Premium Gadgets Seeing Faster Growth, Demand From Tier-3 India And Beyond

Premium gadgets are finding more takers in tier-2 and 3 cities in India, compared to India's top metropolitan cities, according to Counterpoint Research.

"In smartphones, the premium market is growing. About 35% of those sales come from tier-1 cities, about 27% come from tier-2 cities, and the remaining odd 37% comes from tier-3 and beyond," Tarun Pathak, research director at Counterpoint Research, told NDTV Profit.

Tier-1 cities are India's top eight metro cities, while Counterpoint counts tier-2 as a combination of about 98 cities. Tier-3 cities go beyond these 106 cities.

Even as the tier-3 market eclipses tier-1, growth is much faster in the former. "Tier-3 is growing 19-20% year-on-year, while tier-1 and 2 are negative, since people are holding on to phones for a longer period of time and replacing them after three or more years," Pathak said.

Tier-3 growth is driven by a mix of people upgrading from feature and entry-level phones and financing deals coming in handy, he said. "On top of these, there are regional trends like microinfluencers come up that are influencing buying decisions," Pathak said.

Data consumption in tier-3 is also about 1.4 times, compared to users in tier-1 and 2 towns. "They are spending more time on their phones, consuming more data, and as a result, wear and tear is higher, which is why replacement frequency is higher. People are also buying second-hand phones at a higher speed," Pathak said.

This demand and growth extend beyond smartphones. "We're seeing this trend across consumer electronics. Financing deals such as EMIs and offers and the proliferation of microlending firms such as KreditBee have helped with easy credit in the system, leading to more and bigger purchases," Pathak said.

Samsung, speaking to NDTV Profit in May this year, had echoed similar sentiments. "Something that we see today and where we're growing quite well is the tier-3 and below (segment) to categories like the Rs 20,000-30,000 segment," Raju Pullan, senior vice president of Samsung's smartphone division, had said then.

"The area is contributing to about 43% of the overall Samsung Finance+ so we're seeing very strong upgrades there," he had said.