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Small towns spin big brand dreams

business Updated: Sep 24, 2011 03:03 IST
Shrenik Avlani

Call it Semi-Bharat, if you will. As India's economy grows bigger and consumerism catches on, smaller towns and cities beyond the big metros are emerging as strategic centres for a host of big corporates trying to boost sales.

With annual consumer goods spending expected to double over five years to about $750 billion (Rs 37 lakh crore) , a range of companies – from car-makers to computer firms, from hotels to cellphone manufacturers — are increasing focus on places such as Guwahati, Patna, and Ranchi.

“The people in semi-urban India have the money, aspirations, knowledge of brands and purchasing power,” said Neeraj Garg, director of Volkswagen’s passenger cars division. Garg has often been surprised by the sales reports coming in from places like Raipur, Sonepat and Patna that show sales of about 100-150 units a month.

The deals are smart even for luxury car brands.

“The bulk of our sales are still accounted for by metros, where we are now well represented but there is a lot of potential for growth in tier II and III cities,” said Michael Perschke, head, Audi India.

The Radisson group threw open its first hotel in Ranchi, once considered a slow tribal zone town (and now home to Indian cricket skipper Mahendra Singh Dhoni), earlier this year, while computer-maker Lenovo stepped up its efforts to reach out to consumers in Tier 3, 4 and 5 cities last year.

There are strategies to match the smaller centres where affordability is critical to drive sales volumes.

Lenovo launched 150-200 square-foot stores to enable the company to penetrate deeper into the small towns. There are 400 “Lite” stores across India. “LES (Lenovo Exlusive Store) Lite stores help us connect with our consumers across the length and breadth of India, particularly in the upcountry markets,” said Rajesh Thadani, director of Lenovo’s consumer business.

Dell has identified 22 small cities to capture mid-market clients for hardware, software and IT services. “Out of these, we have already established our presence through our commercial channel network in the top 12 tier cities including Chandigarh, Jaipur, Surat, Baroda, Lucknow and Coimbatore,” said P Krishnakumar, director (marketing, consumer and SMB), Dell India.

Electronics giant Samsung has set up branch offices in Guwahati, Ranchi and Patna and is expanding its footprint in smaller markets. Samsung is also investing in roadshows, local language advertising, exhibitions and fairs to woo the smaller areas.

“Though Tier 1 and 2 cities remain big spenders, the growth in tier 2 and 3 cities is also very fast,” said Palash Nandy, vice-president, marketing, at Legrand Group India. “We would be focusing on smaller cities and towns, to achieve a 30% annual growth this year,” he added.

“This year we expect the contribution of Delhi and Mumbai to drop to around 40% of our sales (from 70%)rest will come from tier II cities,” said Andreas Schaaf, President, BMW India.

Most of this growth would be in smaller cities, where millionaires sprout as the economy expands.