For a long time, small towns in India have lagged behind big cities, but this has changed as a result of technology, rising income levels, and policies. The demand for premium products is on the rise as small town consumers become more affluent.
The biggest generational change is that few people dream of living in a big city. Although most do not want to migrate, rising job opportunities and the availability of first-class educational opportunities have prevented them from having to do so.
Due to the digital revolution, the pandemic has also led to reverse migration that has enabled people to earn more income and earn a living,” says Suraja Kishore, CEO of advertising agency BBDO.
Additionally, they don’t mind where they come from either. “Many of them introduce themselves with their district and village names,” said Kishore, emphasizing how strong their sense of identity has become over the years.
Sanskaris of the West-rising demand for premium product
In addition to changing attitudes, their incomes are nearly on par with their urban counterparts. For the last five years, the average monthly household income for all Indian cities has grown at 8.4%, whereas it has grown at 7.8% in tier 2 and tier 3 cities, according to Kantar.
According to Kantar, graduates and postgraduates have grown at the same rate of 5.6% CAGR in urban areas as well as T2 and T3 cities. This has led to a culture shift in small towns.
It is good to be able to shop online, and they are also embracing Westernization at a rapid pace, with the world at their fingertips.” says Kaul. Kishore also agrees that the trend of trends ‘percolating’ from the West to big cities of India is a thing of the past.
Self-love
As liberated small towners become more affluent, they are putting more emphasis on comfort and self-love. They are also outspoken and more ambitious, says Kaul.
The pace of consumerism in small towns is growing, along with individualism, outspokenness, and ambition and moving towards demand rise in premium products like costly mobile phones etc.
Between 2019 and 2022, e-tailing or electronic retailing has grown at a 37% CAGR in T2 and T3 cities compared to a 20% CAGR in urban areas. In addition to mobile telephony and technology, there are other factors at play as well that contribute to this change.
ITC’s consumer and market insights lead, Aashish Shukla, says that if technology had come when there was no money, or even if policies were not aligned, it would have been different.
Not refined, but raw
In Kantar’s estimation, over half of ‘urban consumers’ between 15 and 55 live in T2 and T3 towns, and their numbers are growing in small cities and towns beyond these areas as well.
Branding and marketing experts say new-age consumers are affluent and demand for premium products but are they easy to target?
In small towns, products need to be customized to their needs. For instance, if they buy a mobile phone, they cannot send it to a service center in a bigger town and it takes a few months.
For a long time, small towns and villages have been bringing in volumes for FMCG giants due to their consumption of smaller sized packs, and most of them have eliminated small stock-keeping units that served this purpose. Many local brands are now creeping into the market and making a dent, so that approach might no longer work.
With their earthy flavour and feel, these brands are not only challenging large FMCG giants — across food, beauty and personal care — but they’re also winning hearts. If you talk to many of them, they don’t have local ambitions, they all want to expand nationally and internationally. They are sharper with their marketing and are heavily expanding.
Based on spending power, preferences, and urbanization levels, urban and non-urban areas were divided. But those theories are being unwound by the new consumer cohort that is westernizing without urbanizing, buying premium products online without visiting malls – and racing ahead to a new reality.
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