Global brands foray into tier-2 cities to leverage opportunities

29 Jan 2024

With large scale expansion in infrastructure and an increasing working population settling in tier-2 cities, there is immense opportunity for consumption. Hence, a lot of global brands, such as Zara, Adidas, Nike, Uniqlo, Marks & Spencer are expanding their footprints in tier 2 cities like Jaipur, Chandigarh, Patna, Lucknow, Kochi, Goa and Coimbatore. As of September 2023, Jaipur, Chandigarh, and Lucknow each have seen a retail stock ranging between 3-7 million square feet.

According to a CBRE study, many of the non-metro cities are seeing commercial office spaces being used for retail supplies. They have moved away from the high streets of the cities and now investment-grade developers are establishing retail spaces that can be used for both entertainment and shopping purposes.

CaratLane is expanding into tier 2 markets and has doubled its presence in cities like Indore and Lucknow in the last one year. Other smaller towns, like Kochi, Guwahati, Ludhiana, and Mysore, have also witnessed a similar story.

E-Commerce has also played a major role in pumping up retail in smaller cities and has helped people explore new brands, which has created the scope for retailers to set up shop and expand in such places. In 2021, about 50% of online shoppers lived in tier 2 and 3 cities and this is expected to increase to 60% by 2030. This shows a high aspiration customer base, which is fuelling quality stores to have a presence in smaller towns.

Tier 2 and 3 cities are becoming mini metros, with an increasing number of small and medium businesses expanding in these areas, which allows people the opportunity to climb the corporate ladder and have more disposable incomes. This in turn, leads to an increasing propensity to spend. Chief Revenue Officer of Manyavar, Vedant Modi, added that about 40-50% of its business is from tier 2 and 3 cities. In fact, Manyavar has recently inaugurated a 17,000 square feet store in Ranchi and have plans to start a 20,000 square feet store in Gorakhpur, which showcases retailers’ interest in smaller cities.