Wednesday, February 6, 2013

Small in size, but huge in possibilities

Global fashion and lifestyle brands have suddenly started betting big on tier 2 cities of India. But why? B&E tries to find some answers to this and many such questions that came along its way when it visited one such city centre in the north-eastern part of the country.

A walk down the Deorali Street of Gangtok and apart from Dodrul Chorten, Sikkim’s most revered Buddhist shrine, one thing that is most likely to catch your attention is a huge Tommy Hilfiger store situated in the midst of this busy street bustling with small shops on both sides. Wondering what this $3 billion ritzy global apparel retail brand is doing in a North-East hill station that has somehow been able to save itself from the perils of urbanisation till now. Me too?! Until I met Shailesh Chaturvedi, CEO & Director, Tommy Hilfiger Apparels India, the next day.

“We would now be expanding more in tier 2 cities,’ he told B&E while revealing his company’s latest strategy to augment its presence in India. The company aims at becoming a pan-India luxury brand by 2010 and for this it has already planned to come up with similar stores in other tier 2 cities of the country that include Ahmedabad, Pune, Ludhiana, et al.

Interestingly, Tommy Hilfiger is not alone. Other lifestyle brands like United Colors of Benetton (UCB), Hidesign and Zara have suddenly developed a fondness for tier 2 and tier 3 cities of India. While UCB already has a two storey store in Siliguri (a tier 2 city in West Bengal) and is planning a few more in other small cities; home grown Hidesign too is going great guns and has just established a flagship store in Jaipur. Even Tag Heuer, the Swiss luxury brand, is gearing up to launch its stores in tier 2 cities in the near future. So, what is it that has caught the fancy of global retailers, who, till now, had restricted themselves to metros? Why are they betting big on tier 2 cities?

“With booming Internet and cosmopolitan culture there’s a group of consumers in tier 2 cities of India that wants to own lifestyle brands. In fact, the group always had the purchasing power to own such brands, what it lacked was there easy availability,” reasons Chaturvedi. According to Luxury Market Council of India, 9% of India’s affluent class puts up in tier 2 cities, which says it all about the potential that these beta (tier 2) cities have in store for global retailers. Further, with developed markets in the West reaching a saturation point, leading luxury players across the globe are now concentrating on India. As per Luxurion World 2009, India’s first Ultra Luxury Lifestyle Event held in Mumbai last year, the Indian luxury market is growing at 25% and is expected to maintain this growth rate for at least next 10 years. And the most of it would come from non-metros.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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