Rural Retailing

RURAL RETAILING
AGRIBUSINESS ENVIRONMENT & POLICY
ABM-502
SCHOOL OF AGRIBUSINESS AND RURAL MANAGEMENT
DR. RAJENDRA PRASAD CENTRAL AGRICULTURAL UNIVERSITY
PUSA, SAMASTIPUR, BIHAR
SUBMITTED BY :
Sanjib Kumar Parida (1805204033)
Manish Kumar Tiwari (1805204036)
Nishi Kumari (1805204005)
Mahesh Pal (1805204032)

Rural Retailing Page 1
OBJECTIVES
 To analyze the rapid increase in per-capita consumption, retailing trends and business
models of various retail ventures in India.
 To analyze how intelligently designed rural retailing initiatives can improve can improve
the economic conditions of Indian farmers and yet to be commercially profitable.
 To identify the challenges and opportunities in Rural Retail in India.
 To make the strategies for effective Rural Marketing in India.
INTRODUCTION
"The future lies with those companies who see the poor as their customers."-
C. K. Prahalad (Addressing Indian CEOs, Jan 2000.)
―Retailing includes all activities involved in selling goods or services directly to final consumers
for personal, non business use.‖ - Philip Kotler. Retail comes from the Old French word tailler,
which means "to cut off, clip, pare, divide" in terms of tailoring (1365). It was first recorded as a
noun with the meaning of a "sale in small quantities" in 1433.
The Indian rural market with its vast size and heterogeneous demand base offers great
lucrative opportunities to marketers. After all, two thirds of countries consumers live in rural
areas and almost half of the national income is generated in the rural hinterland. India is
classified into around 593 districts, and approximately 6,38,000 villages, which can be
segmented in different parameters such as literacy levels, accessibility, distribution networks,
income levels, market penetration, distances from nearest towns, etc. Recent developments,
which has taken place in the rural areas under the five- year plans and other such special
programmes, are phenomenal. The overall growth of the economy has resulted into substantial
increase in the purchasing power of the rural communities.
The concept of rural marketing in India is often been found to form ambiguity in the
minds of people who think rural marketing is all about agricultural marketing. However, rural
marketing determines the carrying out of business activities bringing in the flow of goods from
urban sectors to the rural regions of the country as well as the marketing of various products
manufactured by the non-agricultural workers from rural to urban areas.

EVOLUTION OF RETAIL IN INDIA
RETAIL IN INDIA
India is a leading destination for retail investment. Efficient logistics and supply chain is
one of the key factors for success. Retail sector proves to be a backbone to a host of allied sectors
(eg.: agriculture, logistics etc).
a) Organised retail sector – 3% b) Unorganised retail sector – 97% (Fig.2)
In 2018, the organized retail market was $79.43 and Unorganized retail market was about $
697.71. (Fig.1)
Fig.1 Indian Retail Market Fig. 2 Organized Retail Market

Rising income and demand for quality products to boost consumer expenditure. Total
consumption expenditure is expected to reach nearly US$3,600 billion by 2020 from US$1,824
billion in 2017.Indian retail one of the fastest growing markets in the world due to economic
growth.India is the world‘s fifth largest global destination in the retail space. Retail market in
India is projected to grow from an estimated US$672 billion in 2017 to US$1,200 billion in
2021F.India‘s modern retail to double in size over the next three years. The modern retail market
in India is expected to grow from US$13.51 billion in 2016 to US$26.67 billion in 2019. Robust
consumption, rural markets to augment FMCG market. FMCG market expected to increase to
US$103.7 billion by 2020 from Rs3.4lakhcrore (US$52.75billion) in FY18. The sector is
projected to grow 11-12 percent in 2019. Increasing participation from foreign and private
players to boost retail infrastructure. India's online retail sector grows 23 percent to US$17.8
billion in 2017. Online retail sales is forecasted to grow at the rate of 31 percent year-on-year to
reach US$32.70 billion in 2018. Revenue generated from online retail is projected to grow to
US$60 billion by 2020.
GLOBAL RETAIL DEVELOPMENT INDEX 2017

The 2017 Global Retail Development Index (GRDI) titled ‗The Age of Focus‗ has placed India
at the top position among 30 developing countries on ease of doing business in the retail sector.
This is the 16th edition of the Global Retail Development Index (GRDI).
ADVANTAGE INDIA
RETAILING TRENDS IN INDIA (PAST, PRESENT & FUTURE)
Retailing In Past :
Characteristics:
 Traditional unorganized sector
 Only local grocery
 Shops called “KIRANAS” are available
 Apart from them local fairs, hawkers,
pavement vendors
 No standard patterns for selling were
followed
Retailers characteristics:
Retailing In Present :
Characteristics:
 Both organized and unorganized sector
 Still more than 90% is unorganized sector
 Multi braded retailing is the running trend
 Organized sellers follow well-defined
selling, supply chain models, highly skilled
employees corporate’s have entered the
retail industry
 Online retailing is occupying a good market

 Not educated or merely educated
 Family customs
Consumers characteristics:
 Awareness levels were low
 Family sizes were big so incomes were low
spending is low
 Choices were less
share
 Perspective has changed, retail stores have
no more restricted to necessity shopping
 Family disposable incomes have increased
so shopping has become a recreation and
hobby.
Retailing In Future
Characteristics:
 Promising sectors likely to grow in future are fashion, life style, food & groceries
 100% FDI in retailing projects a better future
 Competition would benefit the customers
 E-commerce and M-commerce play a major role in retailing
 Organized sector will be in a growing trend where as un organized sector will loose its
market share
 Retailers will be looking for employees who have good leadership skills, detailed
understanding of CRM & supplychain concepts
 Retailers should have ability to communicate with global customers
 Futures consumers will be more aware and demanding
 Environmental concerns and corporate social responsibilities of retailers play a
dominating role in choosing them by the consumers.
RETAIL PROSPECTS IN RURAL INDIA
Rural India accounts for roughly 83.3% of the population where 6,38,000 villages and
593districts consist of 742 million people.
 15% of rural population lives in 20,000 large non-urban areas with population more than
5,000 people.

 63% of rural population lives in villages of 1000 to 5000 people.
 3, 90,000 villages have fewer than 1000 people accounting for 22% of the population.
 In 2010-11 LIC sold 55% of its policies to rural areas
 Of over two billion BSNL mobile connections 50%are in small towns or villages.
 41 million Kisan Credit cards have been issued against 22 million credit cum debit cards
in urban areas.
Growth in agriculture has resulted in the rapid rise of rural incomes which results in the rise of
consumption pattern especially for factory produced goods in rural areas. The Indian rural
market with its vast size and demand base offers great potential to marketers. So for the retailers
it is required to see in which segment they are catering in the above division of villages. For
example HUL‗s project “Shakti” caters to villages with a population of 500 or above where in
“Eveready” considers even the remotest of village as its target customer. According to the IMD
report 1998 of NCAER(National Council of Applied Economic Research), the consuming class
households (annual income between Rs.4500-15,000) in rural India equal the number in urban
India. Thus rural markets are immensely attractive for most companies.
CONSUMPTION CONTRIBUTION OF RURAL INDIA
AVERAGE MONTHLY ICOME & EXPENDITURE IN RURAL HOUSEHOLDS
Average monthly income for agricultural households is Rs. 8,931; 35% percent of which is
received from cultivation, followed by wages (34%), salaries (16%), livestock (8%) and non-
farm sector (6%). Other sources, including income from rent on building or land, income from

interest earned on bank deposits, dividend or interest earned from investments accounted for 1%
share of total income. Transfer income (which includes remittances) received by the households
have not been accounted for, while calculating the total income.
 Non-agricultural households reported average monthly income of Rs.7,269 per month,of
which, 54% is from wages, 32% from salaries, followed by non-farm sector activities
accounting for 12% of total income.Taking all households combined, the average
monthly income stood at Rs.8,059. 20 States are having higher average monthly income
as compared to all India estimates.
 The average monthly per household consumption expenditure (MHCE) for all households
was Rs. 6,646/-which is less than average monthly income of Rs. 8,059.
 The MHCE for agricultural households is higher (Rs.7,152) as compared to that of non-
agril households (Rs.6,187). Also, MHCE for AH and NAH is lower than their monthly
income.
 51% of the total consumption expense is reported to have been made on food items and
remaining 49% on the non-food items.
 Livelihood shocks faced by households at least once over the last 10 years include crop
failure due to natural calamities (reported by 54% AH), yield loss due to pests and insects
infestation (reported by 28% AH), and sudden fall in crop prices (reported by 18% AH).
 Taking all households combined major illness/accidents (by 19.7% all HH) was another
major shock faced in the given reference period.
IMPORTANCE OF RURAL MARKETS
 Rural per-capita consumption expenditure grew by 11.5 %
 Households having income between Rs. 90,000 to 2,00,000 are increasingly by 5.7 %.
 Projected growth rate of such households is 11% by 2009-10.
 22% population having income more than 10,00,000 in Rural areas.
 Rural employment has gradually shifting from Agriculture.
 Logistics industry contributes to 3% GDP in India as compared to 53% contribution to
China.

CHALLENGES & OPPORTUNITIES IN RURAL RETAILING
Rural Retailing and its Challenges:
Some of the challenges faced by marketers and retailers in rural India are low per capita income,
dependence on the monsoons for purchases, difficulties in communication and high distribution
costs. Marketers are addressing these issues through the 4A's of Availability, Affordability,
Acceptability, Awareness and coming up with innovative campaigns to address the rural
segment. Understanding of rural customers and their needs is what will make the rural foray of
retailers successful.
The main difficulties faced by the retailers in rural markets are:
 Large and scattered market.
 Major income from agriculture.
 Low standard of living.
 Traditional outlook.
 Diverse socio economic backwardness.
 Lack of proper physical communication and infrastructure facilities.
 Many languages and dialects.
 Dispersed Markets.
 Low per capita Income.
 Low levels of Literacy.
 Prevalence of spurious brands and seasonal demand.
Most of the modern retail opportunities are in the urban areas and the rural retail potential has
remained untapped. While there is a large potential in rural areas, fragmentation and cost of
market access are real deterrents. No doubt that rural retailing is gradually gaining grounds with
the explorations by the corporates like ITC‘s Choupal Sagar (rural hypermarket), HLL‘s
Shakthiand Mahamaza. However, the pace at which the retail sector has been expanding in rural
areas should have been much more faster. The higher purchasing power in rural and semi-urban
areas has significantly modified peoples‘ lifestyle; for e.g. the sachet phenomenon is a thought to
reach to the bottom of the pyramid. Lot of people in rural India are just not willing to buy a
whole bottle of shampoo, but that doesn‘t mean they won‘t buy it. Thus, the key is in slicing the

relevant customer segments and developing appropriate formats. If the specific needs of
consumers are recognized, there would be a considerable market expansion, which would diverta
part of retail business to rural areas and help in reducing rural-urban imbalance.
In addition to these problems the number people below poverty line has not decreased in
any manner. Vast numbers of rural people tend to be highly superstitious, are tradition bound,
believe in old customs, traditions, habits, taboos and practices. Initial costs to penetrate into these
markets will be very high. Increasing costs of land in the rural areas also add to retailers
problems. Pace of expansion by competitors, High operating costs, supply chain problems, low
margin on agri inputs and low purchasing power of the customers will further add to the
challenges faced by the retailers.
A huge and distinct rural market has emerged in the country. One needed to distinguish
between a developed rural market and a developing rural market and adopt new strategies with
an aspiring middle class in the scene. Inadequate data and poor infrastructure are still
impediments on the way. The rural diversity, in terms of language and culture, among the States
add to the challenges. The rural population has become very conscious of the value of money
and cannot be taken for granted any more. Everything sold in metros cannot be sold in rural
markets anymore.
The biggest challenge in rural retailing is to ensure products are available across the
638,000villages, which are spread out over three million sq km in India. The problem is further
compounded by the geographical immensity of reaching the 12 million-strong kirana
(neighborhood mom-and-pop) stores in the country. Most of these stores are small, and
consumer goods companies have to reach out to them in villages only through a channel of
distributors and wholesalers, adding to the costs of distribution. At the same time, these small
retailers cannot be ignored about 90 percent of them are in towns that have no more than a
million people and some are in areas that have less than 100,000 people.
Companies are left with no choice but to start building a strong distribution system and
adapting to innovative means of transportation to combat bad roads and poor connectivity. This
challenge affects the pace of replenishments of sold goods as the supply system is too
fragmented and increases inventory holding costs for retailers. Some companies had set up area
offices which in turn manage smaller rural offices. Due to lack of reliable infrastructure for

logistics and since the supply chain is just developing in the country, fast moving consumer
goods companies have to plan their products in advance. So the supply pipeline becomes long
and loaded.
More often companies have to redesign their products and rework on their pricing
strategy to succeed in the rural markets smaller pack sizes, product variants and perception of
affordability are key to target rural markets. Examples include shampoo in sachets and dry food
in smaller packaging. Using the media, which has deeper penetration in rural areas, goes a long
way in building awareness and driving acceptance for products. The channels include the state-
run broadcaster Doordarshan, radio channels, local language advertising, cinema, outdoor
mediasuch as posters, banners and wall writing and tapping all forms of local entertainment. The
availability of more economical technology applications specific to rural markets will also help
organize the fragmented retail formats.
Opportunities in Rural Retailing:
The Indian rural market with its vast size and demand base offers great opportunities to
marketers. Two-thirds of countries consumers live in rural areas and almost half of the national
income is generated here. It is only natural that rural markets form an important part of the total
market of India. According to the NCAER study, there are almost twice as many 'lower middle
income' households in rural areas as in the urban areas.
 At the highest income level there are 2.3 million urban households as against 1.6 million
households in rural areas.
 Middle and high-income households in rural India are expected to grow from 80 million
to 111 million by 2007.
 In urban India, the same is expected to grow from 46 million to 59 million. Thus, the
absolute size of rural India is expected to be double that of urban India.
 As organized retail in rural India awaits the arrival of Reliance Retail, current majors like
ITC, Godrej and DSCL are expanding their retail operations by setting up more stores,
entering new states and offering newer product categories. A shift from selling agri-

inputs will help these stores target the non-farming segments. It is a little known fact
that,while 25% of the rural population is not engaged in agriculture, it earns 50% of the
rural income.
 When organized retail first made its presence felt in rural India, it wasn‘t a pure retailing
operation targeting the rural masses. Companies like DSCL and Godrej who had
significant agri-business interests, set them up to meet the needs of farmers in a store‘s
catchments area. A typical agri-input store would have a catchment area of around 100
villages spread over 20-25 kms. These stores are one-stop shops meant to meet the
occupational needs of farmers by providing agri-inputs and fertilizers. These stores, like
DSCL‘s Hariyali Kisan Bazaar, ITC‘s Choupal Saagar etc. tend to be located in small
towns that function as procurement hubs where the farmers come to sell their produce.
 While organized retail centered on these stores, unorganized retail revolves around the
local village shop and the haat. Shops are usually present in villages with a population of
more than 500 people. They stock more product categories than what similar urban shops
would, but there isn‘t much variety offered within a category. Haats are weekly mobile
supermarkets that are spread over 2-3 acres of land, with more than 300 stalls, selling
anything from animal feed to local medicines.
"Rising rural incomes, healthy agriculture growth, boost in demand, rising consumerism across
India, better penetration of FMCG products in the rural market are contributing to high growth
and rapid expansion of the FMCG industry in rural India,"Traditionally, for the auto industry, the
rural market has been largely restricted to tractors and two-wheelers, though the penetration of
scooters and motorcycles in villages is only 10 percent,as compared to 25 percent in urban areas.
Any marketer worth his salt knows that in the wild blue yonder of rural India lies a huge market
for many products and brands. For two-wheelers, colour TVs and fridges rural areas account for
30 per cent or more of the market.

MAJOR RETAILERS IN RURAL INDIA (SIGNIFICANT PLAYERS)
 ITC- Choupal Saagar
 DCM Shriram – Hariyali Kisaan
Bazaar
 Tata Chemicals Ltd – Tata Kisan
Sansars
 Triveni Engineering & Industries Ltd-
Triveni Khushali Bazaar
 Future group-Godrej Collaboration –
Aadhaar
 HUL – Project Shakti
 IOCL – Kisan Seva Kendra
 Reliance- Rural Business Hubs
 HPCL- Apna Pump
 Murugappa Group – Parry‘s Corner
 Mahindra & Mahindra- Subh Labh
Rural Malls: ITC-Choupal Sagar
Choupal Sagar is one of the first organised retail forays into the hinter land. It was soft-launched
on 15 August. It is actually a warehouse for storing the farm produce that ITC buys through its e-
chaupals. The mall has come up in one part of this warehouse.It has been set up by the
international business division of tobacco major ITC. It has been initiated as rural shopping-cum-
information centres in Madhya Pradesh. The first rural mall has come up 40-odd kilometres
journey from Bhopal towards Sehore.ITC Spent 3 years and Rs.80 crores on research and
development of this concept including investments in E-choupal.
Objective
ITC describes the establishment as a set to create a high-quality, low-cost fulfilment channel for
rural India. However, any organisation is driven by the profit motive which are served
throughthis initiative:
 Reap benefits from the market they have created
 Creating an entry barrier for other prospective players ITC has very effectively integrated
its profit and social motives.

Concept
KSA Technopak - "It is definitely a pioneering venture because no other Indian company has yet
entered rural retailing with the all-under-one-roof concept."Malls stocking wide variety of
products with floor space of 7000 sq.ft plus a trading zone and information centre. It is a Hub
cum Supermarket, which has been set up in a section of the ITC rural warehouses.
Format
Chaupal Sagar cannot be shoe horned into any of the existing retailing categories. At 7,000
square feet, it is too small to be a mall. It has opted for self-service, stocking its merchandise on
shelves lining the neat aisles, it stocks a breadth of products no supermarket can. It offers almost
everything - from toothpastes to televisions, hair oils to motorcycles, mixer-grinders to water
pumps, shirts to fertilisers. It is just a very sharply thought-out rural store.Most of the brands it
sells are national such as Marico, LG, Philips, torches from Eveready,shirts from ITC's apparel
business, bikes from TVS, and tractors from Eicher.
Facilities
Spread over 5 acres of land at Sehore in Madhya Pradesh: -
 •Rural shopping malls will be open from 6 am to 9 pm.
 •Features and facilities at these ITC malls can overshadow those in the metros. The ITC
store sells everything that a rural consumer may ask for - sarees to kurta-pyjamas to
shirts(in the range of Rs 99-500), footwear, groceries, electronic durable from TVs to
microwaves, cosmetics and other accessories, farm consumption products like seeds,
fertilisers, pumps, generators and even tractors, motorcycles and scooters.
 Banking and automated teller machines will be standard at the malls.
 Insurance products for farmers.
 Entertainment facilities, restaurants, public facilities and parking space will also be
available.

 There is even a fuel pump in tie-up with BPCL and a cafeteria.
 Parking lot for 160 tractors.
 There will be a primary healthcare facility to be serviced by a private healthcare service
provider.
 Information centres: The company will create the facility for providing online
information on commodity rates and weather.
 Shopping malls will have a training facility on modern farm techniques.
 Farmers can come and log on to the Internet and check the pricing and sell their
commodities.
 There will also be godowns for storing the wheat and soybean and also for stocking
products retailed at the mall.
Business Model
The business model of Chaupal Sagar is linked closely with the E-chaupal initiative of ITC. Role
of ITC is to create infrastructure such as space, computers, and building. ITC will charge a fee
for the services and items sold at the mall.
E-CHAUPAL : E-Chaupal is the backbone of these rural malls. While the first layer (E-Chaupal)
provides the farmers necessary information about weather and prices, this hypermarket initiative
will provide them another platform to sell their produce and purchase necessary farm .
The e-Choupal model required that ITC to make significant investments to create and maintain
its own IT network in rural India and to identify and train a local farmer to manage each e-
Choupal.
•E-Choupal combines a Web portal in the local language and PCs with Internet access placed in
the villages to create a two-way channel between ITC and the villagers. The project started with
a pilot in June 2000 in Madhya Pradesh with Soybean farmers. Currently, it covers six states, and
multiple commodities like prawns, cotton and coffee with 4000 Choupals.

•Plans are to reach 15 states by 2010, covering 100,000 villages with 20,000 Choupals.
•Each e-Choupal (equipped with a PC with Internet connectivity, printer and UPS) typically
housed in the farmer's house, is linked to the Internet via phone lines or,increasingly, by a VSAT
connection, and serves an average of 600 farmers in 10surrounding villages within about a five
kilometer radius. Using the system costs farmers nothing, but the host farmer, called a sanchalak,
incurs some operating costs (The IT partof each e-Choupal costs about Rs 1.3 lakh, each e-
Choupal is estimated to pay back for itself in 4.5 years) and is obligated by a public oath to serve
the entire community; the sanchalak benefits from increased prestige and a commission paid him
for all e-Choupal transactions. The farmers can use the computer to access daily closing prices
on local mandis, as well as to track global price trends or find information about new farming
techniques-either directly or, because many farmers are illiterate, via the sanchalak. They also
use the e-Choupal to order seed, fertilizer, and other products such as consumer goods from ITC
or its partners, at prices lower than those available from village traders; the sanchalak typically
aggregates the village demand for these products and transmits the order to an ITC
representative. At harvest time, ITC offers to buy the crop directly from any farmer at the
previous day's closing price; the farmer then transports his crop to an ITC processing center,
where the crop is weighed electronically and assessed for quality. The farmer is then paid for the
crop and a transport fee. "Bonus points," which are exchangeable for products that ITC sells, are
given for crops with quality above the norm.
•Farmers benefit from more accurate weighing, faster processing time, and prompt payment, and
from access to a wide range of information, including accurate market price knowledge, and
market trends, which help them decide when, where, and at what price to sell. Farmers selling
directly to ITC through an e-Choupal typically receive a higher price for their crops than they
would receive through the mandi system, on average about 2.5%higher (about US$6 per ton).
The total benefit to farmers includes lower prices for inputs and other goods, higher yields, and a
sense of empowerment. At the same time, ITC benefits from net procurement costs that are about
2.5% lower (it saves the commission fee and part of the transport costs it would otherwise pay to
traders who serve as its buying agents at the mandi) and it has more direct control over the
quality of what it buys.

•By building a network of warehouses near the production centres and by providing inputs to the
farmers and test output at the individual farm level, ITC is able to preserve the source and quality
information of produce purchased. By helping the farmer identify and control his inputs and
farming practices and by paying better for better quality, ITC is able to improve the quality of
produce that it purchases. In the commodities market, these two combine to help ITC create the
differentiator that it set out to establish in the beginning.
•ITC gains additional benefits from using this network as a distribution channel for its products
(and those of its partners) and a source of innovation for new products. It is also being used to
provide services like rural market research to those interested Strategy for Success.
•Use of ITC warehouses : This will help in cost control as well as better utilisation of space in
these warehouses. It will also provide convenience and familiarity with the target customer.
•Targeted at Farmers selling to ITC warehouse through E-chaupal : With its network of e-
chaupals, ITC communicates its latest commodity prices to the farmers via the Internet or VSAT
lines. If they find these attractive, they sell their produce to ITC. The sanchalak (the person who
operates an e-chaupal; most of them are farmers) of villages near these malls reckons that half
the farmers in his village deal only with ITC. Now, by setting up the mall next to the warehouse,
ITC is trying to monetise the footfalls from farmers; thatis every time sanchalaks- and farmers
visit ITC's soybean factories in MP to sell their produce, they also have the opportunity to spend
their freshly earned cash. ITC realised that the farmers had just got money, that they would spend
it anyway, and that they had an empty vehicle with which they could lug the stuff back.
•ITC intends to capture the rural folks' out-of-village shopping:
The warehouse is one bulwark of its strategy, obviously. But the farmers will come here only
after every harvest. To ensure that they keep coming to Chaupal Sagar even at other times, the
company is offering a slew of other goodies. Another building is coming up next to the main
warehouse. When completed, it will house a bank, a cafeteria, apart from an insurance office and
a learning centre. ITC has tied up with agri-institutes to offer farmer training programmes. Then,
plots of land have been earmarked to display large agricultural machinery like threshers. Other
parcels of land have been earmarked for pesticide and fertiliser companies for demonstrating

their products. A petrol pump is coming up as well. To attract footfalls during the lean season,
ITC plans to organise various activities and events including melas, training programs,
demonstrations. The hubs are strategically located to attract suburban crowds as well.
•Retail channel for its own brands as well as for other brands :Working through the sanchalaks,
ITC first pushed its own products, like salt, into the hinterland, and then invited others like
Parachute and Philips to ride on this distribution chain. Today, it plans to similarly create
revenue streams around its warehouses.
Financing Scheme
•ITC is investing initially Rs 3 crore (Rs 30 million) in each such shopping mall. However it is
working out a strategy to make it cost-effective for them.
•To keep its own investment to the minimum, ITC is encouraging the samyojak - a local broker
or middleman co-opted by ITC - to pick up equity and manage these shops as partowners.
•Assisted by four ITC salesmen, the samyojaks will assess demand, ensure just-in-time delivery,
manage customer service and keep accounts.
•Uniqueness Of the Model: lies in the fact that it works equally well for ITC as the buyer of farm
produce and ITC as the seller of desirables.
•Charge fees from the brands being showcased at the mall as well as for the services being
provided at the Mall.
Results & Expectations
•During the peak season, a hub sees traffic of about 200 tractors per day on an average, as
farmers come to sell their crops at the hubs.
•Initial response: On the first day the store notched up a business of about Rs 70,000-80,000.
Footfall of about 700-800 people on weekdays and soaring to 1,000 on weekends with
conversion levels of 35%.

Future Plans
•ITC chairman Yogi Deveshwar has promised his shareholders that the company would open
1,000 rural malls in India. This is the first one to have come up.
•Encouraged by its image as a fair and reliable buyer of farm produce, ITC decided to invest in
5-acre malls, costing between Rs 3-5 crore each, across 15 states. The first five -four in Madhya
Pradesh and one in UP - will be inaugurated by March 2004.
•The first shopping mall is being set up near Sehore, and the second one will come up in June
near Itarsi in Oshangabad district.
HUL - Project Shakti :
•HUL provides training on basic accounting, selling skills, health hygiene and relevant IT skills
to Shakti entrepreneurs and equips them with smart phones which have been enabled with a mini
Enterprise Resource Package (ERP) which helps them to run their business efficiently and
further augment their income.
•HUL has trained thousands of Shakti Ammas across the villages in a bid to develop an
entrepreneurial mindset and make them financially independent and more empowered. The
Shakti programme was extended to include ‗Shaktimaans‘ who are typically the husbands or
brothers of the Shakti Ammas. Shaktimaans complement our Shakti Ammas.
•They sell products on bicycles in surrounding villages, covering a larger area than Shakti
Ammas can cover on foot. Today, Project Shakti provides livelihood enhancing opportunities to
nearly 70,000 Shakti Entrepreneurs who distribute our productions in more than 162,000 villages
and reach over four million rural households. There are 48,000 Shaktimaans across India.
Dabur Swavalamban :
•Dabur India, one of India's leading FMCG companies and the world's largest ayurvedic and
natural health care company, announced the successful completion of employment guaranteed
training of the first batch of rural youth under its ambitious community development initiative,
‗Swavalamban‘.

•18 young boys have completed the month-long training programme under this initiative and
were today awarded the completion certificate and a job offer letter, offering all the 18 rural
youth employment immediately after completing the course.
•This mega initiative is aimed at improving the employability of local youth from villages by
Providing them free technical training and skill development opportunities.
•The Project, being run in association with the Rural Development and Self-Employment
Training Institute (RUDSETI), will offer training to rural youth on three key areas of Sales,
Merchandising and Promotion. The group will be offered guaranteed employment, post
completing their training.
Tata Kisan Sansar (TKS) :
•Tata Chemicals and Rallis India, the two companies under the $29 billion Tata Group undertook
two separate ventured till 2003. Tata Chemicals had a chain called Tata Kisan Kendra which
offered farmers agri-inputs to financial advisory functions.
•Rallis in partnership with ICICI bank and HUL supported farmers from pre-harvest to post-
harvest stage. In 2004, these two operations merged under the Tata Kisan Sansar(TKS) .
•The idea behind the establishment of TKS was ―To provide the farmer with a package of inputs
and services for optimum utilization of balanced primary nutrients; plant protection chemicals;
water; seeds; post-harvest services; and to develop a genuine partnership with the farmer‖ TKS
today is operating in three states, namely: Uttar Pradesh, Haryana and Punjab.
•It is active in providing the sophisticated modern technology to the small farmers and making
them harness the gain from ICT. The kendras also have exhibition halls where special events —
educational, social or just pure entertainment are held for members of the Tata Kisan Parivar
(Tata Farmers Family), an organization promoted by the TKK network to build relationships
with farmers and their families.
The farmers are benefited in a number of ways by this initiative:
• Easy availability of credit
• Easy leasing of farm equipments
• Assessability to latest technological know-how.

• Availability of crop insurance
• Knowledge sharing
• Better prices of final products
Godrej - Aadhar And Manthan :
•Godrej's agri business, started 30 years ago in a modest way, had grown to a Rs 1,000 crore
division under Godrej Agrovet and Goldmohur Foods. It started its rural marketing initiative
based on two concepts- Aadhaar and Manthan.
•Godrej Industries test-launched the concept in Maharashtra and Andhra Pradesh to sell its own
and other products, besides offering soil testing and veterinary services through Aadhaar.
Manthan focuses entirely on supplying quality animal feed so that the animal produce, dairy and
poultry, gets a boost.
•In 2008, Future Group had picked up around 70 per cent stake in Aadhar Retailing Limited. It
now operates stores in Gujarat, Maharashtra, Haryana and Punjab and mainly sells wheat and
paddy apart from daily need products. •The company also provides farmers with solutions to
problems regarding their agricultural output, which includes what kind of crop can they plant and
when, along with techno-commercial suggestions to help them give a better output. Now future
Group is planning to restore Aadhar brand.
•It is planning to come up with wholesale distribution centers across different districts and then
roll out franchisees to individual entrepreneurs. They can source products from these wholesale
centers and then sell it in villages.
DCM Hariyali Kissan Bazars :
DCM Sriram Consolidated Ltd., which is in consumer finance and insurance businesses, has
diversified into rural malls too under the banner ―Hariyali Kissan Bazars‖ Each "Hariyali Kisaan
Bazaar" centre operates in a catchment of about 20 kms. A typical centre caters to agricultural
land of about 50000-70000 acres and impacts the life of approx. 15000 farmers.
Each centre is engaged in:
• Bridging the last mile: Provides handholding to improve the quality of agriculture in the area.
Provides 24X7 supports through a team of qualified agronomists based at the centre.

• Quality Agri-Inputs: Provides a complete range of good quality, multi-brand agri inputs like
fertilizers, seeds, pesticides, farm implements & tools, veterinary products, animal feed,
irrigation items and other key inputs like diesel, petrol at fair prices.
• Financial Services: Provides access to modern retail banking & farm credit through simplified
and transparent processes as also other financial services like insurance etc.
• Farm Output Services: Farm produce buyback opportunities, access to new markets & output
related services.
• Other Products and Services: Fuels, FMCG, Consumer Goods and Durables, Apparels etc.
Haryali centres are IT enabled capturing critical data of farmers and providing them with an
access to weather forecasts, market prices and latest technical knowledge.
(DSCL) now has entered the milk procurement business in Uttar Pradesh and is looking
to expand to Rajasthan and other states also. The milk is being supplied to dairy units and is
being mainly used to produce milk powder. The company has started a pilot dairy operation in
Hardoi and Lakhimpur Kheri districts of central UP, where it has four sugar mills. The company
has also made arrangements with regional rural banks to facilitate farmers in getting finance for
cattle purchase. To its landmark achievement it has been taken up as a Case Study by Harvard
Business School (HBS). However after thriving opening of about 300 outlets and an economic
slowdown it did not expand in 2009-10 and 2010-11 also.
STRATEGIES FOR EFFECTIVE RURAL MARKETING
Rural Marketing mix would traditionally include the strategy which encompasses the four Ps
namely Product, Price, Place and Promotion that a company uses to promote and sells its brand
or product in markets. Apart from this rural marketing also includes four A‗s, namely
Affordability, Availability, Awareness and Acceptability.

By definition a product refers to anything that is capable of or can be offered to satisfy need or
want.
 Product for rural market must be built or modified to suit the lifestyle and needs of the
rural consumers, at the same time keeping in mind their paying capacity as well as their
willing to pay. Some particular product strategies for the rural market are new and
modified products altered for the rural requirements. For example Nokia develop
affordable Mobile phones for rural markets with the unique feature of local language
capabilities.
 Secondly, the product has to be utility oriented. British Petroleum‗s energy cell
manufactures and sells smoke less, biomass run stoves. Sophisticated packaging has to be
avoided at the same time value packs need to be provided.
 The second P refers to Price. Price is the amount the customer has to pay in order to
acquire a product or services. Rural pricing revolves around 3 C's, namely customer
value, competitors prices and cost to company. 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. This
overall price benefit has to be passed on to the consumer who requires value for money
products. Typically Indian villages have a population ranging from a few hundreds to
5,000. A manufacturer has to decide whether coverage of villages with population less
than 2,000 is lucrative enough or not. Of late a lot of retail outlets have been set up in the
villages. Distances and poor infrastructure also play a deterrent here.
 Promotion implies all the activities undertaken to make the product or service known to
and preferred among the user and trade. Promotion aspect always creates a challenge in

rural markets because of the fact that village have thin population density and are widely
spread over large remote areas and poor media penetration. NCAER sponsored by the
India Society of Advertisers conducted survey to study the socio economic effects of
advertising. It covered 3,836 household in 50 towns and 50 rural districts in 10 states. It
showed a clean rural urban divide, 16% of rural and 25% of urban customers felt that
advertising influenced them to frequently or always buy products they do not really need.
With fewer people having traditional media access and even fewer getting influenced by
it non-traditional media vehicle like hoardings and wall painting, street plays and
musicals are providing greater influence. Poor Media penetration has to be overcome by
extensive use of local media, events, presence in high congregation areas like Haats and
weekly bazaars, fairs etc. Wall writing, horse cart, bullock cart panels, pamphlet
distribution are some other effective means of sending out a message. The entire
communication and media strategy has to devise a system based on research findings.
Effective Rural Market Research is also a critical component for a successful rural marketing
strategy. Asscanty data availability fails to provide the market research benefits that are there in
urban marketing. Most of the data available is owing to the private efforts of companies and are
not readily shared. Moreover, the rural markets behave most differently from urban markets. So
marketers cannot follow the same strategies that have been successful in the urban markets.
While many marketers have tried to market their products in rural areas, just a handful of the
same only has succeeded. A strong insight into rural consumer behaviour and sensitivity to their
values and beliefs is required to understand the rural market.
REGULATIONS AND POLICIES IN RURAL RETAIL
Essential Commodity Act : The fertilizer industry is centrally regulated by the government
through an administered pricing mechanism & sales allocation under Essential Commodities Act
(ECA). In the year 2002-03, the government announced a long term Pricing policy for urea.
Indian Land Acquisition Act 1984: Provided that in a case where the said declaration has been
published before the commencement of the Land Acquisition (Amendment) Act, 1984 (68 of
1984), the award shall be made within a period of two years from such commencement.

Agricultural Produce (Grading & Marketing) Act 1937 : (Act No.1 of 1937) (as amended up
to 1986). The Agricultural Produce (Grading and Marketing) Act, 1937 was enacted by the
Parliament with an intention to provide for rating and marking the products taken from
agriculture including other products. The Act extends to the entire Indian Territory including the
State of Jammu and Kashmir. According to the interpretation clause of the Act, ‗agricultural
produce‘ means all the agricultural produces or horticulture added with all products of food or
any drink produced in such manner and fleeces inclusive of animal skins.
Under PN4/2006 : 100% FDI is allowed through the automatic route in- Floriculture,
Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aqua-culture, Cultivation
of vegetables, Mushrooms, Under controlled conditions and services related to agro and allied
Sectors.
Intra State Agricultural Land Taxes : Vary, promoting the current finance minister to meet for
a common GST (Goods and Services Tax) which would help in bringing all the various state
taxes under a common fold including the agricultural income taxes levied individually state to
state.
RECOMMENDATIONS AND CONCLUSION
•The business model for rural retail can be successful only when integration between the profit
and social motive is apparent. The social angle needs to be met for it to be acceptable.
•Selection of location of the store is very important. Selecting a store in the locality will pay off
than having it at the out skirts of the village.
•Empowerment in terms of economic power, purchasing power, knowledge and information
dissemination is crucial for rural retail ventures to succeed. The model should empower the rural
consumer and at the same time take advantage of this empowerment through creation of demand
for its own products and that of its partners.
•The level of penetration except for certain products, has been negligible so far. However, so far
as the rural share in consumer expendables like cooking oil, tea, electric bulbs, hair oil, shampoo,
toilet soap, toothpaste, washing cakes and washing powder is concerned, their share on an
average, is much higher than consumer durables. Though the rural-urban differentials are not so
pronounced in the case of durables, the rural market penetration is low with respect to urban
areas. However, in case of health beverages and cosmetics like shampoos, nail polish and

lipsticks, large gaps exist. Hence these products provide substantial opportunity to enter the rural
markets.
Definitely there is lot of money in rural India. But there are hindrances at the same time.
The greatest hindrance is that the rural market is still evolving and there is no set format to
understand consumer behaviour. Lot of study is still to be conducted in order to understand the
rural consumer.
REFERENCE
 Rural Retailing in India – A Changing Paradigm by International Journal of Social Sciences
 Rural Retail In India (A Changing Scenario) – Prospects And Challenges by IJSTM
 NABARD All India Rural Financial Inclusion Survey 2016-17
 Indian Rural Retail Industry- An overview by IJSER.
 Retail Industry Trends, Growth, Analysis, Industry Overview (2018-23).
 Indian Brand Equity Foundation paper on Retail- March 2019
 The Agribusiness Book : A Marketing and Value chain Perspective.
 SlideShare PPT on Rural Retailing in India.

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