Tier-II, III cities beckon retailers

Retailers are investing heavily in these markets

As the Indian economy is growing at a decent pace in all sectors, metros and other tier-I cities are inundated with huge investments both in industrial and service sectors. Retail market is also taking its share of benefits. With the growing purchasing power in combination with the national and international brands pouring in, retail market has received an impetus to grow at large in the country. Trends are showing that after establishing their niche in the tier I cities, these national and international retail brands are treading on to tier II and tier III cities to tap the opportunities. The big brands namely Shoppers Stop, Tommy Hilfiger, Giovanni, Gili, and Metro Shoes are looking at these cities with positive anticipations. Be it EBOs, MBOs, or shop-in-shops, the big and small brands are venturing these cities with all sorts of formats.


Lucrative opportunities


After focusing and pioneering in the metro cities and other tier I cities, these brands are leveraging on other locations like tier II and tier III cities to expand their consumer base. The other major factors luring these top retailers to forge into the interiors include- low real estate cost, less competition, and package from the government to develop these areas.

 “Tier II and tier III cities are gaining momentum at a rapid pace and it makes sense to increase the brand visibility in these cities,” says Shawn D Cutinha, Head – Retail, Tommy Hilfiger.


Also, to capture the larger pie of profitability, these brands are making their way to these untapped opportunities. “Our prior expansions in Tier II and III cities have been very successful and profitable considering a host of factors. First is the availability of prime locations as retail at reasonable prices. Second, is the brand conscious consumer; who is ready to pay for quality and style. Third, is the lack of competition thereby providing us a greater share of the pie as well as an early mover advantage,” asserts Farah Malik Bhanji, Executive Director, Metro Shoes Limited.


Expansion plans


With the aim to capture the customer base to the maximum, retailers do the complete recce of the locations in the cities, which play an important role to start up the business. The retailers keep the account of major statistics like total population, catchment area, details of the near-by shops etc. 


As Cutinha clarifies “We conduct stringent survey of the city before opening our outlet in the area. We consider emphasize on high footfall, high streets etc.”


Tier II and tier III cities are becoming the promising locations to leverage the brand name. With the aggressive roadmap in hand, Metro Shoes Ltd is planning to make a mark in cities like Patiala, Raipur, Meerut, Jamnagar, Ghaziabad, Bhatinda. Apart from these, the company will set up more stores in the current cities of Bhopal, Jalandhar, Madurai, Jaipur, Rajkot, Coimbatore, Aurangabad, Ahmedabad, Nagpur, Pondicherry, Jodhpur and Guwahati.


Gili, the prominent jewelry brand has recently announced its future plans to open at least 50 EBOs in these second rated cities. “We are planning to invest around 100-150 crore in tier II cities and hope to achieve the break-even in the first year itself,” says Rahul Vira, CEO, Gili.


Marketing strategies


The marketing strategies are also playing a vital role to create awareness among the customers. Standardised marketing strategies are employed in general by major brands with some differences depending on the specific region.

Metro Shoes has introduced its new retail format called MSL – More Shoes for Less in the locations of Aurangabad, Baroda etc, to attract the customers.


Gili has also come out with ‘Gili Signature’ its new product line for gripping the market share. Tommy Hilfiger employs both ATL & BTL routes for promotions. “Apart from print ads, hoardings, SOH etc, we also screened a special TH watch commercial in cinemas, with great success,” says Cutinha. Tommy Hilfiger already has its accessories available at various departmental stores to increase its brand visibility and bring awareness among the customers. It is planning to open its own EBOs, in the near future.


Since tier II and tier III cities carry immense potential due to heavy real estate development, the top brands are finding them to be the favorable regions to invest heavily and expect fruitful returns. In the coming times, investors would fetch multiplier effect for the money invested in these regions, further making these markets lucrative.  



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