During the 2025 festive season in India, smaller towns and cities took the lead in online shopping. Specifically, cities classified as Tier-3 drove more than 50 % of all online orders for the Diwali period.
Key Data Points
- Based on an analysis of about 4.25 crore shipments by logistics-intelligence firm ClickPost, Tier-3 cities alone contributed 50.7 % of all online orders during Diwali.
- Tier-2 cities added another 24.8 %, meaning non-metro (Tier-2 + Tier-3) accounted for roughly 74.7 % of total online order volume.
- The average order value rose from ₹3,281 in 2024 to ₹4,346 in 2025 — a jump of about 32.5%.
- In Tier-3 cities, cash-on-delivery (CoD) remained dominant, at about 52% of orders.
- Despite large volumes from smaller towns, logistics standards held firm: average delivery time ~2.83 days; same-day hyper-local deliveries rose by 42% year-on-year to 8.7% of orders. Business Standard
Why This Shift Matters
- Democratisation of e-commerce: The fact that Tier-3 cities now lead online sales during a major festival shows how digital retail is spreading beyond big metros.
- Growth engine for brands: For e-commerce platforms and D2C brands, the growth is now coming from smaller towns, which may require different marketing, logistics and payment strategies.
- Logistics & fulfilment implications: With high volumes from Tier-3, firms need to invest in local warehousing, last-mile delivery, and region-specific inventory.
- Payment & product-mix insights: CoD still strong in Tier-3 suggests need for trust-building and tailored payment options; also higher order value suggests these towns are spending more on larger ticket items.
- Competitive opportunity: Brands that focused on metros may face increased competition from players targeting smaller markets.
Challenges & Considerations
- Infrastructure strain: While average delivery times are still good, scaling hyper-local delivery to smaller towns can be harder (roads, address systems, workforce).
- Sustaining growth: It’s one thing to spike during Diwali; maintaining high order volume and loyalty from Tier-3 beyond festive season is another.
- Payment behaviour: High CoD share raises logistics costs and risk; converting customers to prepaid/digital payments may be key.
- Product assortment: Preferences in Tier-3 may differ (more value, localised preferences) compared to metro markets.
What Brands & Platforms Should Do
- Localise offers: tailor deals, marketing messages and logistic capabilities for Tier-3 towns.
- Build trust: emphasise delivery reliability, easy returns, to reduce return rates and build repeat purchase.
- Strengthen payments: provide multiple options including CoD, UPI/digital wallets, but work on shifting towards digital.
- Scale logistics: partner with regional carriers, establish mini-hubs, optimise last-mile.
- Monitor data: track region-wise performance, product categories that are doing well in Tier-3 (e.g., fashion, home-appliances, electronics).
Looking Ahead
This trend suggests that for the next festive seasons (e.g., Dussehra, Diwali next year), Tier-3 cities will be even more critical for online retailers. The focus will likely shift to sustaining this growth, improving margins in these regions, and ensuring infrastructure keeps pace.
Conclusion
The 2025 Diwali online retail season reaffirmed that Tier-3 cities are no longer peripheral markets — they’ve become central to India’s e-commerce boom. With over half of the orders coming from these towns, businesses must rethink their strategies to cater to this “new main market”.
