The growth of premium categories, including fashion, packaged foods, cosmetics, dining, and lifestyle accessories, is being driven by small towns in India. As consumer demand steadily recovers, retailers are expanding at a faster pace in tier-2 and tier-3 markets compared to metros. This growth is fuelled by aspirational demand, the convenience of digital payments, and the influence of social media, according to industry executives.
The availability of platforms such as Instagram and YouTube has made information accessible to consumers everywhere, while e-commerce ensures delivery to smaller markets. A report by consulting firm Redseer, in collaboration with digital payments firm Plural by Pine Labs, predicts that the Indian e-commerce market will reach ₹9 lakh crore by FY26, with tier-2 and smaller cities driving most of the growth. The penetration of smartphones, internet access, and favourable government policies have played a vital role in the adoption of digital payments.
The report further highlights those online shoppers are projected to increase by 50% in the next three years, reaching 300 million by FY26. Consumer companies across various categories, such as Nestle, Domino’s, McDonald’s, and Lotus Herbals, have reported higher traction for premium products in tier-2, tier-3, and even tier-4 markets, contributing significantly to the post-pandemic revival.
Brands like Shoppers Stop, Meena Bazaar, Soch, Mohanlal Sons, and Tasva have planned the highest number of store openings in a year to meet the rising demand, particularly in tier-2 cities. Executives from these companies express confidence in the performance of these stores, with plans to open at least one store every month, primarily in tier-2 and tier-3 cities. Shoppers Stop, for instance, opened only three out of the 11 department stores launched in the last financial year in metro cities.