Tier 2 and 3 cities cornered a greater share of India’s e-commerce market over the last 12 months, with easy access to large assortments of products prompting shoppers in under-penetrated markets to turn to online purchases, according to a report by Unicommerce.
E-commerce market share of tier 3 cities grew from 34.2% in 2021 to 41.5% in 2022, while tier 2 cities rose from 19.4% to 21.4% during the period. At the same time, market share of tier 1 cities‘dipped from 46.4% in 2021 to 37.1% in 2022, the report added. Unicommerce analyzed data from over 500 million orders that were processed in the last two years.
Unicommerce provides the e-commerce and retail industry with an integrated supply chain technology platform.
The move hints at a growing appetite among India’s small city shoppers to buy everything online, including mobile phones, apparels as well as packaged goods. More than six out of 10 orders shipped in 2022 were for buyers in tier 2 and beyond cities. Orders from tier 3 towns rose by over 65% from the year earlier, it added.
“Order volumes from tier 3 markets grew 64.7% in 2022 compared to a year ago, while tier 2 markets also clocked an impressive 50.9% in the same period. Order volumes from Tier 1 cities recorded a modest 10.3% growth in 2022, compared to 2021,” it said.
Tier 2 and 3 cities accounted for nearly 63% of total orders, growing at a faster clip compared to tier 1 markets. According to Unicommerce, the next stage of e-commerce growth in India is being powered by users living outside big cities.
“The e-commerce industry in tier 2 and tier 3 cities has been growing consistently over the last two years. The young aspirational consumers in these regions are becoming more experimental in their choices, boosted by the flexibility and convenience offered by e-commerce. Fashion, beauty, and personal care continue to be prominent categories. However, businesses focusing on tier two and beyond regions have two key concerns—cash on delivery orders and low average order value.
COD leads to higher returns, therefore brands are offering extra discounts on prepaid orders and leveraging technology to convert CODs into prepaid orders. “To address the average cart size, retail brands are offering bundle options. It’s a win-win for both, as consumers get extra discount and brands can reduce operation costs,” said Kapil Makhija, chief executive, Unicommerce.