Rising Stature Of Non-metro Cities In Ecommerce Ecosystem

Gone are the days when the ecommerce ecosystem growth was riding on the back of robust demand from the metro cities, now the enhanced participation from the tier-2, 3 and 4 cities has tilted the growth dynamics. The ongoing sales surge on the ecommerce platforms has seen the stature of the non-metro cities rise to a whole new level.

As the annual festive season sales events kicked off on the major ecommerce platforms, the customers from the non-metro cities made their mark straightaway. As these platforms recorded a surge in sales, the impressive participation from the non-metro cities indicated an emerging trend. These platforms saw their traffic from these regions skyrocket, growing consistently.

While it is evident that the non-metro cities are causing a shift in the ecommerce ecosystem, it is important to know what has been driving this surge and aspects related to this growth.

The Surge In Participation
Meesho, an ecommerce marketplace shared that the platform achieved 145 crore customer visits, with around 45 per cent of shoppers hailing from tier 4 cities during its sales event. On the other hand, the data from Amazon India revealed that ‘The Amazon Great Indian Festival 2024’ witnessed 11 crore customer visits in the first 48 hours, with 80 per cent coming from Tier 2 and smaller towns.

Amazon India, in a release stated that more than 65 per cent of sellers who received an order were from tier 2 and 3 cities, such as Moradabad, Saharanpur, Churu, Tiruvallur, Haridwar, Bikaner, Jodhpur, Jaipur, Surat, and Pune during the first 48 hours of the sales event.

Affordability, Value-for-money Offerings
Since the customers from the tier-2, 3, and 4 cities are more value-conscious, their purchase decisions tend to focus more on factors such as affordability and a certain product's value. They also consider financial risk while finalising their choices.

“Consumers in these regions are highly value-conscious. Platforms that offer discounts, promotions, and trials have seen significant traction because they reduce the financial risk associated with trying new products,” stated Swagat Sarangi, Co-founder, Smytten and Smytten Pulse.

Highlighting that affordability has not only led to an increase in sales of the economy products segment but has also led to a surge in the luxury segment such as diamond, Disha Shah, Founder and Designer, DiAi Designs stated, “In India, the Tier 2 and 3 cities have picked up in demand because of the affordability that comes with lab-grown diamonds. We have also noticed that spending power in these tiers has increased significantly and buyers in these cities love to invest in stylish fine jewellery pieces.”

Echoing this trend in rising spending power and demand in semi-urban and rural markets, Jitendra Agrawal, CEO of Lighting and Consumer Durable Business at Surya Roshni, said, “Customer response has been quite encouraging, especially in the last few weeks. Energy-efficient and premium products have driven the majority of sales this year. Surya Roshni’s strong presence in semi-urban and rural markets has translated into solid offline sales in tier-2 and tier-3 cities. We have observed that customers are looking for better value for their money, so it is a behavioral shift in the industry."

Tapping The Untapped Market
The focus of ecommerce platforms is usually tilted towards catering to the demand from tier-1 cities. However, with the rise in internet penetration and the rise in disposable incomes in non-metro cities, customers from these cities have started to become comfortable with this new mode of shopping which has forced these platforms to take more steps to ensure greater participation.

“This festive season saw an increase in demand for products that could improve people's lifestyles, and tier 2 and 3 cities experienced significant growth in the lead-up to the festivities. This indicated that the potential in these regions remained untapped. To penetrate deeper into these markets, companies have been investing in acquiring customers from these cities,” highlighted Umair Mohammad, co-founder and Chief Executive Officer (CEO) of Nitro Commerce.

The Inclusion Of Gen AI
Personalisation becomes one of the key elements when it comes to catering to the needs of the customers on a platform. Since users from non-metro cities need assistance when shopping online as compared to their metro cities counterparts, the role of generative artificial intelligence (Gen AI) becomes crucial. This has been driving the surge in sales.

"GenAI is revolutionising e-commerce platforms with personalised recommendations and by enhancing consumer experience. This festive season we have witnessed a massive increase in sales more so in tier-2 and tier-3 cities where unique offerings resonate deeply with consumers. We have seen a 12 per cent increase in 'arts and crafts' vendors, which points to more personalisation of gifts,” stated Sampad Swain, Co-founder and CEO, Instamojo.

The Trend Of Localisation
Even though ecommerce platforms provide relatively easier access to a diverse range of product categories without geographical boundaries, the experts believe that the customers from tier-2,3 cities do not only buy a product, they seek a connection and that connection is driving these ecommerce platforms to enhance their focus on localisation aspect while dealing with this segment of customers.

“Many platforms are focusing on regional festivals, local preferences, and culturally relevant marketing campaigns to resonate with consumers in these towns. This has played a crucial role in creating deeper connections and driving engagement. Ecommerce platforms are responding by increasing their listings of local brands and offering products that resonate with these buyers,” added Sarangi.

Improved Logistics Network
One issue that the customers from the non-metro cities had always complained about was the poor delivery connectivity as far as their regions were concerned. The ecommerce sector, especially the quick commerce ecosystem, has been working towards optimising its inventory management to make sure that it caters to its potential customers more effectively. And guess what, it has been paying off.

“Noticeable rise in adoption from tier-2 and tier 3 cities, with consumers becoming more comfortable with Ecommerce. Faster internet penetration and improved logistics distribution are making it more conducive for brands to cater to these regions effectively- Madhav Kasturia, founder and CEO of Zippee.

As the festive season sales on the ecommerce platforms have picked up pace and with the big sales events like Diwali lined up, this surge in participation from the tier-2, 3 and 4 cities is expected to continue on similar levels. While it is helping the ecommerce ecosystem to flourish, it is also driving the Indian economy on a growth trajectory.