. Online shoppers are expected to grow by 50% in the coming three years to reach 300 million by FY26, Redseer partner Jasbir Juneja said in the report.

    FILE PHOTO_ Woman shops inside the Big Bazaar retail store in Mumbai.Reuters
    Representative Image
    Small towns are driving the growth of premium categories such as fashion, packaged foods, cosmetics, eating out and lifestyle accessories amid a steady revival of consumer demand. Prompted by the trend, retailers are expanding faster in tier-2 and -3 markets than metros as aspirational demand, ease of digital payments and social media fuel this growth, executives said.

    "The contribution of top 10 cities has declined 4-5% and gone in favour of tier 3, 4 cities - that long-term trend is indisputable and every retailer has to pay attention to these markets," said Ashok Sonthalia, chief financial officer of Tata Group-backed Titan Company, which sells watches under the Titan and Fastrack labels besides jewellery brands Tanishq, CaratLane and Mia, along with Skinn perfumes and Taneira sarees.

    Consumers everywhere have access to what's happening, thanks to platforms such as Instagram and YouTube, with ecommerce ensuring delivery to the smaller markets, he said.

    "Hence, we are seeing this happening across our fragrances, watches, sarees, bags and jewellery lines," Sonthalia said.

    Premiumisation Wave Sweeps Across India’s Small Towns.

    The Indian ecommerce market is expected to reach ₹9 lakh crore by FY26, with customers from tier-2 and smaller cities driving most of the growth, consulting firm Redseer said in a report on Tuesday, released in collaboration with Plural by Pine Labs, a digital payments firm.

    "From bustling cities to remote villages, digital payments are on the fast track to change the way users transact," the Redseer report said. "Penetration of smartphones and the internet, and favourable government policies have been key drivers in the adoption of digital payments."

    Online shoppers are expected to grow by 50% in the coming three years to reach 300 million by FY26, Redseer partner Jasbir Juneja said in the report.

    Consumer companies across categories, such as Nestle, Domino's, McDonald's and Lotus Herbals have cited higher traction for premium products in tier-2, -3 and even tier-4 markets, leading much of the post-pandemic revival, adding this is happening despite inflation.

    Nestle India chairman Suresh Narayanan said in a recent interview with ET: "We are surprised that some of our premium packs of coffee and chocolates are seeing a surge in demand from the really small towns. Distributors too are asking us for stocks... and such markets are serviceable now. Earlier, many of these markets had no roads."

    Brands such as Shoppers Stop, Meena Bazaar, Soch, Mohanlal Sons and Tasva have planned the highest number of stores in a year to cater to the demand surge, especially in tier 2 cities, executives from these companies said.

    "We have planned to open at least one store every month and most of it is in tier-2, -3 cities and we are confident of these stores doing well," said Sameer Manglani, owner of Meena Bazaar.

    Soch, another ethnic wear brand, has opened stores in cities like Kurnool, Muzaffarpur, Gorakhpur and Jaipur. It plans to start outlets in Udupi, Dehradun, Allahabad, Madurai, Ludhiana, Barnala, Faridabad, Jodhpur, Vellore and Thrissur.

    Of the 11 department stores opened by Shoppers Stop in the last financial year, only three are in metro cities.


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    ( Originally published on Jun 06, 2023 )
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