Rural markets in India represent a large opportunity for consumer goods companies as rural populations and incomes grow. However, rural distribution is challenging due to factors like scattered populations and lack of infrastructure. Companies are experimenting with innovative distribution models like ITC's e-Choupal, HUL's Project Shakti, and rural retail formats to better reach rural consumers. Successful rural marketing requires adapting the four P's, especially developing new distribution channels suited to rural contexts.

1. Vinay Jha

2. Rural India The Market
Size
 Rural India The Market Size Source : Census of
India 2001 Distribution of National Population
12.2% of the world's consumers live in rural India.

3.  Rural India The Changing Face The “culture of
non-indulgence” and abstinence in consumption is
well and truly over Rural India buys 46% of all soft
drinks sold [Coca-Cola is growing at 37% in rural
markets with only 25% penetration, compared with
24% in urban areas] 49% of motorcycles and 59%
of cigarettes Source: MART


9. Rural Markets: the next frontier:
 Rural markets are the places to watch out for, as
this is the next battleground for the organizations
to fight for increasing their market shares, with
urban markets getting saturated, and farmers
getting richer, it is no wonder that there is an
impulse to go rural among the marketers
particularly FMCG and

10.  Consumer Durable companies. But the urban
marketing strategy does not fit into the rural
marketing structure and it needs a reorientation by
looking at the competitive landscape and
challenges of the rural market.

12.  They have tried tinkering with all the four 'P's of the
marketing mix i.e. Product, Pricing, Promotion and
Place [ E.g. HUL has been a pioneer in reaching out to
the smallest of villages with innovative products such
as single-use packets of shampoo] To sell in villages,
products must be priced low, profit margins must be
kept to the minimum and the marketing message must
be kept simple.

13.
 However, the area where innovation has moved
to center stage is in the fourth P -- place (or
distribution). Distribution channels can make or
break a company's rural marketing efforts.
Companies know it far too well that unless they
come up with some innovative distribution
channels that grasp the rural nuances well, all
their rural efforts will come a cropper. Some of
the examples of how India Inc has moved on a
path-breaking manner to tap this market are
ITC’s Choupal Sagar HLL’s Project Shakti DCM
Shriram’s Hariyali Kisaan Bazaar Godrej’s
Aadhaar Stores Mahindra’s ShubhLabh Stores
Oil major IOC’s Kisan Seva Kendras

16. The Distribution
Challenge Large and Scattered Markets
 Dispersed population and trade Low density of
shops/village and high variation in their concentration
Inadequate Transport Facilities Lack of Retail
Infrastructure Poor visibility and display of product on
rural shop shelves Highly credit driven market and low
investment capacity of retailers Inadequate bank and
credit facilities for rural retailers Lack of proper
warehousing facility Multiple Tiers (large no. of
intermediaries) leading to higher costs *[ Though it
depends on Cost/Benefit ratio of the individual
organization] Poor Communication of due to Poor Reach
of Media

17. Response to the
Issues Large and Scattered Markets
 Inadequate Transport Facilities
 Marico and HLL have started using delivery vans to
cater to rural markets. Coca Cola has opted for a ‘hub
and spoke’ distribution system. [Coke bottles were
transported from the bottling plants to the hubs (large
distributors) and from hubs to spokes (smaller
distributors) situated in small towns. Further
distribution is done from there.]

18. Response to the
Issues
 Large and Scattered Markets
 Inadequate Transport Facilities
 Companies with relatively fewer resources can
come together through syndicated distribution
through co-partnering with non-competitive
marketers for the same market. E.g. Samsung has
tied up with IFFCO. Motorola and Nokia have
partnered with ITC e-choupal Aviva life Insurance
has tied up with BASIX, an NGO

19.  Response to the Issues
 Large and Scattered Markets
 Inadequate Transport Facilities Companies follow a
strategy called "co-opetition", in which they come
together to synergize their resources in rural
markets for benefit of both the partners and yet, can
compete in the urban markets for market share.
E.g. Procter & Gamble has tied up with Godrej and
Marico industries and now it is planning one with
Nirma for distribution of Camay soaps. ICICI
collaborating with P & T to open ATMs

20. Response to the Issues
 Lack of Retail Infrastructure
 Lack of proper warehousing facility The concept of ‘rural
mall’, first introduced by ITC as Choupal Sagar is proving to
be an effective way out. Along with ITC’s Choupal Sagar,
few more companies have taken initiative in same direction.
To name a few are TATA Kissan Sansar, Delhi Shriram’s
Kissan Haryali Bazaar, Godrej’s Aadhar and Manthan.

21. Response to the Issues
 Multiple Tiers: Poor Communication due to Poor
Reach of Media
 ITC’s e-Choupal is an innovative, technology based
way to address this issue where Intermediaries are
avoided Direct contact with the consumer is
established, thereby empowering the farmer, to
decide when to sell, and reducing the information
asymmetry, by providing real time data on latest rates
at mandi and CBOT.

22.  HLL’s Project Shakti showed another smart way of
reaching 10 lakh homes directly in the villages
through the use of Self Help Groups
where traditional communication/distribution
system is neither efficient nor cost-effective.

23. 
Distribution in Indian rural markets is indeed a
great challenge but can be tackled by designing
and adopting effective strategies and proper use
of resources: e-chaupal(ITC), shakti amma(HUL),
ICICI bank, Dabur, Casas Bahai, Jaipur foot,
Aravind eye hospital, Parry’s, have made
significant progress in penetrating the rural
market.