Rural Retail Options – Traditional Vs Emerging

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

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

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

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

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

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

Retail Options rajeshaithal.blogspot.com 7

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

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

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

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

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

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

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

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

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

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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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

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

Village Retailer rajeshaithal.blogspot.com 26

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

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

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

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

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

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

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

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

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

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

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

Rural Retail Options – Traditional Vs Emerging

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