How Tier 2 and Tier 3 cities are proving to be growth engines in India

As saturation in the economy continues to rise in India, Tier 2 and Tier 3 cities grew as a revolutionary wave that has been found to be delivering success. The economic growth of the country truly relies on the revival of businesses and overall performance rise for business in all sectors. While we are adapting to new normal, digitization has proven to be the strongest support system that kept several businesses and people afloat. Talking about business recuperating themselves, the traction has been witnessed since the unlock phase began in India. However, Tier 2 and Tier 3 segments have showcased great potential. Many factors lead to a major shift in the buying pattern. A surge of reverse migration, generated by the pandemic has been a strong factor in taking most of the young professionals close to their homes due to relocation. Furthermore, customers today want to buy in a way that is easy, secure, and hygienic, COVID-enabled rapid growth in new shoppers in the digital space as it thoroughly meets these requirements.

A strong push in the line of Aatmanirbhar Bharat initiative

'Aatmanirbhar Bharat' proposed a broad outline to promote the development of India in different sectors and asserted that the coronavirus pandemic cannot stop the march of the nation towards self-reliance. This gave a push for the businesses and helped in making the economy self-reliant. Moreover, digitization has emerged as a central pillar to meet the interests of societies, people and organisations alike as we are collectively transitioning to the 'modern standard'.

Experts’ Viewpoint on Tier 2 and Tier 3 cities

Businesses are increasingly becoming optimistic after the uncertainty of the first few months, and recovery is on the way. We reached out to some experts from various industries, to get their point of view. Let’s look at what they have to say:

Aggarwal, CEO, StoreHippo

E-commerce has bounced back very quickly after the ease in lockdown restrictions and by June end many companies already went close to the pre-COVID levels. The festive season was a refresher and gave a boost to online sales. E-tailers experienced 40-60% growth in sales this festive season. What’s even more interesting is that many first-time buyers have been added to the customer base of e-commerce companies. The festive season sales were mainly driven by tier 2 and tier 3 cities who have been conditioned to the variety of products and ease of shopping online.

Delivering the best user experience is going to be the gamechanger this season. While price remains important, ease of ordering is what every e-tailer is focussing on. The winning formula is going to be products at your fingertips, quick checkout, fast delivery! So etailers have been amping up their mobile presence along with offering ease of payment through UPI and other digital alternatives. To ensure fast same/next day delivery, supply chains are being revamped and automated. Brands are also exploring multilingual options to engage customers better in a country as diverse as India. Along with this, hyperlocal e-commerce is gaining huge momentum wherein retailers are trying to fulfil orders as quickly as they can.

Prateek Sood, Director, Grand Slam Fitness

Among many industries, the crisis has hit fitness centres hard. Fitness manufacturing companies are coming up with different business strategies to make sure that their patrons stay healthy inside their homes. Tier 2 and 3 cities are back to normal and reopened the gyms with full force. People are coping with new normal and trying to balance things as it was earlier.

We saw a huge demand for commercial gym equipment in September and October month. 95% demand coming from tier 2 and 3 cities such as (Rajasthan, Madhya Pradesh, Gujarat) as new gyms are opening up. We are seeing a 20% hike in demand for commercial gym equipment from last year. Looking at the demand, we are also expanding the business by launching 5 more gyms in 2021. Also, planning to launch an international brand in India that is ‘Octane fitness’, which offers Cardio equipment.

Amol Roy, Founder Shutter Cast

The pandemic came as distress for most of India’s companies. Probably a decent amount is trying to adapt and stay afloat. Digitization and digital transformation were once hard to reach; now we are part of the motion to make it accessible for all organizations. Several brands have developed their standalone websites to appeal to the booming market. Most of the demand came from tier 2 and tier 3 cities and beyond, contrary to estimates. We have observed that many SME’S and MSME’s are now adapting to the current scenario at a much faster pace.

Digital transformation is becoming a need of the hour. From healthcare to payments, everything is moving to digital to provide the services to their respective audience and users. We as a digital marketing agency, have seen a huge rise in the number of clients approaching us for acquiring digital services and we are aware with the fact that this will continue for so long in the coming years.

Rajesh Gupta, Co-Founder and Director, BUSY accounting software

People have suffered losses due to the lack of the right kind of bookkeeping systems. This has made companies think about getting advanced accounting solutions. We have been receiving calls and enquiries from various Tier 2 and Tier 3 regions to transform their financial accounting systems and ensure safety, accuracy etc. With this, we have managed to acquire close to 33% growth post the period of lockdown and helped thousands of MSMEs by providing a free version of accounting software during the period of lockdown, across India. Around 40% of the businesses are grappling to sustain themselves to cope with the current unavoidable situations. We are trying to help ease the accounting operations of MSMEs and make them able to survive. With the surge in demand, we are also progressing to providing the best digital accounting services to MSMEs which are the most efficient target audience as well as known as the backbone of the economy.

Kunal Mahipal, CEO, Onsitego

Onsitego is in the business of protecting and extending the life of all electronic gadgets, big and small. The company offers a range of customer-oriented, post-purchase services – that have been designed to protect the devices and ensure their longevity.

The after-sales service industry is still quite fragmented and under-penetrated, and we have enough headroom to grow. Most of our volume comes from metros and Tier I cities, but we have seen a lot of traction from Tier 2 and Tier 3 cities in Madhya Pradesh, Rajasthan, and Tamil Nadu. With higher spending power and consumers evolving with time, we can see further addition of customers from Tier 2 and Tier 3 cities across India.