Everything about a smaller city is cheaper except being wrong.
Reach is cheaper, rent is cheaper, the competition for attention is thinner. And a failed delivery, a rude call, a product that arrives damaged costs you several times what the same failure costs in Bengaluru.
Those two things move in opposite directions, and almost every expansion plan I have seen budgets for the first one only.
That is the whole argument. The demand beyond the metros is real and documented, the cheap reach is real, and the reason brands stall there is that they bought attention in a market where a mistake travels and they had not yet built the ability to avoid mistakes.
So the sequence matters more than the spend. Get to the point where you can serve a town properly, then advertise into it. Not the other way round, which is the order almost everybody uses because the advertising is the easy part to start.
The demand is real
Worth establishing, because the sceptical version of this is also wrong.
Unicommerce’s analysis of orders flowing through its platform found that 66% of new D2C orders in FY2026 came from tier II and tier III cities, a figure picked up across the trade press. That is platform data rather than a market-wide census, so read it as a large sample of real orders rather than as a national statistic.
Other figures float around and they are not comparable with it. One summer 2025 sale period put tier 3 at 38% of order volumes against metros at 42%. A Diwali 2025 report put tier 3 alone above half. Those measure different windows and different definitions of a tier, so lining them up produces a trend that is not there.
The direction is what matters, and it is not in dispute. If you are a consumer brand selling only into eight cities, you are selling into the minority of the market.
I also went looking for a reliable comparison of advertising costs between metro and non-metro inventory and could not find one. So treat the cheap reach as a thing you should verify in your own account rather than as a published fact.
Why a mistake costs more there
Here is the mechanism, and it is the part that gets left out.
In a metro, your unhappy customer tells nobody who matters to you. Their neighbours are strangers, their colleagues buy different things, the complaint goes into a review nobody local reads.
In a town of four hundred thousand, the same customer tells twenty people, and those twenty people are all your prospects. They share a WhatsApp group, their children are at the same school, they buy from the same three shops. The social graph is dense and it overlaps almost perfectly with your addressable market.
Word of mouth is not a channel there, it is the market structure.
Which inverts the usual logic of a cheap test market. Low cost of reach normally means you can afford to experiment, and here it means the opposite: you can afford the advertising and you cannot afford the learning curve, because your early failures are being recorded in exactly the network you need for your later growth.
The practical consequence: the first fifty customers in a new town matter more than the first five hundred in a metro, and should be handled accordingly. Not with a discount code. With somebody’s actual attention.
In a metro the brand vouches for you, in a town a person does
The second structural difference, and it decides where the money should go.
A buyer in Indiranagar who has never heard of you will still order, because the category is familiar, the platform is trusted and the brand is doing the reassurance. Advertising can create that on its own.
A buyer in a smaller city is far more likely to want a human reference point, and the question underneath the purchase is who else here has bought this. Which means the trust mechanism is not your brand, it is a person: the dealer, the local shop, the installer, the neighbour who already has one.
So the budget that would go entirely into advertising in a metro should be split. Some into reach, and a real share into whatever creates a local reference: a stocking dealer, a service partner, a visible installation, the first customers treated well enough that they will say so when asked.
This is also the reason distribution still beats advertising in most of these markets, long after it stopped doing so in the metros. You are not buying attention, you are buying somebody local who will vouch.
Your competitor is not who you think
Brands tend to assume they are upgrading a smaller market. Frequently they are downgrading its service.
The incumbent in a tier 3 town is a shop that answers the phone at nine in the evening, delivers the same afternoon, knows the customer’s name and will take the thing back without a form. That is a service bar set by somebody with lower costs and no call centre.
Against that, a national brand offering a four-day delivery window, a chatbot and a returns policy that requires a pickup appointment is not a modernisation. It is worse, in the ways that matter to the buyer, and the pitch has to acknowledge that rather than pretend the comparison is with nothing.
Which is a positioning problem rather than a logistics one. You need a reason to be chosen that survives the local alternative being more convenient, and “we are a proper brand” is not it in a market where the shopkeeper’s word is the warranty.
What to test, and in what order
The sequence I would use, and it is deliberately slow at the start.
Serviceability first. Find out, before any spend, what your actual delivery time and success rate look like in the specific pin codes you are targeting. Not the courier’s claimed coverage, your own completed orders.
Then fifty customers, acquired any way you like, and handled by a human who calls them. The purpose is not revenue, it is finding out what breaks and what the local objection actually is.
Then language, if the category needs it, which I went through in publishing in Hindi and regional languages and will not repeat.
Then the local reference: one dealer, one service partner, or a cluster of customers willing to be named.
Only then the advertising, which at that point is pouring water into a vessel that holds it.
Most brands run this list backwards, starting with the cheap reach because it is the step that can begin on a Monday, and then conclude that the market is price-sensitive when what they actually proved is that it is unforgiving.
Where I come out
Tier 2 is not a cheaper version of a metro. It is a market where distribution and reputation do the work advertising does elsewhere, and where your errors are published to the people you were about to sell to.
If you are planning this, spend the first quarter on serviceability and fifty well-handled customers, and hold the media budget until you can state your delivery success rate in those pin codes from your own data.
The brands that do well in these markets are not the ones that got there cheapest. They are the ones nobody in the town has a bad story about.
If you’d like to think through the sequence for your own category, or whether your current delivery reality can survive the attention, drop me a line on email, WhatsApp, phone or LinkedIn and we can have a quick chat, and my notes on how I work cover the rest. I’m taking on a small number of contracts at the moment, so I’ll tell you straight whether it’s something I could help with.