When it comes to shopping online, tier 2+ cities are growing faster than tier 1 and metros. No wonder, the contribution of sales from these cities have become higher than that from metros in 2017.
In 2017, the growth rate of monthly active shoppers in tier2+ cities was nearly 34 per cent while that in tier 1 and metros was 18 per cent and 11 per cent respectively. Of the 20 million active monthly e-commerce buyers in 2017, 40 per cent were from metros, 19 per cent from tier 1 cities and the largest share of 41 per cent were from tier 2 and cities smaller than them.
In 2016, metros had the highest share of active monthly users of 44 per cent. Tier 1 cities accounted for 19 per cent and tier 2 + cities had 37 per cent of users, finds research and consultancy firm Red Seer.
For customers in tier 2+ cities availability of products is a major factor that draws them towards e-commerce. E-tailers too are increasing their hold on the deliveries and working on building trust in various categories, including fashion.
“The growth in monthly active users was driven primarily by the increase in penetration in non-metro cities. The e-tailers have started to increase their focus on the tier 2+cities as the industry believes this geography would bring in the next phase of growth,” said Anil Kumar, founder and CEO of RedSeer Consulting.
Most of the e-commerce companies are strengthening their distribution, payment, logistics and delivery mechanism so as to reach out to the smaller cities. While players like Flipkart and Amazon still have a large share of metro customers, there are companies like ShopClues, which are specifically focusing on the smaller cities.
“From the logistics perspective, since most national players were not able to reach smaller towns and locations, we had to build and set up a network to these locations, using regional players who travel by roads,” said Sanjay Sethi, CEO and Co-Founder, ShopClues.
For ShopClues 70 per cent of the sales come from tier 2, 3 and 4 cities and 80 per cent of the sales happen via mobile phone.