Apparel Online India Magazine March 1st Issue 2019 | Page 58

How Modern Retailers Are Seeing
A Boom In Tier-2, Tier-3 Markets
India, in the recent past, has been witnessing a huge presence of fashion brands
– national and international – in the metros. At the same time, the past few years
have seen the fashion brands experimenting with newer markets for better reach
as well as revenue generation.
G
rowing incomes, increasing awareness and high
aspirations in Tier-1 and Tier-2 cities are encouraging
several retailers to make a beeline in these areas. The
international brands entered India eyeing the vast US $ 50
billion market opportunity in apparel – a category which is
growing at 12-13 per cent per annum, much of these being
controlled by unorganised retailers in Tier-2 and beyond
markets. Now cashing in on similar opportunities, fashion
biggies like Raymond, Being Human, Woodland and even
online majors like Amazon, Shopclues, etc. are aggressively
penetrating the Tier-2, Tier-3 markets by expanding their
business.
Tapping the Tier-2 and Tier-3 markets
According to Census 2011, about 68.84 per cent of the
country’s population lives in the rural areas, while the rest
31.16 per cent lives in towns and urban agglomerations,
which certainly explains the kind of impact it can have on
the Indian economy, once it gathers serious momentum.
Lalit Agarwal, CMD, V-Mart, asserts, “There is a
huge potential in Tier-2 and beyond areas for organised
retailers. There is a high density of population in small
towns, and because of the penetration of media, rising
awareness and availability of information, people are
getting more aspirational in their fashion choices. The
rapid growth of e-commerce and display of same kind of
content across the country is helping customers in smaller
towns to keep pace in fashion with their counterparts in
metropolitan cities. But since their pocket size is smaller,
they fail to meet their aspirations. We saw huge opportunity
in these areas, especially for retailers, who have value-for-
money proposition, which can suit the pocket size and also
the aspirational needs of consumers in these areas and
their local life preferences.”
Since these locations are mostly unexplored, real estate
costs in these markets are 30-40 per cent lower than those
in metros and Tier-1 cities, which are a definite pull for the
retail brands. Not only mass brands like V-Mart, fashion
forward retail brands like Being Human, Woodland, 109°F,
Madame, etc. too are penetrating this market enormously.
Bipan Jain, Managing Director, Madame, points out,
“People in small towns are now changing from a simpler/
conservative lifestyle to a bit flaunty one, which makes
them a strong customer base for a brand like ours. We see
immense potential in these markets and around 35-40 per
cent of growth is coming from Tier-2 and beyond areas.”
While industry experts opine that these areas have turned
into a retail magnet, they are of the view that consumers
may initially aspire to buy these brands, but customer
58 Apparel Online India | MARCH 1-15, 2019 | www.apparelresources.com
retention might be a challenge for retailers who do not
cater to price points and suitable merchandise for these
markets. So, even as low real estate cost is an attraction,
product prices and merchandise will play a large role for
success in these locations. Rishabh Oswal, Executive
Director, Monte Carlo Fashions Ltd, maintains, “For
Monte Carlo, store presence in smaller markets is steadily
improving owing to rising disposable incomes, increased
penetration of branded wear and greater awareness of
trending fashions among consumers. We are already in
Tier-2 and Tier-3 regions and are further penetrating
into Tier-4 towns as well. There are number of major
players, but there are also countless niche stores and
private companies that cater to specific demographics. A
clothing company possessing a broad line-up of products
has a competitive advantage over its peers. The organised
apparel brands have shifted their focus to improve quality
while reducing costs simultaneously.”
Equal participation from e-commerce
Pegged at US $ 100 billion and growing at a CAGR of
8-10 per cent, the fashion and lifestyle industry in India
is gradually embracing online as the channel of the
future. This move is evident from a projected penetration
of 15-20 per cent over the next five years, from the current
4 per cent. On the basis of research, online players too are
entering the markets of Tier-2 and beyond areas expanding
their horizon and business prospects by the day. Ritika
Taneja, Head – Category Management, Shopclues,
maintains, “We see a huge potential in these markets.
ASSOCHAM says one-third of mall tenants are shifting focus to Tier-2, Tier-3 towns