For the longest time, it didn’t make sense to start an online business or expand an existing one in a tier 2 or 3 city. Merchants always have had at least one of the following worries:
- Whether the total addressable market would be big enough
- Whether customers would be willing to pay online, and
- If there would ever be enough Internet adoption for an online business to make sense
However, cheap internet plans, affordable smartphones, and innovations in user interfaces have proliferated the trend of online shopping in smaller cities.
Specifically in the last two years, due to the after-effects of Covid-19, the non-English speaking markets in India have shown high Internet adoption, online shopping, and digital payments.
In fact, metro and tier 1 cities have reached a saturation point and businesses need to actively venture into tier 2, 3, and beyond markets to tap into the growing Internet population.
As per a joint report released in 2022 by IAMAI-Kantar, there are 351 million active internet users in rural India compared to 341 million in urban India.
The report stated that the pandemic has witnessed a record increase of 51% from 230 million in 2019 in India, in online transactions in the past two years.
The Indian e-retail market is primed to reach nearly 300 to 350 million shoppers over the next five years—propelling the online Gross Merchandise Value (GMV) to $100 to 120 billion by 2025 [source].
How to Leverage New Internet Users
Although there is a boom in the number of active Internet users in tier 2 and 3 cities, not all of them would be transacting customers. Some would just use the Internet for entertainment like watching videos and playing games, while others would use it for educational and other non-shopping purposes.
So, how can businesses leverage this huge number of users to make them loyal customers? Here are four ways you can leverage Internet growth to your advantage:
1. Offline to online (O2O) strategy
While a lot is being said about the rise in online shopping, customers hailing from tier 2 and beyond cities still enjoy shopping from physical retail shops. That is why it makes sense for merchants to adopt an O2O strategy to go big in lower-tier cities.
Implementing the O2O strategy would mean that customers get a unified shopping experience irrespective of the platform they choose to shop from. There are various ways to implement O2O, but the most simple and straightforward strategy would involve giving your customers the freedom to seamlessly shop both online and offline.
With O2O shopping, customers can see the product at the shop, order online, and get it delivered home at a later date. Alternatively, they can purchase it online and pick up the product from a nearby outlet.
2. Brand and bank partnerships
With online shopping becoming a norm, irrespective of how new a company is, customers would always expect a top-notch shopping experience. To grow in tier 2 or 3 cities, you will have to offer everything that a well-established online company offers. Among other things, it includes a well-thought-out partnership with a wide gamut of brands and banks that would offer special discounts to customers.
Having meaningful partnerships with brands will help in the following ways:
- Increase in customers’ footfall
- Awareness through word of mouth
- Brand discovery
- Revenue through co-sponsorships or sharing physical space with brands
Paytm for Business has the apt solution for this as we have partnered with hundreds of brands in various categories. These partnerships will allow you to lend discounts and other offers to your customers.
In addition to brands, Paytm for Business also has exclusive tie-ups with banks that offer additional discounts if customers pay through a specific bank’s debit or credit cards.
3. Attractive financing options
Even after doing everything and doing them right, one strong barrier that businesses will have to deal with is customers’ liquidity issues. Very often, customers add products to their cart and discard them at the checkout page because of low funds in their account.
One of the ways you can forge a strong bond with customers in tier 2 and 3 cities is by removing payment barriers and offering financing options they can’t refuse.
Since the penetration of credit cards is low in tier 2 and 3 cities, customers need alternative credit options.
Interesting Read: Paytm Postpaid – Enabling New to Credit Users to Shop Online
That’s why Paytm’s BNPL offering, Paytm Postpaid, makes sense for businesses wanting to make a dent in tier 2 and 3 cities. With Paytm Postpaid, customers can purchase high-ticket products and pay for them in instalments later.
A few benefits of Paytm Postpaid:
- No activation or sign-up charges
- Instant activation of credit line
- Reach of over 550 cities
- One-click payments
- Zero interest for 37 days payment cycle
4. Right kind of advertising
Around 45% of government-recognised startups in India are located in tier 2 and 3 cities. Businesses trying to make a mark in lower-tier cities might get lost in the crowd.
That’s why it’s imperative for merchants to get the word out about their business. With that in mind, you should also determine the right platform for advertising their brand.
Since digital consumption is at an all-time high in India’s lower-tier cities, it would make sense to explore digital advertising. It would not only ensure more and more people see your brand, but you can also target your advertisement and track its progress.
Paytm Ads is a robust digital advertising platform that will give businesses quality leads. Advertising with Paytm Ads means brands will be visible to over 150 million monthly active users who use the Paytm app.
With a diverse set of users who use the Paytm app daily, Paytm Ads is suitable for any type of business.
Tier 2 and 3 cities have huge untapped market potential. Since the digital infrastructure is getting better and the adoption of digital tools is on an upwards trend, it’s the best time to set up shop in lower-tier markets.
Paytm for Business has an array of tools, which are specifically designed to make merchants’ lives easier and scale their businesses.
Frequently Asked Questions
Question 1: Is there a limit on Paytm PostPaid?
Answer: Customers can use Paytm PostPaid to purchase products of worth Rs 60,000. Purchasing products using Paytm PostPaid means customers don’t have to pay any interest for up to 30 days from the date of the purchase. Payment can also be done in equal installments of up to 12 EMIs.
Question 2: How can Paytm help with O2O?
Answer: Paytm has an array of products that can help you accept money from customers irrespective of whether they shop from your online or offline store. You can make your O2O game stronger if you use payment tools from Paytm such as Paytm Payment Gateway, Paytm Payment Links, Paytm SoundBox, Paytm POS Device, etc.