Consumer Affordability in Tier-1, Tier-2 and Tier-3 Cities of India – An Empirical Study

Abstract

Majority of brick-and-mortar retailers in India assume that;(a) price/product/brand assortmentmust be differentiated among stores located in different type of cities, (b) consumers cannot affordto purchase high-priced products/brands in tier-2 and tier-3 cities, (c) it is easier to sell high-pricedproducts/brands to consumers in tier-1 cities. Such assumptions and misconception shave resultedin increasing challenges with respect to maintaining retailer’s original and principal pricepositioning across different cities in India which could possibly put consumers into a quandary.Brick-and-mortar retailers need to understand the importance of overall store image, overall storeprice image, target consumer group and its implications on the overall store profitability and
consumer perceptions. In this research, we have analysed twelve months actual sales data bytwenty price bands across tier-1, tier-2 and tier-3 city stores of a select retailer and drawn insightsto recommend ideal price/product/brand assortment strategies for brick-and-mortar retailers inIndia across their stores present in tier-1, tier-2 and tier-3 cities.