Small towns, big opportunities: Why are brands eyeing India’s Tier 4 markets?

In the shadow of India’s bustling metropolises lies an often-overlooked economic force—the Tier 4 market, long seen as slow-moving and price-sensitive. However, this is not the case anymore; brands are finally noticing the potential behind the Tier 4 markets thanks to the rapid internet penetration, growing aspirations and increasing disposable income. 

From fashion to FMCG to auto, brands no longer want to stay confined to the oversaturated Tier 1 and Tier 2 markets and instead have started noticing the millions of first-time buyers in the smaller towns.

Now the question arises – what exactly is the Tier 4 market? 

The Tier 4 market in India consists of small towns and semi-urban areas with populations typically under 50,000. These regions have lower living costs, limited economic activity, and underdeveloped infrastructure than metros. However, rising digital adoption, growing aspirations, and increasing disposable incomes are rapidly transforming consumer behavior. The expansion of e-commerce, social commerce, and digital payments has further improved accessibility, bridging gaps that once made these markets harder to reach.

Examples of Tier 4 cities include Gangtok, Banswara, Kapurthala and Kalyani, which are now gaining attention from brands eager to establish a foothold.

NielsenIQ’s latest data reinforces this trend, revealing that Tier 2 and 3 cities saw a steady 14% annual growth in consumer product sales from 2018 to 2023, outpacing metro growth rates. While Tier 4 markets are smaller in scale, they still posted an impressive 10% annual growth rate, solidifying their role as a key contributor to India’s $836 billion retail sector in 2021-22.

Meanwhile, Meesho’s ‘Smart Shopper Report’ highlights the rising influence of Tier 4+ consumers, who have become the most frequent repeat shoppers on the platform, particularly in women’s fashion, footwear, and baby care. This trend is further supported by the fact that over 80% of Meesho’s users come from Tier 2 and beyond, including cities like Ambur, Rourkela, Sangli, and Zirakpur.

As brands explore these emerging markets, advertising strategies must adapt accordingly. “Tier 4 markets are an evolving landscape, and brands are increasingly recognising their potential. While ad budgets for these regions have traditionally been limited, we are witnessing a shift, with more brands allocating a focused percentage to tap into these high-growth areas,” said Uday Mohan, COO, Havas Media India. 

He added, “Media buying strategies for Tier 4 markets differ significantly from Tier 1 and 2—where digital dominates. Here, TV, radio, and hyperlocal activations and influencers are crucial in consumer engagement. The key is a balanced, cost-effective approach that maximises reach while aligning with regional preferences and behaviors.”

Brands’ perspective

Brands echo this sentiment—those already established in the Tier 4 market are expanding further, while others, recognising its potential, are eager to enter and tap into the growing consumer base.

“10 years ago, people used to say, ‘Oh, your brands are very urban.’ I took that feedback seriously. Over the next four to five years, I spent time in central and Eastern UP, Bihar, Jharkhand, and Odisha—regions without large cities. I never really understood the term ‘rural’ especially in the food industry, because I see more aspiration for my brands in these towns than in urban cities,” said Ajay Gupta, Founder, Ching's Secret & Senior Advisor to the CEO, Tata Consumer Products Ltd. 

Gupta further added that Central and Eastern UP, Bihar, Jharkhand, and Odisha drive a significant portion of sales. “For example, 70% of our pasta masala sales come from these states. The same goes for chowmein masala and Schezwan chutney.”

He further shed light on their marketing strategy. “We invest heavily in creating excitement on the ground. While we do run social media and television campaigns, a significant portion of our efforts go into direct consumer engagement. We visit local markets—bhaji markets, for example—and set up stalls where we interact with housewives, teaching them how to cook with our products. The joy of seeing someone say, ‘Arre, ye chawal laal kaise ho gaya?’ when making fried rice, or realising how easy it is to make paneer chilli for just 10 rupees, is invaluable,” he further added that hands-on experience is a crucial part of our marketing strategy, even if it isn’t conventional advertising.

This was reiterated by Vaibhav Rathi, Marketing Head - Homecare, Dabur India Ltd who said that categories like air freshening or mosquito repellants are seeing traction in such markets. According to him, the democratisation of data access and content is building awareness and aspiration in such markets and thus consumers are opening themselves up to categories which they weren't a decade ago. 

“We focus on a two-pronged approach to emerging tiers. Given the context of categories is relatively unknown it's important to share more use cases with the consumers and build relevance. The other is to create access both through availability and affordability to aid participation in the category,” Rathi added. 

While some brands have already established a presence, others are eager to enter the market. For fitness brands like HRX, Tier 2 to Tier 4 markets are crucial, positioning them as key emerging growth areas. “Tier 4, in particular, has been experiencing significant growth, especially in the fitness sector. But fitness isn’t restricted to any specific Tier —it’s a universal trend,” said Jivika Lillaney, Brand Manager at HRX by Hritik Roshan. 

Lillaney said that they’re already making inroads—it’s just a matter of building more buzz. So for them, expansion into Tier 4 is definitely on the horizon. “Tier 2, Tier 3, and Tier 4 markets are all significant for us, though Tier 3 is currently the strongest. That said, Tier 4 is growing steadily,” she added. 

Meanwhile, fashion brands are also eyeing Tier 4 markets as the next growth frontier. According to Nisha Khatri, Head of Marketing at Libas, while the brand has seen success in Tier 1 and Tier 2 cities, Tier 3 and especially Tier 4 markets remain largely unexplored. She added that as a brand catering to 18 to 45-year-olds, this presents an exciting opportunity to push boundaries and expand reach.

“Over the past few years, we've observed a shift driven by rising disposable incomes and greater access to the internet and smartphones. With aspirations soaring and consumers more in tune with global fashion trends, people in Tier 4 cities now have direct access to fashion through their screens. While their consumption patterns may differ, their aspirations remain just as high. Given the increasing demand from these markets, we are excited to expand further into this space,” Khatri said. 

Even as brands continue to expand into Tier 4, the demand is rising. “Emerging tiers are the obvious next set of markets to tap for brands and categories that have largely been urban centric and thus there is a clear need to open gates to communicate with these audiences,” concluded Rathi.