How online stores have penetrated the Tier-2 & Tier-3 cities?

. 5 min read
How online stores have penetrated the Tier-2 & Tier-3 cities?

Understand how internet penetration in India works!

The E-Commerce revolution in India has reached a whole new level with the major players making inroads to Tier 2 and Tier 3 cities unleashing shopping extravaganza for the semi-urban and rural shoppers. The privilege of a superior lifestyle, whether it be branded clothes and accessories, advanced gadgets, high-quality food materials, and whatnot, only been enjoyed by top city dwellers for years- are now just a click away for shoppers in Tier 2 and 3 cities with the help of numerous online stores.

Online shopping has boomed globally since the dawn of the Pandemic. According to many pieces of research and surveys, eCommerce usage in India has increased by over 30% since March 2020. The reasons being-

  1. No need to step outside for anything like- groceries, clothing, medicines, electronics, etc.
  2. Free home deliveries
  3. Contactless delivery options
  4. Maintaining the social distancing protocol properly
  5. Browsing and obtaining impeccable discounts and offers.

The growth potential tier ii and tier iii cities in India has increased drastically with easily accessible apps, and multiple payment options, hence, eliminating any of your hassles or errands.

Digital India, Make in India, Start-up India, skill India

Buying Behaviour Tier 2 And 3 Cities

  • Online shopping pretty much like any other premium facility and opportunities was only available for people living in top metro cities.
  • Purchasing power, technical know-how, internet connectivity, and flair for fashion were more than enough reasons for E-commerce giants to stick around metropolitans for a long time.
  • The increase in demand among urban shoppers for world-class products at the convenience of shopping at home instigated the launch of multiple online retail websites with enhanced customer experience in early 2000.
  • The e-commerce sector which is heavily leaned on the internet and mobile phone penetration has witnessed significant growth, over the past two decades.
  • It is so evident from the data that the total sales have grown from INR 26,263 Crores in 2010 to INR 168.891 Crores in 2016 with a growth rate percentages varying from 12.5% to 54.2% over these years.
Internet penetration has been significant in not just Tier-2, 3 cities but to the rural India as well!

Growth In Tier 2 And 3 Cities In India

  • After a certain point in time, the entire online shopping ecosystem has come to a saturation point for buyers, sellers, and platforms in metro cities.
  • E-commerce giants geared up to expand its horizon to tap a new excited segment of buyers with growing disposable income in Tier 2 and 3 cities.
  • The small user base with a limited mobile phone, internet penetration, and a low internet speed made it extremely challenging for e retailers to get their ball rolling in Tier 2 and Tier 3 cities.
  • When 84% of the total urban population had access to the internet in 2018 the internet penetration was only 16.41% in rural India.
  • Then happened the digital revolution which made 227 million people in rural India active internet users.
  • According to the latest report by the Internet & Mobile Association of India and Nielsen, rural India has 10% more internet users than the urban population as of 2019.

One of the key reasons for the steep growth of online consumers in Tier 2 and tier 3 cities in the cheap data and mobile recharge plan that is more likely to bring nearly another 1 billion users online by 2030.

According to research, the digital behaviour in Tier 2 cities in India, strategic surge in mobile internet usage has boosted the expansion of E-commerce to the remotest corner of India to tap a new segment of shoppers who prefer internet content in local languages.

E-commerce giants witnessed a sharp increase in sales of branded products across categories when a larger chunk of Tier 2 and tier 3 shoppers took it to online shopping.

Anything and everything about online shopping, whether it be-

  1. The wide range of collection across brands.
  2. The hassle-free shopping experience.
  3. Readily available product reviews.
  4. Exclusive discounts and offers.
  5. Multiple payment options.
  6. Simplified product search.
  7. Convenient and quick doorstep delivery.
  8. 30-day option to return/exchange and refund.

options successfully wooed the shoppers.

E-commerce websites in India have leveraged their platform to take customer engagement to the next level with services like video streaming for a subscription fee, like Amazon Prime and e-Wallet services among many others. Digital payment and options for cash on delivery are game-changers for the growth of the domestic e-commerce business.

Growth of internet in the small towns has been extraordinary

Buying Behaviour- Tier 2 And 3 Cities

The Government of India has been a key promoter of the E-commerce revolution in every other Tier 2 and Tier 3 cities with various initiatives like-

  1. Digital India
  2. Make in India
  3. Start-up India
  4. Skill India among many others.

The Digital India mission is to improve broadband connectivity and hotspots in semi-urban and rural areas. Goods and Services Tax (GST) another significant reform has helped the E retailers to simplify tax structure to ensure a seamless flow of goods and services across the country.

E-Commerce Penetration In Tier 2 And Tier 3 Cities

With the outbreak of COVID 19, the eCommerce & E retail sector in India has witnessed a significant inflection with a sharp rise in the number of people opting for online shopping for safety and convenience, and the trend is the same for Tier 1, 2, and 3 cities.

  • Ordering grocery and other essential items from hyperlocal stores via WhatsApp is the latest trend in online shopping.
  • The new feature by OkCredit which is already available for people in 35 cities is quite similar. People can order grocery, medicine, and FMCG goods from their local Kirana stores via WhatsApp. The users will also be provided with information like distance, working hours, Goods available in stock among others.
  • Another newly trending app- OkShop manages to smoothly eliminate the problems of e-commerce in tier 2 and tier 3 areas. With easy availability on all Android phones, you can easily take your business online without any nominal charges.
People are accustomed to using high speed internet in Tier-2 & 3 cities

In Conclusion

It is so evident from the data and studies that the Indian E-commerce industry is on an upward growth trajectory amid all the crises, and limitations and is expected to be the top E-commerce market in the world very soon.

Also read:
Beginners guide to make a startup successful
MSME – Industries that form a Foundation for a Robust Economy


  1. Media sources
  2. Aranca Research
  3. IBEF E-Commerce report 2018
  4. Kalaari capital – India Trends 2018
  5. Union Budget