Rural Retail Options – Traditional Vs Emerging

1. Rural Retail Options – Traditional Vs Emerging Rajesh Aithal IIM Lucknow rajeshaithal.blogspot.com 1

2. Layout • Introduction to rural markets • Rural retail options • Each option in detail • Village retailer • Implications rajeshaithal.blogspot.com 2

3. Importance Of Rural Markets • 72% of the population & contributes nearly half of the country’s GDP ( ETIG, 2002-03) • Rural is bigger than urban FMCGs 53% Durables 59% • 6 lakh + villages (NCAER, 2002) • 36 lakh shops rajeshaithal.blogspot.com 3

4. Rural Retail & Distribution • Dark continent , Black Box. • Reach is the first barrier which needs to overcome ( Banga , 2005) • Critical Component , Barrier, difficult task (Rao S L, 1973; Sarin, et.al., 1988 ; Krishnamoorty R , 2000, Prahalad & Hammond 2002 , Mandira, 1977 ). • Dearth of good quality work and the need for more work to be done by academicians (Kashyap P, 2003 , Srinivasan Viji, 1983 ) rajeshaithal.blogspot.com 4

5. Villages in General • Out of the nearly 6.4 Lakh Villages only 15000 have a population of above 5000 • The Top 85000 villages (2000+ pop , 13%) are home to 40% of the rural population but account for over 60% of rural consumption rajeshaithal.blogspot.com 5

6. Macro Picture Population No. of villages % of total villages Less than 200 114267 17.9 200-499 155123 24.3 500-999 159400 25 1000-1999 125758 19.7 2000-4999 69135 10.8 5000-9999 11618 1.8 10000 & above 3064 0.5 Total 636365 100 rajeshaithal.blogspot.com 6 Census 2001

7. Retail Options rajeshaithal.blogspot.com 7

8. Mobile Traders Small Town Village Retailer Market Rural Retail Haats and Melas New Initiatives Innovative options rajeshaithal.blogspot.com 8

9. Super Markets of Rural India • Over 47,000 haats and 25,000 melas are held annually • The average daily sale at a haat is about Rs 2.25 lakh • Annual sales at melas amount to Rs 3,500 crore • Over half the shoppers at haats have shopping lists • More than 10,000 melas draw visitors from all over India rajeshaithal.blogspot.com 9

10. What are they? • Haats are periodic markets, weekly, fortnightly • Transient Bazaars which catering to the needs of rural consumers • Here buyer & sellers congregate on certain days of the week to trade, barter & sell at make shift markets • Some of the bigger Melas have become major events in the rural marketing calendar rajeshaithal.blogspot.com 10

11. Haats • Still play a major role in the rural economy • Provides first contact pint for the villager to the market • Means for distributing local products, exchanging rural surplus, buying daily necessities as well as farm supplies & equipment • Weekly haats are more popular, • Avg. haat Caters to customers in 16 villages, nearly 27% are held at distances between 6-15 kms rajeshaithal.blogspot.com 11

12. Mobile traders The mobile traders are the ones who move with their products, from village to village. • 4,00,000 – Mobile traders • Visit 75 Lac rural HH, twice a week • 5 Villages per week • Close to 20 % of them have branded • products rajeshaithal.blogspot.com 12

13. Small town markets - An effective way to reach rural masses in certain product categories - Even for consumables, can be an effective way of redistribution both for direct sale as well as wholesaling - Can be an effective point for communication rajeshaithal.blogspot.com 13

14. Distribution of Towns in India Town Class Population No of towns % of total towns Class I 1 Lac & Above 423* 8.2 Class II 50,000-99,999 498 9.6 90 % of durables Class III 20,000-49,999 1386 26.9 purchased by rural people are Class IV 10,000-19,999 1560 30.2 from these Class V 5,000-9,999 1057 20.51900 towns Class VI Less than 5,000 237 4.6 Total no of 5161 100.0 towns *10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354 Source: Census 2001 rajeshaithal.blogspot.com 14

15. Innovative Options Effective use of the existing infrastructure • Post offices 1,38,000 • Public distribution shops 3,80,000* • Bank branches 32,000 PHCs, Cooperatives, Petrol Pumps……… rajeshaithal.blogspot.com 15

16. New Initiatives • Project Shakti • Echoupal & Choupal Sagar • Mahindra shubhabh • Mahindra Rural Intiative • Godrej Agrovet - Adhaar • Tata Kisan Sansar rajeshaithal.blogspot.com 16

17. ITC Sagar Choupal • An One stop shop for the farmers • A complementary element to E-Choupal • ITC is planning to open 50 such malls in next 2 years • No specific department, Both food and non food items • Sales persons used. rajeshaithal.blogspot.com 17

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24. ITC Sagar Choupal • Target Customers – Rich farmers (major segments) – Urban customers passing through the highway – Customers from the city • Location – Presence of E- Choupal – Near the highway rajeshaithal.blogspot.com 24

25. Strategy • Discounted price • Functional in nature • Designed to encourage impulse purchase – By farmers – By influencers • Blocks competitor’s entry • Keeps everything a farmer may need • Additional support services rajeshaithal.blogspot.com 25

26. Village Retailer rajeshaithal.blogspot.com 26

27. Village Retailer • Retailer – an important intermediary • Marketing action of retailers influences structure (Ingene & Lusch, 1981). • Differences between urban and rural retailers - Number of retailers itself is high - Quantum of business done by them is also low - Need support in terms of credit and other facilities rajeshaithal.blogspot.com 27

28. Village Retailer • Different from urban – size, purchase and support needs • Structure itself- how many shops, type of shops, stocking • Buyer-behavior, frequency & quantity that they purchase rajeshaithal.blogspot.com 28

29. Some Rural Retail Stats Growth 1995 1999 Grocer 69 57 Gen Store 11 13 Chemist 3 3 Others 17 27* No. of Shops ORG MARG 1999 None 1-4 5-15 16+ <500 26 56 15 3 500-1999 7 41 42 10 2000+ 2 8 44 46 rajeshaithal.blogspot.com 29 IMRB, 2001

31. Problems • Large No. of Small Shops • Dispersed Population & Trade • Multiple Tiers • Low Density of Shops • Inadequate Bank & Credit Facility rajeshaithal.blogspot.com 31

32. Problems •Poor Storage system •Highly credit-driven market and low investment capacity of retailers •Limited Shelf Space & Low visibility •Poor Communication of offers rajeshaithal.blogspot.com 32

33. 1-Level Channel Manufacturer Retailer 2-Level Channel Manufacturer Distributor Retailer 3-Level Channel Manufacturer Distributor Wholesaler Retailer 4-Level Channel Manufacturer Distributor Wholesaler S-WS Retailer 5-Level Channel Manufacturer Distributor Wholesaler S-WS V-WS Retailer rajeshaithal.blogspot.com 33

34. Village Retailer • Still depends heavily on wholesaler for his regular purchases • Buys in small quantities and more frequently making direct distribution by companies a difficult task • Stocks more of local brands than national ones rajeshaithal.blogspot.com 34

35. Retail Options Opportunities Challenges Haats & Melas Single point access to Suitable for only rural consumers from certain product many villages categories & periodic nature of the market Village Retailer In direct contact with Spread-out, with the villagers low quantity purchase & higher frequency Mobile Traders Move from one village Unorganized nature to the other & know of business & the villagers dependency on rajeshaithal.blogspot.com unbranded products 35

36. Retail Options Opportunities Challenges Existing other Physical Infrastructure Dealing with Infrastructure in place government mechanism to access them Small Town Can be a good way to Loss of control for Markets reach villages through the company & wholesale complexity of dealing with wholesalers New Initiatives – New channel with Most initiatives are kiosk based, rural opportunities to reach still in nascent stage retail chains & consumers more of development SHG-based efficiently, potential models for growth & rajeshaithal.blogspot.com 36 Innovation

37. Implications for Rural Marketers • The options for reaching the rural consumer is increasing and there is a need to look beyond the traditional options • But each of these options need to be see in the context of the product category to be distributed. rajeshaithal.blogspot.com 37

38. Marketing in India Blog : rajeshaithal.blogspot.com rajeshaithal.blogspot.com 38