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September 17, 2007

Moving first in Tier II

Business Today has an interesting article on companies that have successfully launched their operations in Tier II cities rather than the metros.
It's not just in China that global retailers are flagging off operations with forays into tier II and tier III cities instead of focussing on the big metros. In Russia, French retail giant Carrefour has announced its plan to enter the country via tier II cities by early 2008. Back home, a clutch of companies-both foreign and Indian, and not just retailers-is using small-town India as a launch pad for their products and services. These include players in financial services, broadcasting, and retail to name just three sectors.

Vishal Retail has over 50 stores in 18 states under the brand Vishal Retail Mega Mart. The cities where Vishal Retail has a presence include tier II and tier III outposts like Surat, Raipur and Siliguri. Then there's Prozone Enterprises, a retail infrastructure services provider that's a subsidiary of ready-made garments maker Provogue. Prozone has executed projects worth Rs 1,100 crore in tier II and tier III cities.

Beyond retail, Bajaj Allianz Life Insurance Co., the largest life insurer in the private sector, kicked off its India operations with a sharp focus on rural and semi-urban India with a popular unit-linked 'unit gain' product. That may be the reason for Bajaj Allianz being only the second player in the private sector to come out of the red. There's also Mahindra & Mahindra Financial Services, which began life by providing finance to buyers of tractors. That essentially meant the company had to have a rural and semi-urban focus. Today, M&M Financial has gone on to offer the entire gamut of financial services, right from two-wheeler financing to investment advisory. It's still focussed only on the non-metros. Consider finally DishTV India, an early bird in the direct-to-home (DTH) entertainment market, that leveraged its first-mover advantage by offering services in far-flung areas, essentially regions that haven't been touched by the onslaught of cable television.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.