The rising affluence of small town consumers driving demand for premium products

• With growing affluence and technology, the pace of consumerism in India’s small towns is growing fast, say experts.
• Their love for premium products, products that exhibit self-love and care is driving them to shop online.
• A confluence of technology, growing income levels, education and more has caused a cultural shift in small towns.

India’s small towns have been running behind big cities for a long time — but that’s no longer true. Thanks to the juxtaposition of technology, rising income levels and policies – small towners are not what they once were.

The biggest generational change is that — few dream of living in a big city. While most of them do not want to migrate, rising job opportunities, availability of first-grade educational institutions are ensuring they do not have to.

“The pandemic has also ensured reverse migration where they can generate more income and enjoy a livelihood thanks to the digital revolution,” said Suraja Kishore, CEO of BBDO, an advertising agency, speaking at a webinar organized by Market Research Society of India (MRSI).

Moreso, they are not unhappy with where they’re from either. “If you see, many of them introduce themselves with their district name and village name,” said Kishore, emphasizing on how strong their sense of identity has become.

The Western sanskaris

It’s not just attitudes that are changing – their income levels are rising almost on-par with their urban counterparts too. While the all-India urban average monthly household income has been growing at 8.4% for the last five years, it has been growing at a compounded annual growth rate (CAGR) of 7.8% in tier 2 and tier 3 cities, says Kantar.

The number of graduates and postgraduates have also been growing at the exact same rate of 5.6% CAGR in urban areas as well as T2 and T3 cities, it adds. All this has been bringing a cultural shift in small towns, says Aditya Kaul, group account director at Kantar.

“They enjoy the comfort of online shopping, and are also embracing Westernization at a faster rate, with the world at their fingertips,” adds Kaul. Kishore also agrees that the trend of trends ‘percolating’ from the West to big cities of India, and then to towns is gone.

Love, thy self

Now, liberated, small towners are also becoming consumers of premium products. “They are expressing affluence with an increasing focus on comfort and self-love. They are high on individualism, outspoken and more ambitious,” Kaul says.

Kaul concurs, “There is a higher pace of growing consumerism in small towns along with growing individualism, outspokenness and more ambition.”

It’s very much evident from their spending and buying habits. E-tailing or electronic retailing has been growing at 37% CAGR in T2 and T3 cities as compared to 20% in urban areas – between 2019 and 2022. While a large part of this change is credited to mobile telephony and technology, there are other factors at play too.

“A lot of factors came together like government policy and economic growth. If technology had come when there was no money, or even policies were not aligned, it would have been different,” explains Aashish Shukla, consumer and market insights lead at ITC.

Raw, not refined

According to Kantar, as many as half the ‘urban consumers’ between 15-55 years, at around 139 million of them, reside in T2 and T3 towns. And their number is growing in small cities and towns beyond that too.

The new-age consumers are growing in affluence and becoming more demanding, but are they easy to market to? The answer is not so easy, say branding and marketing experts.

“In small towns, products have to be customized to their reality. For example, if they buy a mobile phone, they cannot courier in case of a defect to a service center in a bigger town and it takes a few months etc,” says Shukla.

For a long time, small towns and villages have been bringing in volumes for FMCG giants due to their consumption of smaller sized packs, and most of them did away with smaller stock keeping units that served this purpose. That might no longer work, especially after many local brands – some offline and some completely online – have been creeping into the market and making a dent.

Not only are these brands — across food, beauty and personal care — challenging large FMCG giants, they’re also winning hearts with their earthy flavour and feel. “They are sharper with their marketing and are heavily expanding. If you talk to many of them, they do not have local ambitions, they all want to expand nationally and internationally,” says Kishore.

The urban and non-urban areas were divided on the basis of spending power, preferences and urbanization levels. But those theories are being unwound by the new consumer cohort that’s westernizing without urbanizing, buys premium products online without visiting malls – and racing ahead to a new reality.