Tier-2 and Tier-3 cities in India were once considered secondary markets, but now they account for almost 60% of all online orders. These regions are at the forefront of the e-commerce revolution, with three out of every five orders on the top e-retail platforms from here. The trend is no different during the festive season. As MSMEs can look forward to $13 billion worth of business, a leading logistics provider recently stated that a whopping 60% of the order volume will be from non-metro cities.
There’s been a 23% increase in online business in 2024 compared to 2023. The upward tick in e-commerce market share of Tier-3 cities has been consistent—from 34.2% in 2021 to 41.5% in 2022, while tier 2 cities rose from 19.4% to 21.4%.
It’s worth looking at what has caused this surge in online shopping in these regions:
- Easy Access to Multiple Products
Tier 2 and 3 cities’ share in e-commerce sales for the past few years can be credited to the increasing demand for and easy access to large catalogues of products in the fashion, personal care, beauty, and electronics segments in under-penetrated markets. The wide range of options has led to 55% of orders coming from first-time shoppers.
- Increasing Internet Access and Digital Penetration
Smartphones and data plans have become incredibly affordable, improving internet access even in remote cities and towns. Thus, more consumers are shopping online, leading to an e-commerce boom. AI recommendations and social media influencer marketing are also contributing to the surge, so much so that 84% of shoppers are buying products based on online promotions.
- Change in Consumer Behavior
Consumers in non-metro cities are more aspirational today and enjoy the flexibility to browse and buy online, and shop in-store but pay digitally.
As the above factors are leading to shoppers’ preference shifting from traditional retail to e-commerce, the boom presents several opportunities for MSMEs in Tier-2 and Tier-3 cities:
- Access to a Broader Customer Base
The thriving e-commerce landscape presents MSMEs in Tier-2 and Tier-3 cities with numerous opportunities for growth and expansion. By leveraging e-commerce platforms, MSMEs can reach customer beyond local markets, increasing brand visibility and recognition and driving sales through targeted marketing.
- Increased Revenue Potential
The growing consumer base in these regions translates to higher revenue potential for MSMEs. The festive season, in particular, offers a lucrative opportunity to boost sales.
- Export Potential
India is dotted with many non-metro towns and regions that have carved out niches for themselves in various industries, contributing significantly to exports. Bhagalpur in Bihar for Tussar Silk to Chanderi in Madhya Pradesh for sarees and fabric or Kutch in Gujarat for its mirror work and leather; innumerable regional pockets in the country are contributing to the global market, most of the manufacturers and sellers being MSMEs
- Diversification and Availability of Products and Services:
Different consumer preferences allow MSMEs to stock up on various products. E-commerce platforms enable these enterprises to diversify to cater to all their customers’ choices so that MSMEs can experiment with different categories and enter niche markets without the constraints of a physical store.
- Eliminating Middlemen for More Profits
Small businesses can cut out middlemen and boost their profits by connecting directly with customers. This direct link through e-commerce opens new opportunities, enabling MSMEs to grow their business and expand their reach, showcase their diverse product range to a global audience, and compete head-on with bigger retailers.
Although consumers from smaller cities are now adopting online shopping, only about 1 in 10 of India’s small businesses have shifted to selling online. This is due to several hurdles these enterprises face, starting with the struggle to secure financing. Limited credit histories often make it hard to obtain traditional loans, which prevents MSMEs from
- Investing in or upgrading infrastructure like user-friendly websites, inventory management, warehousing and digital payments
- Keeping up with skilled labor
- Expanding market reach
- Competing with well-established brands with resources
Access to funds can allow MSMEs to invest in better technology, improve supply chain efficiency, and ultimately scale their business to reach a larger audience.
India’s Tier-2 and 3 cities are at the forefront of the e-commerce boom, and MSMEs require strategic financing to capitalize on this opportunity. Protium’s loans financial solutions can bridge the working capital gap so that MSMEs can invest in essential infrastructure, technology, marketing, logistics, and digital literacy to compete with established brands and be ready to tap into the $13-billion online market!