Mid-Tier Cities- The Greener Pastures

Parveen Sahni
Director - Retail, Canon India (P) Ltd.

Gone are the days when metro cities were perceived to be the safe haven for businesses. Now, with the increasing consumer demographics and socio-economic profiles of some of the tier-2 and 3 cities, most of the IT hardware providers are encouraging their IT retail business in these places. Thus, various routes are taken such as National distributor, Regional distributor, local dealer network, VARs, retailers etc to expand their retail base.

The mid-tier markets can be the future growth drivers for consumer durables given the growing disposable incomes, rising aspirations of people to own quality products and improved infrastructure support that the government is providing with respect to the development of these cities. Today, Customers in smaller cities are seen as much aspiring as their counterparts in the metros.  

Best Mode of retailing in Tier II & III cities…

The mode of retailing shapes up differently for the metros and the mid-tier cities. This is due to various reasons and demands of the locale.

Emphasising on this further, Nidhi Sardana, DGM- Retail, Intex Technologies (India) Ltd. says, "For Intex, Tier II & III cities have been the focus markets for expanding the business. We have adopted two models to reach out to every consumer residing in these cities and towns. Firstly through our exclusive distributors or regional distributors who sell to VARs (Value added resellers) and dealers and secondly, retailing the products through our standalone stores. Through these stores, we get direct access to customers who can give their feedback to improve the quality of services."

Nearly a decade back the mid-tier cities were pretty neglected by most of the brands. But now that has become a focus area for all the brands rather, the reason is the rapidly shaping infrastructure in tier II and III cities. 

Parveen Sahni,  Director - Retail, Canon India (P) Ltd., opines, "The mid- tier cities is attracting most of the brands to come and start doing retailing over there. Brands are coming up with exclusive showrooms to give the complete knowledge and experience about the product in that particular area, otherwise customers from these places had to travel to tier I cities to gain awareness about the product so that they can make an informed purchase. Now the same products, with the same look and feel and the same showroom experience and atmosphere has been made available to the customers in tier 2-3 cities, this has become very beneficial for the local customers."

Sunil Nayyar, Senior General Manager, Sales, Sony India, says that Sony Brand Stores is specifically customised according to the location and have products displayed according to the tastes of the audience in the region. 

S V S Mani Head - Transaction Acer India	Nidhi Sardana DGM- Retail, Intex Technologies (India) Ltd.	S.M. Ramprasad Deputy GM - Consumer Product Group, Epson India

Channel Mechanism…

Distributors and dealers or resellers operate in smaller cities but the channel operation in these places is slightly different from A class cities. Since the volume in smaller cities is limited, most of the time, a single distributor sells the whole basket of IT products such as laptops, desktops, computer peripherals etc.  While in A-class cities a certain distributor mostly deals with only one product category. 

Nidhi Sardana of Intex emphasizes that in case of retailing also, in smaller cities one would not see a retailer only selling IT products. He will be selling a mix of IT and Electronic products but in A class cities a IT retailer only sells IT related products.

 "As of now it is mostly the traditional channel of IT partners operating in modes of exclusive and multi brand stores in mid-tier markets. The art of retailing though is seeing a sea change with many maturing into competitive level along the style of the metros," says, S V S Mani, Head – Transaction, Acer India.

However, S.M. Ramprasad, Deputy General Manager – Consumer Product Group, Epson India says, "Currently you will find the malls to be occupied mostly by white goods retail chains and some of the specialty office stationary store chains  We have seen in recent times some of the traditional dealers also moving into the space which is a good sign."

Amit Nath Country Manager, India & SAARC - Trend Micro	Sunil Nayyar  Senior General Manager, Sales, Sony India

Challenges in retailing in Mid-tier Cities…

Consumer mindset seems to be the main challenge while operating in smaller cities. Still today consumers in tier II and III cities feel that a showroom and a mall means expensive products or it will be expensive then normal high street store. 

According to Amit Nath, Country Manager, India & SAARC - Trend Micro,"The major challenge is pricing. It is important to have a balanced pricing strategy between LFRs and retailers. There is no denying the fact that the presence of LFRs has created greater competition. However, this also has opened up a new challenge for the retailers as they have to find ways to evolve and sustain their business. This is because LFRs can sustain themselves with huge discounts. However, this is a huge challenge for conventional retailers as it affects their margin to a great extent. So, to maintain a balanced pricing strategy is one of the greatest challenges." 

S V S Mani of Acer points out that awareness and confidence in a brand amongst consumers in metros are relatively high when compared to a tier II and III markets. This is an extremely crucial factor that makes retailing relatively simpler compared to a Tier II markets where an ISP requires adequate training to educate the consumers on the features offered via a live demo of the product and enhance brand quotient among them.

Finally…

It is a little smoother to retail in Tier II and III cities given that it is easier to build connect between a brand and consumer or between a company and a dealer. Once the connect is established, consumers remain brand loyal for a longer period of time. However, a lot of on ground support has to be activated to provide value added services to a customer. n