GST cuts, discounts boost festive demand as tier 2, 3 shoppers upgrade

GST cuts, discounts boost festive demand as Tier 2, 3 shoppers upgrade

A combination of factors, including recent GST cuts and promotional offers, have prompted buyers in tier 2 and 3 cities to upgrade their purchases, boosting sales of large-screen televisions, water purifiers, dishwashers and fashion wear, among others, executives say.

Smaller towns together accounted for around 58 percent of transactions in the first “festive week”, an analysis by e-commerce enablement SaaS platform, Unicommerce, has found.

While metros and tier 2 cities recorded a 22 percent increase in order volumes during the September 22-29 period, tier 2 and 3 towns together registered a 20 percent growth from the year-ago period.

Big screens in demand

Until recently, the majority of sales in rural and tier 3 and 4 markets came from the entry-level 32-inch TV segment. After the GST cuts, the dynamics have completely shifted, said Avneet Singh Marwah, CEO, SPPL, the exclusive brand licensee for Kodak and Blaupunkt.

The entry point for buyers has now moved to 40 and 43-inch models, while 55-inch TVs are also performing strongly. With television penetration already above 85 percent—including CRT and LED TVs— the share of first-time buyers is declining, and the trend of upgrading to larger screens is gaining momentum.

“In the coming years, bigger screen sizes will dominate sales, while the demand for 32-inch TVs will steadily fall," Marwah said.

Kamal Nandi, business head & EVP at Appliances Business of Godrej Enterprises Group, said sentiments during Navratri, which began September 22, were better in non-metro markets, registering close to 30 percent growth over the last years. Metros recorded a 12 percent growth during the period.

E-commerce players Amazon and Flipkart also launched their annual festival sales on September 23, as this the period when shoppers go for big-ticket purchases.

“The trend is seen almost across categories, including ACs, which have had price reductions owing to GST, but not limited to ACs,” Nandi said.

Clean water, washing made easy

Washing machines are an exception, with a growth of more than 30 percent in both metro and non-metro segments, with the former taking the lead.

Advanced water purifiers have seen high demand among non-metro shoppers. "In Tier 2 and 3 urban markets, vis-à-vis Tier 1 cities, we are already seeing faster uptake of multi-stage RO+UV purifiers that can handle variable input water quality," said Anurag Kumar, chief growth officer, Eureka Forbes.

Kumar said demand for advanced models such as hot & ambient and stainless steel tank based purifiers is strong. As the Jal Jeevan Mission extends tap-water access to more rural households, a rise in the demand for purifiers in these markets is expected, Kumar said.

These sales are expected to have inched up in the first week of October, as most employees get salaries in late September, Philip Xia, General Manager of TCL India, said.

Fashion forward

Amazon, too, is betting big on the smaller towns, noting that 65 percent of its orders and 85 percent of new customers now come from beyond the metros. Premiumisation remained a defining trend in the Amazon Great Indian Festival.

"Growth was not confined to metros; demand from smaller towns and Tier 2/3 cities contributed significantly, reinforcing the accessibility of premium products across Bharat," the company said.

Fashion brands are also riding the trend. “This festive season, we are seeing a good revival of demand after a long pause. Tier 2 and tier 3 cities are absorbing fashion better than before and are showing strong interest in premium products. Our BIBA Reds collection is generating delight and strong appeal among customers,” said Sidharth Bindra, Managing Director, BIBA.

Luxury fashion platforms are witnessing even sharper growth. Culture Circle said orders from tier 2 and 3 cities rose 340 percent year-on-year, with cities like Jaipur, Lucknow, Indore, Chandigarh, and Kochi leading the surge.

Premium sneakers such as Air Jordans and Yeezy drove the majority of sales, while perfumes and high-ticket purchases also gained strong traction.

“The festive season has been phenomenal for Culture Circle, with tier 2 and tier 3 cities emerging as our fastest-growing markets. This represents an exceptionally high jump that has exceeded our projections,” said Devansh Jain Nawal, CEO & Co-Founder, Culture Circle, an app for sneakers and streetwear.