What’s Making The Preschool Industry Profitable in Tier II and Tier III Cities?
Parents all around the world seek quality education for their children. With the changes happening in the social and economic structure of India, it has intensified the need for early education, especially in tier II & tier III cities.
The Pre-school segment in India is worth US$ 2.1 billion and is expected to grow at a CAGR of 23 per cent by 2022. With growing awareness among parents in tier 2 and tier 3 cities, the penetration rate for the preschool segment is expected to rise to 25 per cent. The pre-school market in the smaller cities is growing at a whopping 120% per annum, much higher than the growth in the cities. With increased competition in metro cities, franchises have shifted their focus to smaller towns for more profits. Below are some of the factors responsible for the unprecedented growth of the pre-school industry in tier II and tier III cities.
Increase in Disposable Income
There was a time when spending 1000 of rupees for the education of a child below 5 was unheard of. But, with a change in lifestyle and increase in disposable income of people living in small towns have led to the growth in pre-school franchises in these areas. People want to provide the best of education to their children right from the kindergarten age and are willing to spend any amount for it.
Brand Name Matters
There is a huge demand for preschools in rural India, but people in tier ii & III cities prefer a reputed name. Parents are apprehensive about sending their kids to any local pre-school. It has become a trend in small cities to send their toddlers off to a big-name pre-school as they have proven child development.
Bridging Educational Gap
Earlier, parents from small cities used to prefer teaching their child at home until age five before scouting for the right school. However, now they have realized that educational achievement is all about how the early bird catches the worm. Parents now believe that a child needs proper exposure before getting into a formal school. Pre-schools bridge the educational gap.
Opportunity for Franchisees
Pre-school industry is witnessing a substantial increase in demand coming from tier II & III cities, especially for branded pre-schools.
Earlier pre-school franchises were sceptical of venturing into tier II and III cities, but now it has converted into optimism with an increase in disposable income levels and the number of working parents in these cities. Realising the potential for pre-schools in small towns, more and more franchises are establishing their presence there.
Moreover, factors like low rentals and a more spread out infrastructure as compared to the metros are also encouraging pre-school franchises to set their foot in these cities. The overall cost of setting up a pre-school at smaller cities is around 50% less than in metros.