Rising aspirations: Buoyed by rising incomes and an explosion in products and services, a growing number of small-town consumers want to keep up with Joneses in metro

THE BIG PICTURE

Our Definition of Small Towns: Population of 5-10 lakh Number of such towns in India: 40

Breakup: North: 17 South: 12 East: 3 West: 8

This is a story about spaces through which the information highway winds its way in tandem with endless stretches of cement-and-mortar tarmac, thatched-roof hamlets dotting one side and sugarcane fields swaying in the wind the other. These are the spaces where roaming has as much to do with mobile banter as with walks through bustling, brand-bristling bazaars, where the often-excitable vernacular is being increasingly peppered with hitherto urban jargon like footfalls and walk-ins as well as stock-trading talk like shorting and timing. Where brands such as an unabashedly-wannabe "Polo Jean Joint" co-exist peacefully with the phoren Lees, and Wranglers, where cutting-chai at the roadside dhabhas and the cappuccinos of the branded coffee shop chains often attract the same client on different days.

These are the towns whose people are discovering the virtues of a new form of plastic-that with the Visas and Masters stamped on them, with which they can buy PCs to ride the information highway and mobile phones to rap and roam, gain a sense of self-assurance in those brand-buzzing bazaars, and pay for those cappuccinos and sandwiches in those novel coffee parlours.

These are the people who, taking a cue from their brethren in the metros and mini-metros, are beginning to believe that debt isn't always a four-letter word. That buying one's own home is actually possible in the first half of life itself, that automobiles big and small aren't just for well-heeled city slickers, and that televisions, washing machines, air-conditioners and the entire durables gamut aren't urban luxuries any more but virtually indispensable add-ons.

To be sure, this story isn't about FMCG majors selling shampoos with moisturisers to wide-eyed countryfolk. That happened at least 20 years ago. Neither is it about the advent of television into mud-walled homes. That happened over a decade ago. This is a story about the millions earning more, borrowing cheaper, and spending freely on products and services that you always thought were only the purview of the urban rich. No longer. Thanks to exposure from multi-media-television, Internet, publishing, Hollywood and Bollywood-Small Town India is aspiring like never before. For any marketer worth his spiel each one of them is king, and small-town India his temple. Estimates arrived at by BT indicate that in just 40 towns with a population of 5-10 lakh, there exist at least 20 million customers for products like Rs 1,000 shirts, Rs 55-per-ticket multiplexes, Rs 20 capuccinos, Rs 1-4 lakh home loans, credit cards, mutual funds and insurance. And that, be assured, is just the tip of the ice berg. According to the 2001 Census, India has some 5,161 towns (excluding the 384 "urban agglomerations") and some 6.38 lakh villages, with a population base of some 600 million.

The Big Forty

Be it Jalandhar or Trichy, Rajkot or Gorakhpur, Jodhpur or Vijayawada, they're breaking out of long-forgotten cocoons and discovering the joys that only the market can bring. And their providers-the marketers-are, across products and services, responding to the growth in up-country India that's driven largely by affordability triggered by lowering interest rates and increasing income levels. That can only, for instance, explain why close to 50 per cent of the home loans market is concentrated outside of the top 20 towns, which has prompted HDFC to expand into some 172 locations (the latest being Anand in Gujarat), and others like IDBI Bank to head toward towns like Kolaphur and Erode.

Mangalore: Saibeen Shopping Complex is a favourite haunt of the city's rich

SOUTH Towns like Madurai and Vijayawada are the new frontier for marketers

That's why broking houses like India Bulls and Kotak, along with the big mutual funds like ICICI Prudential-which have so far penetrated just a minute fraction of the Indian population-are spreading the equity cult to the deepest parts of India, riding on the National Stock Exchange's presence in over 350 cities. The insurance majors too have hopped on to the wagon: MetLife, for instance, has trained its sights on 64 towns with a minimum population of 5 lakh. Car major Maruti has tied up with State Bank to leverage its 12,000 branches to sell new as well as used models in centres like Trichy and Madurai, and convert two-wheeler users into car owners. After all, a graduation of 1 per cent of the two-wheeler base translates into 50,000 new car buyers.

Meantime, handset major Nokia is finetuning a major thrust into tier II and tier III centres, a fast-food chain like Café Coffee Day is looking at towns right from Ranchi to Sangli, Titan showrooms have mushroomed in 75 centres, including Bhatinda and Bharuch, McDonald's and Pizza Hut are eyeing Dehra Dun, an all-veg avatar of Domino's Pizza has dropped anchor in Surat, huge retail spaces are mushrooming in Surat and Bharuch, apparel brands like Peter England are present in over 100 towns, right from Solapur to Chapra, PCs are selling faster in tier II and tier III centres than in metros and brands like Benetton, Lee, Levi's, Woodland, Reebok, Adidas, Nike, Raymond and Weekender can be found in the markets of Ganpat Galli of Belgaum and Model Town in Jalandhar.

It's difficult not to run into an ICICI Bank or an HDFC Bank or a UTI Bank in the 40-odd towns with a population in the 5-10 lakh range-which is the sample Business Today has closely explored for this story-not just raking in deposits but offering all kinds of loan products to prospective clients. "If earlier the multiple for buying a house was 10-15 times, today it is just 4-5 times across India. That's one reason why the trend is shifting towards secondary markets," says Suresh Menon, General Manager (Mumbai Region), HDFC.

Dehradun: Rahul Windlass (R) with his wife and son at a Domino's outlet

NORTH Big brands, the preserve of metros so far, are making their presence felt

Listing out all the brands and services entering smaller towns will prove exhausting, and also pointless after a point. What's evident is that it's the huge opportunity out there-see following story-that's pushing marketers deeper up-country, each of whom has reached different destinations in the urban-to-rural expedition, depending on what they have to offer and also how long they've been in the Indian market. For instance, for every McDonald's just about to get into a 4.5 lakh populated Dehradun, there will be a Peter England or a Titan that crossed that hump long ago, and which would now be looking at a tier III town now with a population under 3 lakh.

Making mid-size towns-those that follow the metros and the mini-metros on the value chain-even more attractive and accessible are two significant, contrasting, factors: One, connectivity via a network of national highways, and two, migration into such towns from villages. Take the migration factor first: If, earlier, the metros were the first option for job-hungry rural folk, today it's towns like Mangalore and Belgaum that are attracting people from the interiors. Suraj Kaeley, Marketing Head of insurance major MetLife, points out that one reason for the focus on towns is that that the potential for growth is faster here than in the metros because of the migration effect. "The population in a town may be only 5 lakh, but it can soon become 10 lakh due to migration from rural areas. On the other hand, the metros have very little scope left for expansion."

And if they're aren't migrating, they at least know where the action is. In Belgaum, for instance, brokers point out that they get enquiries from the nearby small towns of Gokak, Raibag and the agricultural belt Khanpur. Reliance Web World too is getting walk-ins from Khanpur and Nipani (a tobacco-growing centre), even though its network is not yet up and running in those areas!

Whilst migration will help broaden the consumer base in the mid to longer term, simultaneously the national highways originating from Big City India that will pass through these towns will also bring with them products, services and a quality of life never experienced before. A drive down the still-to-be-completed four-lane Pune-Bangalore National Highway already reveals a changing landscape: A mechanic who gets under your car with spanner in one hand and cell phone in the other, a couple of Reliance petrol pumps amidst a stark barren setting, swanky motels-cum-restaurants that make the good old dhabas appear prehistoric, a Tata Motors dealership across which a shepherd nonchalantly guides his trudging folk, and a public sector petrol pump in an obscure village between Kolahpur (roughly 600 km from Bangalore and 380 km from Mumbai) and Karad (85 km from Kolahpur) whose attendants grunt matter-of-factly to let you know they accept plastic of most hues. Meantime, towns like Hubli, Belgaum, Vijaywada and Madurai coming onto radar screens of low-cost airlines like Deccan Air also help give these mini-cities immediate access and the added bonus of metro-like respectability.

Rajkot: The crowd at the City Mall exemplifies te shift in consumer mindsets

WEST Huge retail spaces have altered consumer attitudes towards spending

Marketers rushing into these towns is also helping unleash the entrepreneur shackled in Small Town India. Rather than migrate to cities or overseas for better opportunities, many of these well-educated youth are exploring, for instance, the huge franchising opportunity that's emerging-be it for a Baskin Robbins ice cream outlet, or a Compaq reseller or a McDonald's or a Pizza Hut. If a Café Coffee Day has ambitions of having over 500 outlets all over, and has already opened up in towns like Belgaum, Vijaywada, Madurai and Mangalore, it's got as much to do with the promoters' enterprise as with the rash of enquiries emanating from a Sangli, Shillong, Siliguri and Ranchi. As Sudipta Sen Gupta, Head (Marketing), Café Coffee Day, tells it: "We expand on the basis of enquiries we get, and their conversion into an outlet depends mainly on the location."

Clearly, the opportunities in the Indian market don't exist only in the metros. And we're not talking just about low-cost, plain-vanilla products and services-why else would Siemens be distributing its high-end appliances in Salem or Toyota Corollas and Camrys selling in Gulbarga in Karnataka. Small Town India enjoys similar aspirations and spending power than the metros, the difference being that the metros have more of such consumers. But that's today. As the metros get saturated, marketers will rely on other catchment areas: the mini-metros, the 10 lakh population towns, the 5 lakh ones, the sub-three lakh towns.... That's why a company like HDFC will continue with its "outreach programmes"-executives make regular once-a-week visits to prospective centres, stay in hotels and gauge the potential of consumers and credibility of developers for months, sometimes years, before deciding to put up a full-fledged office in that town.

It's not only metro-India that's clamouring for a better quality of life: The rest has aspirations too and, make no mistake, they're not just for gel toothpaste, liquid soaps and defrost refrigerators.