This is a rural Marketing slide.
Talks about Channels, Distributions and how to set up a channel in India.
Good for MBA grads and BBA grads looking to get in Channel Management
2. Challenges in Rural Distribution
Large number of small markets
Dispersed population and trade
Poor road connectivity
Multiple tiers
Poor availability of suitable dealers
Low density of shops per village
Inadequate banks and credit facilities
Poor storage system
Low investment capacity of retailers
Poor visibility and display of products on rural shop shelves
Poor communication of offers
3. Distribution Strategy
Ensuring Reach and Visibility:
Reaching upto Mandis, Towns and semi-
urban centers particularly for shopping
products and consumer durables
Targeting larger villages:
There are around 90000 large villages out of total
650000 with a population – covering 40% of rural
population and 60% of total rural consumption
Understanding of peak season
Marriages, festivals and harvest
4. Distribution Strategy
Delivery vans:
Company delivery vans which can serve two purposes:
they can take the products to the customers in select
rural areas and also enable the firm to establish direct
contact with them and thereby provide an opportunity
for promotion
Collaboration for Distribution:
Organizations with lesser distribution reach, collaborate
with organizations that have achieved high penetration
levels in rural areas. P&G had tie-ups with Godrej.
Marico with Nirma for distribution of Camay soaps.
5. Distribution Strategy
Converting unorganised sector manufacturers
into distributors
Small scale manufacturers have good knowledge
of the territory and have good sales network.
Organizations like Exide are attempting to convert
these small scale manufacturers to become their
dealers.
Company’s own Distribution Network
6. Distribution Channels in Rural India
Cooperative societies:
Over 4 lakh co-operatives for marketing, credit
and dairy cooperative in rural areas.
Farmers Service Co-operative Societies function
like mini super market for soaps, detergents,
cloth, seeds, fertilizers, pesticides
These societies have infrastructure for storage and
distribution
Companies contact these societies to sell their
products
7. Distribution Channels in Rural India
The SHG Model:
Members of SHG get matching loans from banks
Corporates work with SHGs for rural distribution
HUL Shakti program
The Youth Entrepreneurship Model
Train young rural persons for distributing products
and services
Colgate, HUL, Complan
Insurance, telecom
8. Distribution Channels in Rural India
Public Distribution System
Under PDS about 4.37 lakh fair price shops
Is utilized for marketing consumable items and
low value durables in rural areas
Petrol Pumps
Also sell consumables such as soaps, detergents,
biscuits etc, particularly on the highways
Also stock certain agricultural inputs like fertilizers,
seeds and pesticides
9. Distribution Channels in Rural India
Agricultural input dealers:
2,62,000 fertilizer dealers in the country
During off season consumer item companies sell
their products through these dealers
Shandies/ Haats/ Jathras/ Melas
Shandies operate in a weekly cycle
Haats can be used for demonstration &
distribution
Melas work best for introducing new brands and
building brands through events at the venue
10. Rural Distribution Channels
Layer Channel Partner Location
Layer 1 Company depot / C&F A National/state level
Layer 2 Distributor/van operator/
super stockist/ rural distributor
District level
Layer 3 Sub-distributor/ retail
stockist/ sub-stockist/ star seller /
Shakti dealer
Tehsil HQ, towns and large
villages
Layer 4 Wholesaler Feeder towns, large villages,
haats
Layer 5 Retailer Villages, haats
11. Rural Distribution Channels
FMCG Durables PDS Regional
/ Local
Cement Bulbs/
Tubes
Company
manufacturing
plant
Company
manufacturing
plant
Food
Corporation
of India
Manufacturers Company
Manufacturing plant
Company
Manufacturing
plant
Company Depot Wholesaler(city) Depot
C&F A C&F A Zonal Offices Wholesaler
(small town)
C&F A
Distributor District Office Distributor Distributor
Sub stockist Depot
Retail
Outlets
Exclusive
Dealers/ Dealers
Fair Price
Shop
Retailers, village
haats, mobile
Traders
Outlets Exclusive dealer/
Retail Outlets
Consumer Consumer Consumer Consumer Consumer Consumer
12. Wholesaling in Rural Markets
54% of rural consumption is routed through
wholesalers located in nearby feeder markets
frequented by village retailers to replenish stocks
Indian wholesaler is a trader rather than a distributor
Tends to support a brand during periods of boom and
withdraws support during periods of slump
13. Rural retail System
Village
Population
% of Total
Villages
% of
Population
% of Retail
Outlets
No of outlets
per village
>5000 3 22 14 28
2001-5000 14 32 32 16
1001-2000 22 25 33 9
<1000 61 21 21 2
Total 100 100 100 6 (average)
14. Rural retail System
Rural India accounts for 65% of retail outlets in the
country
High distribution costs due to geographical spread
and low volumes per outlet act as a barrier to the
entry of products in rural markets
The average monthly sale per village shop is less
than Rs.5000, which restricts the variety and range of
the products stocked
58% villagers prefer to buy from a haat for better
price, quality and variety wholesalers located in
nearby feeder markets frequented by village retailers
to replenish stocks
15. Stock Turnover in Rural Distribution
Average stock in villages is about a third of that in
feeder villages
Off-take of packaged food and tobacco is higher in
villages; toiletries are higher in feeder villages
Average monthly sale per village shop is less than
Rs.5000, which restricts the variety and range of the
products stocked
58% villagers prefer to buy from a haat for better
price, quality and variety wholesalers located in
nearby feeder markets frequented by village retailers
to replenish stocks
16. Rural Retail Shelf
Rural retail shelves are flooded with local and
regional brands as these
Number of categories stocked by rural and urban
stores does not vary significantly; but what does vary
is the number of companies/brands
Slow-moving products covered with dust. The
visibility of brands poor due to absence of racks and
display boxes and stands
Marketers need to devise strategies to occupy rural
retail shelf space by providing display and storage
systems
17. Mobile Vans
Salesman loads the van with stocks from stockist or
company stock point
Eveready batteries and torches established
distribution network that includes 1000 vans, 4000+
distributors and 44 warehouses. These vans reach 6
lakh retail outlets directly, each van making 50 to 60
calls per day. The company ensures that the van
revisits a retailer every 15 days. The stock for these
vans is supplied by the small town distributors.
18. Rural Mobile Traders – Last-Mile Distribution
Mobile trading is an age-old, direct to home,
unorganized distribution system in rural areas
Sell daily-need and FMCG products, footwear etc
mostly local brands
Carry products on bicycles, mopeds, handcarts or on
foot
Have a deep reach in small villages to avoid
competitions from shops in bigger villages
Enjoy good rapport with their clients
Mostly sell fakes and local brands
19. Haats and Shandies
Are the periodic markets and the oldest marketing
channel in India
Provide an opportunity to purchase consumer goods
and sell surplus agricultural products
Popular as it is also a place for social, political and
cultural contact
Haats – data – next slide
20. Haats and Shandies
Number of haats: 43000 around
Average annual sale per haat: Rs 80 crores
Large Haat Small Haat
No. of stalls 545 327
Av No. of visitors 12000 5600
No. of villages
covered
57 21
Ref: RMAI – 2010 report
21. Public Distribution System (PDS)
A system of distribution for essential commodities
through a network of FPS (Fair Price shops, also
referred ‘ration shops’)
The commodities are wheat, rice, sugar, edible oil
and kerosene. PDS reach urban and rural population
PDS with a network of about 5.27 lakh FPS is the
largest distribution network of its type in the world
22. Behaviour of Rural Channels
Purchasing cycles: In high turnover feeder villages,
rural shopkeepers visit the neighboring urban
wholesale market for their purchases 3 to 4 times a
week. In other areas, where rural shopkeepers
depend only on counter sales buy once a week or
once a fortnight
Seasonal pattern of stocking: Main buying season
for rural consumers is during the harvest and retail
stocking of toiletries, cosmetics, ribbons, bangles,
clothes, fertilisers, seeds also follow this pattern.
23. Behaviour of Rural Channels
Credit facilities to customers: Credit sales
account for 60 to 70% of sales in some districts,
while in others it is 15 to 20%. Final settlement takes
place at the harvest time
Pricing by the channel: Interior villages retailers
sell at a price higher than the MRP justifying that
they spend time and money to fetch the products
from town wholesalers. A town wholesaler may
deliberately cut the price of a fast-moving brand to
increase his business.
24. Behaviour of Rural Channels
Stocking behaviour: Rural retailers stock particular
items because of consumers demand and to a lesser
extent because of wholesaler’s push or competitor
stocks the item too
Purchase source: Retailers go to the nearby town
/large feeder village once or twice a month to buy
their stock. The agents do not visit them often
Transfer of Capital: Pattern follows retailer’s own
need to transfer capital from store to their own
cultivation. After harvest, they invest cash from crops
to build retail inventories
25. Behaviour of Rural Channels
Channel Promotion: Interior rural retailers do not
qualify for discount schemes. Feeder market retailers
buy in bulk and get the benefit of discount schemes
Rural retailer – consumer dynamics: Rural
consumer loyalty to retailer is very high. Retailer
influence on consumer is very high and consumers
trust the rural retailers
27. Rural Logistics
Hub and Spoke System
Traffic moves along the spoke connected to the
hub. Also known as Satellite Distribution concept
Syndicated Distribution
Companies come together to form a syndicated
trading corporation (Indus Towers, IFFCO). Small
companies hand over the distribution responsibility
to already established distributors (L&T, Jyoti Ltd)
28. Modern Retail in Rural Areas
ITC Choupal Saagar
DSCL Hariyali Kisaan Bazaar
Tata Kisan Sansar
Godrej Aadhaar
Started by Godrej Agrovet. Now 70% controlled by
Futures Group
3A Bazaar (Chaudharpur, JP Nagar, UP)
Triveni Kushali Bazaar (Unit of Triveni
Engineers)