Rural Bazaar Vs. Urban Bazaar Presenters: Hemank, Harsh
Introduction• Rural market is going at a rate which is twice to that of the urban market.• Rural markets have witnessed an increase in sales of erst-wile urban kitchen gadgets like refrigerators, mixer grinders and pressure cookers.• This clearly indicates that rural tastes are changing at a fast rate.• This is a marked transition in the purchasing power of the rural households.• According to a survey by NCAER, an average rural household owned three consumer durables as compared to seven consumer durables owned by an average household.• Mere one per-cent increase in India‘s rural income translates to a large buying power of Rs. 10,000 crores.• MART, the specialist rural marketing and rural development consultancy, has found that 53 per cent of FMCG sales and 59 per cent of consumer durable sales lie in the rural areas.
• It is also seen that purchase and use of certain durables and non- durables by consumers in rural areas is more than that of the consumers in urban areas in the following products :- PRODUCTS SEWING MACHINES RADIO/TRANSISTORS WRIST WATCHES BLACK AND WHITE TELEVISION SETS CASSETTES BICYCLES PRESSURE COOKERS
Rural retail Growth story :- PRODUCT CATEGORY MARKET SIZE($ Billion) FOOD AND GROCERY 152 CONSUMERS DURABLES 20 APPAREL 19.15 PHARMACEUTICALS 5.5 OTHERS 83.12 Source :- Nitin Shrivastava, 2008, Perspectives on retailing in India and Rural marketing
• The rural population is largely self dependent and is able to produce most of its consumption needs locally.• According to a study on the impact of the slowdown on rural markets commissioned by the Rural Marketing Association of India (RMAI) and conducted by MART, the rural economy has not been impacted by the global economic slowdown that took place during the last two years.• Infact, the rural economy grew at a phenomenal 25% in 2008 when the demand in urban areas across the globe slowed because of the global meltdown.• Rural population due to its irregular income and limited resources is highly price sensitive. Ensuring a high market share and deep penetration will ensure large volumes thereby achieving overall economies.• According to a report by Crisil, Discretionary spending of a typical rural Indian household rose from`14,000 in 2004-05 to `24,000 in 2009-10, growing at about 11% every year, and faster than the inflation rate of nearly 6% a year over that period
• This overall price benefit has to be passed on to the consumer who requires value for money products. Some examples :- GODREJ Launched HUL Launched a variant Cinthol, Fair Glow and of its largest selling Godrej in 50 gm. SKU at soap Lifebuoy in Rs.2 Rs.4-5 packs Coca-Cola also launched Sunfill, a COKE launched it’s Rs.5 ready to drink bottle concentrate at Rs.2(25 gm) and Rs.15(200 gm) Philip developed a TV “Vardaan” for rural markets. This TV can work on the voltage 90-270 volts
Sector :-FMCG• The products are branded and backed by marketing, heavy advertising, slick packaging and strong distribution networks.• Despite the strong presence of MNC players, the unorganized sector has a significant presence in this industry.• Rural markets account for 56% of the total domestic FMCG demand.• The FMCG market is set to double from USD 14.7 billion in 2008-09 to USD 30 billion in 2012.• According to various estimates, FMCG sector has witnessed more than 60% growth in rural and semi-urban India as of 2010.• Rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages
• Fast Moving Consumer Goods (FMCG) are witnessing more than 50% of growth in its Rural and Semi-Urban Segments as of 2012.• It is projected to grow at an CAGR of 10% throughout 2012 to carry forward its market size to over Rs.1,06,300 crore from present level of Rs.87,900 crore, according to an analysis carried out by the Associated Chambers of Commerce and Industry of India (ASSOCHAM).• ASSOCHAM also analysed that the FMCG products, which will attract the eyes of rural and semi- urban folks, will mainly comprise soaps, detergents, cold drinks, consumer durables, toothpastes, batteries, biscuits, namkeens, mosquito repellents, refined oil, and hair oil.• The market size for nail polish at around Rs.270 million in rural areas as against only Rs.81 million in the cities.• Similarly, the market for lipsticks is worth around Rs.250 million in rural areas, compared to only Rs.131 million in the urban segment.• Face cream demand in villages estimated at about 1,099 tonnes far outstrips that in the cities at about 426 tonnes, shampoo too has more potential in rural bazaar (about 2,257 tonnes) than urban markets (about 718 tonnes).• The rural market for mosquito repellents is reckoned at around Rs 173 million against a mere Rs 79 million in urban centres.
SHARE OF RURAL SALES Source :-ASSOCHAM COMPANY SALES BY VOLUMEHINDUSTAN UNILEVER LTD. 50%DABUR INDIA LTD. 50%COLGATE PALMOLIVE INDIA 37%MARICO 36%GSK 25%NESTLE INDIA LTD. 25%GODREJ(GCPL) 30%CADBURY’S 25%
FUTURE OUTLOOK• With relatively lesser capital and technological requirements, a number of new brands emerged domestically as well while the relaxed FDI conditions led to induction of many global players in the segment.• Both these factors resulted in leading to rapid development of the FMCG market in India.• Riding on a rapidly growing economy, increasing per-capita incomes, and rising trend of urbanization, the FMCG market in India is expected to further expand to Rs 1,80,000 crore by 2015.
TREND IN YEARLY TRACTOR SALESThe tractor industry reported a strong 28.3%growth in sales volumes during 2009-10, thereby ending the phase of cyclical correction that had pulled down tractorsales during the preceding two years(2007-09). Significantly, the revival of 2009-10happened despite the drought-like conditions n many States during theKharif season dampening sentiments (Source ICRA Estimates)
TRENDS THAT MAY BE EXPECTED• Slowdown in rural demand due to slowing of the government’s cash transfers including MGNREGA (Mahatma Gandhi National Rural Employment Guarantee), limited increase in minimum support prices and a higher cost of production due to wage inflation and rising energy costs resulting in shrinking margins and worsening terms of trade for farmers.• The monsoon season a key event to watch• High cost of production imply shrinking margins for farmers• Rural demand should weaken, due to subdued farm produce prices, urban demand would be be impacted by weak consumer sentiment.• Moreover, as the penetration increases, growth rate shall start seeing a decline
TRENDS IN BANKINGRural Retail Banking• Reserve Bank of India (RBI) to promote rural credit and banking primary agricultural credit societies (PACS)1 also provide other agricultural inputs to the farmers.• Current, Estimates >> number of rural bank branches 31,727. 39.7% of total bank branches in country. The number of no-frill accounts is 28.23 million. only 54 savings accounts for every 100 persons in rural areas and only 26% of rural citizens with an annual income of less than Rs. 50000 have a bank account.• Number of innovations and experiments have been initiated to bridge the gap between the rural population and the formal retail banking system.
INNOVATIONS AS OF TODAY• Local area banks (LABs) mobilize rural savings by local institutions and make them available for investment locally.• Self-help groups (SHGs). Being a savings - first model, credit discipline is a norm of the group; besides joint liability and social collateral make such groups bankable in the eyes of bankers. The linkages are achieved through non-governmental organizations (NGOs) and other intermediaries, and this has formed the basis of the micro-finance movement in India.• Kisan Credit Card--enables the farmer to get loans over a three to five year period as a revolving credit entitlement, thus, providing them control over their cash flows and reduced transaction costs for both the banks and the farmers.
EXPECTED/PROBABLE TRENDS• Customers in rural India also get a highly customized services as in urban areas.• UID Project provides primary database for providing services in rural• Use of Tablets /Mobile/internet Banking services• Use of mobiles for quick money transfer lie M-Pesa (Kenya)