This document discusses rural distribution strategies and challenges. It outlines various distribution models companies use to reach rural markets across multiple tiers. Traditional models include distributors, sub-distributors and retailers. Emerging models leverage self-help groups, existing infrastructure like fertilizer dealers and petrol pumps, and volunteers to improve rural coverage. Effective rural distribution requires addressing issues like access, credit availability and product visibility in dispersed, low density markets.

1. DISTRIBUTION STRATEGY

2. INTRODUCTION
• Availability determines volume and market
share
• Challenge : Reaching 6 lakh villages and
feeding a retail network of over 35 lakh village
shops
• 68% of rural markets still lies untapped due to
inaccessibility.
• Some successful regional brands : Ghari
detergent, Anchor toothpaste, Gemini Oil
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3. Problems faced in rural distribution:
• Large number of small markets
• Dispersed population and trade
• Poor road connectivity
• Multiple tiers – higher costs
• Poor availability of suitable dealers
• Low density of shops per village, high variation in
their concentration
• Inadequate bank and credit facilities for rural
retailers – poor viability of retail outlets
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4. • Poor storage systems
• Highly credit-driven market, low investment
capacity of retailers
• Poor visibility and display of product
• Poor communication of offers and schemes –
poor reach of media
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5. Coverage Status in Rural Markets
• Rural – any location with a population of less
than 50,00.
• 50% of rural population resides in 1 lakh off
large villages ( 2000+ population)
• Account for 60% of rural wealth
• 2.3 lakh tiny villages (<500 population) –
hardly any shops
• Distribution becomes uneconomical towards
smaller towns
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6. Channels of Distribution
Five layers of distribution channels for movement of
products from company depot to interior village markets:
Layer Channel Partner Location
Layer 1 Company depot/ C&FA National/State level
Layer 2 Distributor/ van operator/ District level
super stockist/ rural distributor
Layer 3 Sub-distributor/ Retail stockist/ Tehsil HQ, towns
Sub-stockist/ Star seller/ and large villages
Shakti dealer
Layer 4 Wholesaler Feeder towns,
large villages,haats
Layer 5 Retailer Villages, haats
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7. Rural Distribution System
• Wholesalers
• Retailers
• Mobile traders
• Vans
• Weekly haats
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8. Wholesaling
• 70% of rural market – beyond reach of direct
marketing
• 50% rural consumption through wholesalers
• Speculative rather than distributive
- insufficient product availability
- urban areas – most concentration on
retailers - wholesale distribution less
-companies neglected rural markets
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9. Rural retail system
• Rural retail spread
- Rural India - 65% retail outlets in country
- 35 lakh retail outlets spread over 6 lakh villages
- High distribution cost
* geographical spread
* low volumes per outlet
- Average monthly sale per shop < Rs. 5000
- restricts variety and range of products stocked
- 58% of villagers prefer to buy from haats rather than
shops coz of better price, quality and variety
- Availability of shops in villages is poor
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10. Rural premises:
- infrastructural constraints
* lack of sufficient space
* inadequate power supply
* lack of proper storage system
- financial constraints
* inadequate funds
* unwillingness of banks to extend loans
- low retail space per capita – <100 sq.ft area
- travel and transport costs
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11. Rural retail shelves
• Filled with local and regional brands – higher margins and
longer credit periods
• Less variety of brands available
• Number of brands per product category decreases
towards smaller villages
• Ensure visibility on shelves
• Product stocking – cluttered &disorganised
• Slow moving products – dust covered
• Absence of proper racks, display box, stand
• Strategies: provide display & storage systems
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12. Vans
• Salesman loads van with stocks from nearest
stockist or company stock point
• Works around surrounding markets
• Then moves to next stock point – journey
cycle
• Used for both sales & promotions
• Eg.: Everyday , J.K. Diary
• Effective but expensive
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13. Mobile Traders
• Direct to home, unorganised distribution
• Daily need products – mostly local brands –
detergent, cosmetics, personal
care, garments, footwear
• Carry products on bicycles, mopeds, handcarts
• Deep reach
• Good rapport with clients
• Mostly sell fakes and local brands
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14. Haats/ Shandies
• Oldest marketing channel in India
• Profile of haat visitors and purchase behaviour
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15. BEHAVIOUR OF CHANNEL
• Credit facilities to customers
• Pricing by channel
• Reason for stocking a product / brand
• Seasonal pattern of stocking
• Information source and influence on retailer
• Purchase source for the retailer
• Purchasing cycle
• Channel promotion
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16. PREVALENT DISTRIBUTION MODELS
RETAIL WHOLESALE
VAN/SUBSTOCKI FEEDER TOWNS
ST WHOLESALE
AND RETAIL
RURAL
MARKET
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17. MARKETING
DISTRIBUTION MODEL 1
COMPANY
C&FA
DISTRIBUTOR DISTRIBUTOR
(RURAL) (URBAN)
SUB- WHOLESALER WHOLESALER
DISTRIBUTOR
RETAILER RETAILER RETAILER RETAILER RETAILER
(RURAL) (LOCAL) (SATELLITE (URBAN) (URBAN)
MKT)
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18. CHARATERISTICS
• Rural distribution separated from urban distribution
• Company appoint a sub distributor(SD)under rural
distributor(RD)
• Owing to poor road networks & low volume per outlet, RD
covers a large area
• DM1 model focuses more on RD’s & SD’s rather than the
wholesale channel and has large no. of points appointed in
the rural areas as locations are scattered. This ensures that
companies products reach maximum no. of areas
• Advantages include better monitoring, price discipline and
control over the sale and distribution of products
• Companies prepare PJP’s (Permanent Journey Plan) – six
working days. Outlets are covered only fortnightly
• No. of outlets covered in a day is 30 – 40 of which 15 – 20 are
productive Eg. HLL
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19. DISTRIBUTION MODEL 2
DISTRIBUTION MODEL 2
COMPANY
C&FA / DEPOT
DISTRIBUTOR
WHOLESALER
RETAILER RETAILER
(LOCAL)
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20. CHARATERISTICS
• There is no separate channel for rural distribution
• Minimises distribution costs, allowing companies to offer
better margins to distributors and other channel partners
(fewer)
• Companies with limited no. of SKUs and high sales volume
adopt this model
• It is also preferred by new entrants who lack infrastructure
required to have wide distribution network
• Example: Priyagold biscuit, Nirma (Shakti detergent, Nirma
soaps, Camay & other toiletries)
Issues:
• Coverage, No SD to cover interior parts
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21. NIRMA DISTRIBUTIONSYSTEM
NIRMA DISTRIBUTION SYSTEM
NIRMA Ahmedabad
DEPOT Hyderabad, Kolkata, Kanpur
DIRECT DISTRIBUTOR
At district level
SUB DISTRIBUTOR/BIG WHOLESALER At Tehsil level Covers 300-400
outlets directly
WHOLESALER RETAILER WHOLESALER RETAILER
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22. DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 1
LG
DEPOT
NEW RURAL DISTRICT OFFICE
C&F AGENTS WAREHOUSE
EXCLUSIVE DEALERS MULTIPLE DEALERS
CONSUMER
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23. MARKETING
DURABLE GOODS COMPANIES DISTRIBUTION SYSTEM - 2
PHILIPS
DEPOT
DISTRIBUTOR STOCKIST
(URBAN) (RURAL)
RETAILER RETAILER
(URBAN) (RURAL)
CONSUMER
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24. Retail outlets are not able to sell more durables because:
• They lack variety
• Transport costs increase the prices (The net landed cost of a
21-inch Color TV is Rs. 1000 more compared to the price
offered by a dealer in the city)
Rural buyers prefer to buy from city stores because:
• More choices are available
• It is possible to get competitive prices through bargaining
• Rural buyer can see many options, visit several shops and
check different prices
Problem:
• To generate volumes, companies give huge discounts to the
big city dealers, which results in price differences and put the
rural retailer at disadvantage
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25. NIRMA DISTRIBUTION SYSTEM
DISTRIBUTION OF FAKE PRODUCTS
MANUFACTURER
WHOLESALER IN BIG
CITY
WHOLESALER IN
SMALL TOWN/KASBA
HAAT VILLAGE MOBILE
RETAILER RETAILER TRADER
CUSTOMER
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26. Channels of distribution:
Channel 1: Manufacturers to wholesaler/retailer in big city or
small town, or directly to customer
Channel 2: Wholesaler in big city to wholesaler in small
town/kasba
Channel 3: Wholesaler in small town /kasba to village
retailer/mobile trader/haat
Fakes reach consumers through the following channels:
• Small kirana shops located within the village
• Big shops generally located on the main road
• Door-to-door visits by salesmen who pose as company
representatives
• Salesmen in local trains and buses
• Mobile traders
• Haats
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27. EMERGING DISTRIBUTION
MODELS.
Marketers are innovating new cost effective
approaches to reach markets.
Objectives:
Maximize existing infrastructure.
Ensuring participation and economic
sustainability of all stakeholders

28. CORPORATE- SHG LINKAGE(self help
group)
• 10-15 women organized by govt bodies.
• To boost the self worth among women.
• Loan assistance from rural banks for setting up
of income generating enterprises.
• Rapid Growth provided an opportunity to
establish a path breaking distribution model
through the linkage of the groups for
marketers.
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29. TTK PRESTIGE PRESSURE COOKER CASE
• Stagnating Sales and declining returns.
• Company saw SHG women as an opportunity
to enter to the rural market.
• Meetings were organized with the group .
• Interested women were chosen as dealers and
demo cookers were given to present at the
SHG meetings.
• Women dealers also visited other potential
buyers and booked orders.
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30. Satellite Distribution Model.
(HUB & SPOKE SYSTEM).
Stockists are appointed in major towns and feeder
towns.
Retailers in feeder towns get attached to these
stockists.
Manufacturer supplies goods to stockists.
Functions performed by stockists include
Financing, Ware housing, Sub distribution.
Volume done by retailers varies due to
location, capacity etc.
Over a period of time some retailers will be elevated
to stockists points.
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31. Pioneers in Satellite Distribution model
COKE & PEPSI
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32. SYNDICATED DISTRIBUTION
Distribution is posing a major problem for a
new company to penetrate to Rural market.
Two or more companies come together to
form a syndicated trading organization to
jointly distribute a collective group of
household products by sharing costs.
Small company should not deal in the same
products that the big company deals
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33. JK Diary Case
• JK diary launched a WHITENER DIARY TOP in
50 gm. sachets priced at 6.50 Rs targeting at
Rural customers.
• To cover the interiors a van was hired(125 Km
*25 Days) @6Rs Per Km.
• Since JK diary has only a single product they
shared the travelling expense with three other
companies targeting at rural customers.
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34. Problems with syndicated Distribution.
• Markets for the coverage of two companies
are different.
• Terms of Payment are different.(Cash by one
company & credit by other company).
• Salesman of only one company accompanies
the van: ( Pushes his companies products &
does not make serious efforts to collect the
payments of other companies).
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35. ITC’s DISTRIBUTION MODEL.
• Reached Rural Consumers through its e-
Choupal model for backward and forward
linkages for its agri related business
• Services provided like
• Information
• Knowledge
• Purchase
• Sale
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36. NYKS Haat DISTRIBUTION MODEL
• Nehru Yuva Kendra Sangathan.
• Hires young people as National Service Volunteers
(NSV) for 2 years with 2000Rs stipend.
• NSV is assigned with 15-20 villages :organize
events and create good rapport and credibility
with villagers.
• After 2 years Existing NSV retire to give way to
fresh NSV’s.
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37. PROJECT DISHA- CASE.
• MART selected500 ex volunteers to promote
company Brands(COLGATE).
• Volunteers will be provided with all facilities(
bicycles, umbrellas, storage boxes, T-shirts,etc).
• Volunteers buy stock from nearby sub stockists and
sells at near by Haats and village Shops on the way.
• Average sales of 1000Rs Per day.
• Result is that Company got benefited from this .
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38. AGRICULTURE INPUT DEALERS.
• 2,62,000 fertilizer dealers in country.
• Fertilizer companies have retail outlets within
a range of 5 Km.
• Marketers found the possibility of selling their
products through these outlets.
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39. PETROL PUMPS & EXTENSION COUNTERS.
• 60% of 12000 Petrol pumps in INDIA is located
on Highways close to villages.
• Selling of food Products & toiletries through
these outlets.
• Exploring possibility of selling agri inputs &
LPG cylinders from these outlets.
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40. OTHER CHANNELS.
• HERO HONDA Company reported emergence of
Unofficial channel of distribution.
(Village Mechanics, Real Estate Agents &
Shopkeepers).
Take the Bikes in 2’s or 3’s from company Dealers.
Display them outside dealer’s Premises and will
close the sale.
Paper work left to the Dealer to complete.
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41. IDEAL DISTRIBUTION FOR RURAL.
• Per Capita Sales=Annual Sales/Market Population..
Name of the Model Best situation
Project Shakti.(Corporate –SHG) Low PCS, Low Population Density
Segment consumers.
NSV Model Low PCS High Population Density
PDS, Cooperatives& Fertilizer Dealers. Segment.
Rural Markets are GOLD Mines which forced marketers to
come up with innovative ideas to ensure the reach of their
Products in these areas
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42. THANK YOU
Prof. Raghavendran Venugopal 42