The Growing Importance of Tier-II cities in India

I had read the report from Ernst & Young “The Dhoni Effect: Rise of Small Town India” a while ago. I came across a very nice article on Wharton, An Increasingly Affluent Middle India Is Harder to Ignore, which talks more about what you could infer from that article.

Basically it is a myth that people in smaller towns don’t have the buying power. The Print media has seen the highest growth outside the metros. The internet too is seeing the same phenomenon and we expect users from Tier-II and smaller towns will consume languages on the internet. We see on people from Tier-II cities writing to us very often which shows the internet penetration is reaching the smaller towns.

The article mentions few interesting points,

According to the 2008 edition of the RK Swamy BBDO Guide to Market Planning, 51 districts in India have at least one town with a population of more than 500,000. Together, they have twice the market potential of the four metros (Mumbai, Delhi, Chennai and Kolkata) combined.

The ratio of spending to earning is higher in Tier II towns such as Nagpur, Jaipur, Surat and Coimbatore than it is in the metros.

Contrary to popular belief, it is not the urban Indian who drives trends, but the long-ignored Buntys and Bablis. They are on the move. There is a sense of urgency, excitement and confidence as they race ahead. Marketers and their agencies cannot afford to ignore them. They are the future market, not just of India, but the world.

Spending power moved from downtown Mumbai’s Marine Lines to the distant suburb of Malad many years ago. Now it is going further, to Madurai and Moradabad. And demands are different. One example: In the last few years, the male skin whitening category, which didn’t even exist a decade ago, has grown 150% annually to $100 million. Most of this growth has come from Middle India.

The relevant consumer base is large and growing, as are affluence levels. Towns such as Chandigarh, Ahmedabad, Jaipur, Lucknow, Indore and Pune have three-quarters or more of the affluence levels of Mumbai. On growth potential they do even better. That small-town urban India is attractive in terms of purchasing power, time spent on media, and product consumption comes across clearly.

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