Rural Retail Options – Traditional Vs Emerging

Rural Retail Options – Traditional
Vs Emerging
Rajesh Aithal
IIM Lucknow

rajeshaithal.blogspot.com 1

Layout
• Introduction to rural markets
• Rural retail options
• Each option in detail
• Village retailer
• Implications


Importance Of Rural Markets
• 72% of the population & contributes
nearly half of the country’s GDP ( ETIG,
2002-03)
• Rural is bigger than urban
FMCGs 53%
Durables 59%
• 6 lakh + villages (NCAER, 2002)

• 36 lakh shops rajeshaithal.blogspot.com 3

Rural Retail & Distribution
• Dark continent , Black Box.
• Reach is the first barrier which needs to
overcome ( Banga , 2005)
• Critical Component , Barrier, difficult task
(Rao S L, 1973; Sarin, et.al., 1988 ; Krishnamoorty R , 2000,
Prahalad & Hammond 2002 , Mandira, 1977 ).
• Dearth of good quality work and the need
for more work to be done by academicians
(Kashyap P, 2003 , Srinivasan Viji, 1983 )

Villages in General
• Out of the nearly 6.4 Lakh Villages only
15000 have a population of above 5000
• The Top 85000 villages (2000+ pop , 13%)
are home to 40% of the rural population
but account for over 60% of rural
consumption


Macro Picture
Population No. of villages % of total villages
Less than 200 114267 17.9
200-499 155123 24.3
500-999 159400 25
1000-1999 125758 19.7
2000-4999 69135 10.8
5000-9999 11618 1.8
10000 & above 3064 0.5
Total 636365 100
Census 2001

Retail Options


Mobile Traders
Small Town
Village Retailer Market

Rural Retail

Haats and Melas

New Initiatives

Innovative options

Super Markets of Rural
India
• Over 47,000 haats and 25,000 melas are held
annually
• The average daily sale at a haat is about Rs 2.25
lakh
• Annual sales at melas amount to Rs 3,500 crore
• Over half the shoppers at haats have shopping
lists
• More than 10,000 melas draw visitors from all
over India

What are they?
• Haats are periodic markets, weekly, fortnightly
• Transient Bazaars which catering to the needs of
rural consumers
• Here buyer & sellers congregate on certain days
of the week to trade, barter & sell at make shift
markets
• Some of the bigger Melas have become major
events in the rural marketing calendar


Haats
• Still play a major role in the rural economy
• Provides first contact pint for the villager to the
market
• Means for distributing local products, exchanging
rural surplus, buying daily necessities as well as
farm supplies & equipment
• Weekly haats are more popular,
• Avg. haat Caters to customers in 16 villages,
nearly 27% are held at distances between 6-15
kms

Mobile traders

The mobile traders are the ones who move with
their products, from village to village.

• 4,00,000 – Mobile traders
• Visit 75 Lac rural HH, twice a week
• 5 Villages per week
• Close to 20 % of them have branded
• products

Small town markets
- An effective way to reach rural masses in
certain product categories
- Even for consumables, can be an effective way of
redistribution both for direct sale as well as
wholesaling
- Can be an effective point for communication


Distribution of Towns in India
Town Class Population No of towns % of total towns

Class I 1 Lac & Above 423* 8.2

Class II 50,000-99,999 498 9.6 90 % of
durables
Class III 20,000-49,999 1386 26.9
purchased by
rural people are
Class IV 10,000-19,999 1560 30.2
from these
Class V 5,000-9,999 1057 20.51900 towns

Class VI Less than 5,000 237 4.6

Total no of 5161 100.0
towns

*10 lakh+ : 27, 5-10 lakh: 42, 1-5 lakh: 354 Source: Census 2001

Innovative Options
Effective use of the existing infrastructure

• Post offices 1,38,000
• Public distribution shops 3,80,000*
• Bank branches 32,000

PHCs, Cooperatives, Petrol Pumps………


New Initiatives
• Project Shakti
• Echoupal & Choupal Sagar
• Mahindra shubhabh
• Mahindra Rural Intiative
• Godrej Agrovet - Adhaar
• Tata Kisan Sansar


ITC Sagar Choupal

• An One stop shop for the farmers

• A complementary element to E-Choupal

• ITC is planning to open 50 such malls in next 2 years

• No specific department, Both food and non food
items
• Sales persons used.

ITC Sagar Choupal
• Target Customers
– Rich farmers (major segments)
– Urban customers passing through the highway
– Customers from the city
• Location
– Presence of E- Choupal
– Near the highway


Strategy
• Discounted price
• Functional in nature
• Designed to encourage impulse purchase
– By farmers
– By influencers
• Blocks competitor’s entry
• Keeps everything a farmer may need
• Additional support services

Village Retailer


Village Retailer
• Retailer – an important intermediary
• Marketing action of retailers influences
structure (Ingene & Lusch, 1981).
• Differences between urban and rural
retailers
- Number of retailers itself is high
- Quantum of business done by them is also low
- Need support in terms of credit and other facilities

Village Retailer
• Different from urban – size, purchase and
support needs
• Structure itself- how many shops, type of
shops, stocking
• Buyer-behavior, frequency & quantity that
they purchase


Some Rural Retail Stats
Growth

1995 1999
Grocer 69 57
Gen Store 11 13
Chemist 3 3
Others 17 27*
No. of Shops ORG MARG 1999
None 1-4 5-15 16+
<500 26 56 15 3
500-1999 7 41 42 10
2000+ 2 8 44 46
IMRB, 2001

Problems

• Large No. of Small Shops
• Dispersed Population & Trade
• Multiple Tiers
• Low Density of Shops
• Inadequate Bank & Credit Facility


Problems

•Poor Storage system
•Highly credit-driven market and low
investment capacity of retailers
•Limited Shelf Space & Low visibility
•Poor Communication of offers


1-Level Channel
Manufacturer Retailer

2-Level Channel
Manufacturer Distributor Retailer

3-Level Channel
Manufacturer Distributor Wholesaler Retailer

4-Level Channel
Manufacturer Distributor Wholesaler S-WS Retailer

5-Level Channel

Manufacturer Distributor Wholesaler S-WS V-WS Retailer

Village Retailer
• Still depends heavily on wholesaler for his
regular purchases
• Buys in small quantities and more
frequently making direct distribution by
companies a difficult task
• Stocks more of local brands than national
ones


Retail Options Opportunities Challenges

Haats & Melas Single point access to Suitable for only
rural consumers from certain product
many villages categories &
periodic nature of
the market

Village Retailer In direct contact with Spread-out, with
the villagers low quantity
purchase & higher
frequency

Mobile Traders Move from one village Unorganized nature
to the other & know of business &
the villagers dependency on
rajeshaithal.blogspot.com unbranded products
35

Retail Options Opportunities Challenges

Existing other Physical Infrastructure Dealing with
Infrastructure in place government
mechanism to
access them
Small Town Can be a good way to Loss of control for
Markets reach villages through the company &
wholesale complexity of
dealing with
wholesalers
New Initiatives – New channel with Most initiatives are
kiosk based, rural opportunities to reach still in nascent stage
retail chains & consumers more of development
SHG-based efficiently, potential
models for growth &
Innovation

Implications for Rural Marketers
• The options for reaching the rural
consumer is increasing and there is a need
to look beyond the traditional options
• But each of these options need to be see in
the context of the product category to be
distributed.


Marketing in India Blog :
rajeshaithal.blogspot.com


Rural Retail Options – Traditional Vs Emerging

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