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Tier-II, III cities beckon retailersRetailers are investing heavily in these markets

By Avinder Batra | July 17, 2010

Retail-Business-Practice

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 areshowing 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.

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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, furthermaking these markets lucrative.