Small towns in India are fast emerging as the new money generators for India Inc. Several companies, from FMCG to durables to apparel, are eyeing to expand in small towns and rural areas.
Trent is doubling down on that shift with an aggressive expansion beyond metro markets. The fast-fashion retailer, part of the Tata Group, has added more than 100 stores in the nine months to December, taking its network past 1,100 outlets, with nearly two-thirds of new openings in smaller towns, peripheral micro-markets, and emerging cities. Its youth-focused chains Zudio and Westside are driving this push, with over 75% of recent Zudio launches outside metropolitan areas, expanding Trent’s presence to 274 cities, including new towns in Kerala.
Trent is not the only company planning to tap the potential of small towns.
Also Read | Tata’s Trent to push deeper into small town India to drive growth, top exec says
Entry-level consumer on target
After more than six years of premiumisation in the FMCG sector, small packs are staging a big return. Small packs are mostly targeted at consumers in small towns and rural areas. ET has reported recently that consumer goods makers are pivoting back to entry-level products and lower-priced packs, seeking to ride a nascent demand recovery following the GST rate cut. Chief executives say early signs of a pickup in rural markets and among lower-income consumers, visible since December, are prompting companies to sharpen their focus on smaller packs and entry-level offerings to drive volume growth.
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“Next year, our big focus is on the shampoo sachets plus some other small stock keeping units (SKUs) for most of our brands,” Emami vice-chairman Mohan Goenka told analyts recently. He said even for the male grooming products, the company will “increasingly focus on small SKUs now because we see a good revival in the rural markets.”
“Till now we have mostly addressed the needs of modern trade and ecommerce-but now the fire has to come from the rural areas. And the next few quarters, that is our focus,” Goenka told analysts recently.India’s largest home appliance maker, LG Electronics India, has also moved to tap first-time buyers, which are concentrated mainly in small towns and rural areas, launching a new line aimed squarely at the entry segment. As part of this push, the company is re-entering the fixed-speed air-conditioner category after nine years, with models targeted entirely at first-time customers.
Also Read | Premiumisation takes a pause as consumer firms revive entry-level push amid rural recovery
In beverages, Varun Beverages, the bottling partner of PepsiCo, in January has introduced ₹10 packs in select markets such as Northeast India and West Bengal. Hindustan Unilever chief executive officer Priya Nair told analysts last week that the company has launched a ₹99 pack of Surf Excel detergent “to bring more first-time users into this premium segment and expand the categories“. Colgate-Palmolive (India) has recently rolled out a smaller pack for their premium teeth whitening range.
The FMCG and consumer electronics sectors have been battling a prolonged slowdown in volumes-first due to the Covid pandemic and subsequently because of elevated inflation in daily essentials. Companies had scaled back entry-level launches amid weak demand.
Why retail is expanding in small towns
India’s retail boom is no longer confined to metros as smaller cities are rapidly rising as the new growth drivers for the country’s retail real estate sector.
According to Cushman & Wakefield’s Q3 2025 Retail Market Beat, leasing volumes in Tier II and Tier III cities surged last year, signalling strong retailer confidence and shifting consumer behaviour. It projects India’s real estate market could touch $10 trillion by 2047, with a major share of future retail development expected in these smaller cities.
Data from Cushman & Wakefield’s Q3 2025 report shows fashion, food and beverage, and entertainment continue to lead leasing momentum in emerging markets. These segments mirror how consumers are prioritising experiences over pure retail spending.
Consumers in these cities are spending more on lifestyle categories and experiences, pushing developers towards retail formats that combine shopping, entertainment and dining. Developers, brands, and investors view these cities as significant growth corridors where modern retail can reach new audiences. With expanding aspirations and improving infrastructure, India’s next phase of retail real estate growth is expected to be broad-based and multi-city, shaped by both consumer demand and investor confidence in emerging markets.