India’s smaller towns aren’t just limited to samosas and dusty markets anymore. They are burgeoning with growth and presenting new business opportunities to large international brands. This shift is evident in the strategies of major global brands like M&S and Pepe Jeans India, who are now focusing on expanding to tier 2 and 3 cities.
The QSR industry is also witnessing this trend, with Pizza Hut experiencing half of its growth in smaller cities and altering its offerings to suit the local palettes. The emergence of a new, fashion-forward market in smaller cities has caught the attention of these brands. As a result, the new generation of consumers in small towns, focused on experiences, consumption, and self-care, is driving a significant change in traditional spending habits.
Luxury car brands like BMW, Mercedes-Benz, and Lamborghini are eyeing smaller towns and cities like Ludhiana, Kanpur, and Surat to drive up volume growth in India. Non-metro cities are expected to drive significant sales volumes, with an emergence of young entrepreneurs from these places, noted top luxury players in India.
According to consumer insights company Kantar, all-India urban average monthly household income has been growing at 8.4% for the last five years. Tier 2 and 3 cities have seen a compounded annual growth rate (CAGR) of 7.8%, indicating the rising incomes and purchasing power of consumers in smaller towns.
Brands like M&S and Pepe Jeans India have recognized this shift and are investing in new store openings and e-commerce to reach more consumers in smaller cities. Online exposure has made small town consumers just as fashion forward as their metro counterparts, resulting in brands targeting these areas for growth.
Overall, the new-age small city consumer is seeking the premium route, which is attracting the attention of large international players from all sectors, including fashion, luxury cars, and food. This shift in consumer trends is indicative of the opportunity that smaller towns and cities present for businesses aiming to tap into India’s growing affluent population and rapidly expanding markets.