This document discusses rural retailing in India and its future outlook. It notes that rural markets represent a large opportunity as two-thirds of India's consumers live in rural areas. Rural demand is growing for packaged foods, personal care products, and other goods. Several companies have customized their products, pricing, and distribution for rural consumers. While rural retailing faces challenges like infrastructure and taxation issues, the future outlook remains positive as rural incomes and consumption are expected to significantly increase over the next decade. Organized retailers and FMCG companies are recognizing the potential of rural markets.

1. Topic : Rural Retailing In India – Aroad Ahead
Ashok Sengupta
Asst.Professor, Braj Institute Of management & Technology,
Aligarh
Abstract :
The Indian rural market with its vast size and demand based offers great opportunities to
marketers. Twothird of countries’s consumers line in rural areas and almost half of the national
income is generated here. Rural market form an important part of the total market of India. Our
ratio is classified in around 450 districts, and approximate 630000 villages, which can be sorted
in different parameters such as literacy levels, accessibly, income levels, penetration, distances
from nearest towns etc.
Demand for top- drawer FMGC products is no longer restricted to urban India. The rural
consumer has emerged as an important cog in the sales growth of premium offerings. Clever
pricing, rising aspirations and new marketing mantras are driving this trend.
In this paper the author’s want to explore the driving forces responsible behind the growth of
rural retail sector. They also try to see the sights, and future outlook for improvement of rural
retail sector in India. And also some of the important remedial measures have been given by
them to over come the hurdles towards the growth of retails sectors in Rural India.
Introduction :
The emergence of 24/7 culture has had a very strong impact on the changes occurring in many
industries. Each passing year has had new effects on the retail industry. Thus, retailing by its
nature is dynamic industry in which there is always changes and the next 10 years will
undoubtedly whole even more changes than the last decades.
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2. Retailing is the transaction between the seller and consumer for personal consumption. A retailer
stocks the good from the manufacturer and than sells the same to the end user for a marginal
profit. In the supply chain that also consists of manufacturing and distribution, retailing is the last
link before the product reaches the consumer. It does not include transaction between the
manufacturer, corporate purchase, government purchase and other whole sale purchase.
Retail can be see under two categories :
1. Organized Sector :- The growth of in the organized retailing has resulted in the establishment
of departmental stores, supermarkets, rural retailing, e- retailing and luxury retailing. Each one of
these formats has a unique advantage and the scale of operation depend upon factor like foot fall,
sales per sq feet etc. organized retailing as per the norms an be run after acquiring license but it is
still a bottleneck for the development of Indian retailing.
2. Unorganized Sector :- The unorganized sector is still dominated in India, since it has the
advantages of low investment need. Traditionally Indian retail outlet is a families livelihood,
with their shop in front and house at the back, having negligible investment in land and assets,
paying little or no tax are known as “Kirana Dukan” formally know as “ Pop & Mom Store” in
USA.
Global Retaining Scenario :
The Global Retail Sector is strongly affected by the slowdown of the global economic recessions
which is become reality in many economies of the world. Retailers all over the world, will need
to adopt their strategies in response to such situations. Eventually, the maturing of many markets
and consumer awareness in many economies has triggered retailers to rethink the strategies.
Secondly, the emerging markets of China and India had begun a rebalancing of the global
economy that will have a huge impact on global retail market.
The world of retail is fast changing by its nature. These changes not only based on the change in
demands of consumers but also need to keep the track of the competition, the changes in
technology and socio-economic climate of the nation. As we know American economy is fuelled
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3. economy growth in many parts of the worlds but this economy, slow down has forces many
retailers to start looking at other economies. Secondly, raising fuel prices have also had a
negative effect on the rapid expansion of the trade in various part of the world. But globalization
is gradually emerging as an integral part of the retail strategy for many retailers.
A.T Karnney’s global retail development index rank 30 emerging countries on a 100 point scale.
The size of organized retailing industry is estimated at US$8 billion and projected to grow at a
compound annual growth rate of 40% to US$22 billion by 2010. Overall, the Indian retailing
industry is expected to grow from the current US$350 billion to US$427 billion by 2010 and
US$635 billion by 2015.
Retailing In Indian Prospective :
With the rises of high level of income of consumers, changes in their buying habits ushering a
revolutions in shopping in India. Secondly, a large young working population with medium age,
nuclear families in urban areas along with increasing working women population and increasing
opportunities in service sector are going to be the key factors in the growth of the organized
retail sector in India.
Modern retailing has enter into the retail market in India as it observe in the opening of shopping
centres, multi store malls and the huge complexes that offers shopping , entertainment, food,
medical and various other services under one roof.
The Indian retail market which is the fifth largest retail destinations globally, and was ranked
second after Vietnam as the most attractive emerging market destination for investment in the
retail sectors. The share of retail sectors in the countries GDP is around 10-12% and 8 percent of
the employment.
According to study by ASSOCHAM, Indian retail bill touch US$365 billion in 2008 against
US$300 billion in 2007. By 2015 the retail sector is projected to over take the US$ 650 billion
mark, and organized retail will cross the US$130 billion mark.
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4. Practically, a major Indian business group is looking for opportunities in the growing retaining
Industry. Among them some of the big name in the Indian corporate sector the A V Birla Group,
Bharti, Godrej, ITC Group, Mahindra, Reliance, TATA’s and the Wadia Group. The modern
retail formats have also gain acceptance in India for e.g Carrefour, Tesco and Walmart are the
international players already operating in India. Several others like Euroset, Supervalue and
Starbucks having plan to enter soon.
Rural Retailing :
The census of India define rural as any habitation where the population density is less than
400persqkm and where atleast 75% of the male working population is engaged in agriculture.
The number of villages thus adds upto 638691 according to NCAER study there are almost twice
as many “lower middle income” household in rural areas as in unban areas.
Burtter is considered as one of the oldest form of retailing in India since independence rural
retail in India as evolved to support the unique needs of our country given its size and
complexities. Haats, Mandies and Melas have always been a part of the Indian landscape. They
still continue to be present in most parts of the country e.g The Suraj Kund Craft is an annual
event that highlights some of the finest handloom and handicraft tradition of the country.
Retailing is the final phase of distribution channel and its clear by now that its availability and
distribution that drive growth in rural India market. Hence, retailing will be significant and will
undergo greater organizations and maturity in the rural markets as in the urban markets.
Some Indian forms had made the beginning, ITC launched India’s first rural mall” Chaupal
Sagar”, E-Chaupal. offering a diverse range of products from FMCG, Electronic to Automobiles
goods, attempting to provides farmers for one stop destination for all their needs. Hariyali Kisan
Baazar Chain launched by DCM. Shriram Consolidated Ltd which are helping transforms rural
India by providing all manner of services to farmers. DSCL plans to expend its outlets to have an
all India presence in about 2 years. This company has already tied up with ICICI Bank for
providing bank services at the Hariyali outlets. Not only that a medical centre is being setup at
one of the Hariyali outlet in Punjab to facilitate tele -medical services but 40 hospitals is also
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5. collaborating in this venture. It also in touch with NIIT to offer computer training facilities at
Haiyali Bazaar. Godrej group has effective us of the same to the farmers. Pepsi on the other
hands is experimenting with the farmers of Punjab for growing the right quality of tomato for its
tomatoes puries and pastes.
Contribution In India Economy
The rural Indian economy, growing at 8-10 per cent every year, will be adding $90-100 billion of
new consumption in the next five years, over the current base of $240-250 billion. There are a
number of factors supporting this growth: increasing incomes due to good monsoons and
government initiatives and schemes; employment opportunities in infrastructure and industry
projects across the country and; emphasis on local employability.
This new consumption will be basic plus, with a high share of packaged foods, personal care,
consumer durables and IT products, two- and four-wheelers, and fashion accessories, among
others. Over the last five years, some consumer product companies have recognised the potential
of rural markets and invested time and resources to tap into this opportunity - understanding and
segmenting the consumer, based on their spends and lifestyles.
Some have re-engineered products, pricing and packaging to customise features and value
relevant for these markets. For instance, LG has Sampoorna, a customised TV; Godrej soaps has
introduced 50-gm packs and Samsung has launched Guru - a mobile that can be charged with
solar energy. Some players have developed new communication and distribution channels within
the hinterland (HUL's Project Shakti; Tata Tea's 'Gaon Chalo') and some have created
completely new products.
The Union Budget for 2009-10 hiked the allocation for the National Rural Employment
Guarantee Act (NREGA) to US$ 8.03 billion, giving a boost to the rural economy. This is in
addition to the ambitious Bharat Nirman Programmed with an outlay of US$ 34.84 billion for
improving rural infrastructure. According to a study on the impact of the slowdown on rural
markets commissioned by RMAI and conducted by MART, the rural economy has not been
impacted by the global economic slowdown. The rural and small town economy which accounts
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6. for 60 per cent of India's income has remained insulated from the economic slowdown.
Moreover, rural incomes are on the rise driven largely due to continuous growth in agriculture
for four consecutive years. Further, the rural consumer market, which grew 25 per cent in 2008
when demand in urban areas slowed due to the global recession, is expected to reach US$ 425
billion in 2010-11 with 720-790 million customers, according to a white paper prepared by CII-
Technopark. That will be double the 2004-05 market size of US$ 220 billion.
According to the study of AC Nielsen, the durables market shrunk in urban India while the rural
market is seeing a 15 per cent growth rate for "Fast moving consumer goods(FMCG)" for which
the sales are up by 23 per cent and telecom is growing at 13 per cent accordingly . Moreover, the
demand for personal care products which grew faster in rural areas than urban areas during the
period April-September 2009.The FMCG companies such as Gore Consumer Products, Dabber,
Marco and Hindustan Unilever (HUL) have increased their hiring in rural India and small towns
in order to establish a local connect and increase visibility. GlaxoSmithkline Consumer
Healthcare (GSK) and Nestle are now launching products specifically for rural markets. Anand
Ramanathan, an analyst from KPMG, said, "Till recently, most FMCG companies used to treat
rural markets as adjuncts to their urban strongholds and rural consumers as a homogeneous mass
without segmenting them into target markets and positioning brands appropriately."
Opportunities :
• The basic scope of this novel initiative will be the mutual benefits of the rural
entrepreneurs and industries. The entrepreneurs – primary beneficiaries, SHGs – bridge
with the community, participating companies/industries and rural consumers have
befitted through a robust commercial relationship. These models of marketing linkages
demonstrate a large corporation which can play a major role in reorganizing markets and
increasing the efficiency of a rural product generation system.
• Because of this sustainable market linkages, rural producers can participate in the
benefits of globalization and will also develop their capacity to maintain global quality
standard. Nonetheless, it creates new stakeholders for the industry sector. And
subsequently, they become part of the firms’ core businesses. The involvement of the
private /industry sector at the rural product and market development can also provide
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7. opportunities for the development of new services and values to the customers, which
will find application in the developed markets. It will be worth mentioning that building a
sustainable market linkage through industry’s intervention will also empower the rural
mass (producers, farmers & entrepreneurs) to cope with socio-economic problems in the
rural society and will ensure economic self –reliance.
Key Trends And Drivers :
Organized retailing is dominated by large conglomerates like TATA's, ITC, RPG group,
Piramals and Rahejas apart from the various MNC's. But this trend is having strong base in
FMCG. Certain growth statistics shows how different products has been booming in rural retail
sectors. Dove shampoo, a premium end product reported a growth of over 100% in the rural
market during Jan-Oct 2010 over the same period last years. Sunsilk shampoo which reported a
growth around 14% in rural India during the period. But it is not for mass brands like Lifeboy,
Nirma or Wheel which have for a decades meet the needs of rural India.
Take a look at the beauty care products like Ponds White Beauty, the brand grew 4200% in Jan
–Oct 2010 in rural markets over same period last year.
In case of food products. Not only the demand of cream biscuits gone up in rural market the sale
of Noodles too is growing nearly twice as fast in rural market compare to urban market. “A
variety of biscuits (creams ,cookies) are growing faster than glucose even in rural market. They
are taking way significant consumption from glucose biscuits”. Opines Vinita Bali, MD & CEO,
Britania Industries
One in every six rural buyer of hair dye now uses colours other than black-which would had
been dubbed indulgences a decade ago. Similarly, urban brand like Deodrants and fabric
softeners are said to be growing much faster in rural area than urban, say a study by Nielsen
Company.
The year- on- year rural growth of premium soap brand Cinthole (original) during April –Sep
was higher this year at around 28% as compare to 12.5% in the corresponding period last years.
Similarly the rural growth mosquito –repellent brand GoodKnight coils was doubled that its
urban market.
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8. At present the rural market is worth approximately $9 billion in consumer spending in the
FMCG annually. Food categories are expected to drive the bulk of the additional $91billion into
the market place by 2025.
Future Outlook
• Textile and Garment companies like Raymond, Madura Garments and Arvind Denims
have achieved forward integration by opening their own retail outlets for their branded
garments. This gives them a huge advantage by reducing the role of intermediaries,
increase profit margin and enables them to be close to the end user.
• Inflation and the global meltdown have had an effect on the growth of retailing in India.
Experts believe the retail industry should focus on distinction, branding, after sales
service, exploring commoditization, share of purchasing power and innovation to tide
over the crisis.
• The year 2009 is seen as a year of consolidation for Indian retail sector. By ushering in
best practices and restructuring business models, the retail industry in India is expected to
adjust to the changing market conditions and ensure new opportunities for growth.
Challenges To Rural Retail Development In India :
• Lack of recognition as an industry.
• The high cost of real estate.
• Various duties.
• Lack of adequate infrastructure.
• Multiple and complex taxation system.
• Entry of competitors.
• Threat of substitute
• Bargaining power of buyers.
• Bargaining power of suppliers.
• Rivalry among the existing players.
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9. • Political system.
• Pricing strategy.
• Problems in supply chain management.
Concluding Remarks
To under the market opportunity for ruler products along with the countries development
priorities and to chalk out a strategy where rural industries have and important role to play.
While the rural products are forced to become part of global supply chain, these products need to
adopt themselves not only according to the changing taste of national market but also according
to changes in taste in international market. Therefore a process is essential to explore the market
linkages and capacity building for SHGs through a bottom up approach and continuous dialogues
with stakeholders of rural enterprise. This process should ensure the participation of rural people
as consumers and producers in the globalization mechanism, with better live hood and global
access to market.
The main challenges of rural retailing can be over come by having fine tune balance between
entire retail sectors and government policies.
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10. References:-
1. Retailing Management (Text and case): Swapna Pradhan, Publication Tata Mcgraws
Hills.
2. Strategic Management: Azhar Kazmi, Publication Tata Mcgraws Hills
3. Times of India (Times Business) 7th Dec ,2010
4. Times of India, 22nd Jan 2011
5. www.businesstoday.intoday.in/bt/story/112 (Rural Retail)
6. www.coolavenues.com/mba-journal/marke (Rural market)
7. www.business.mapsofindia.com/rural-econom...(Rural market)
8. www.thehindubusinessline.com/cgi-bin/
9. www. business.mapsofindia.com/rural-econom.
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