By M H AhssanAn OverviewThe Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages, which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc.
Few Facts70 % of India's population lives in 627000 villages in rural areas. According to the NCAER study, there are almost twice as many 'lower middle income' households in rural areas as in the urban areas.
At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas.
Middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007.
In urban India, the same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural India is expected to be double that of urban India.
OpportunityThe above figures are a clear indication that the rural markets offer the great potential to help the India Inc which has reached the plateau of their business curve in urban India to bank upon the volume-driven growth.
The Indian rural market with its vast size and demand base offers a huge opportunity that MNCs cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban.
As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes from 176 million tonnes in 1991, rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income.
The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased.
The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster than the urban counterpart.
Features of Indian Rural MarketsLarge and Scattered market: The rural market of India is large and scattered in the sense that it consists of over 63 crore consumers from 5,70,000 villages spread throughout the country.
Major income from agriculture: Nearly 60 % of the rural income is from agriculture. Hence rural prosperity is tied with agricultural prosperity.
Low standard of living: The consumer in the village area do have a low standard of living because of low literacy, low per capita income, social backwardness, low savings, etc.
Traditional Outlook: The rural consumer values old customs and tradition. They do not prefer changes.
Diverse socio-economic backwardness: Rural consumers have diverse socio-economic backwardness. This is different in different parts of the country.
Infrastructure Facilities: The Infrastructure Facilities like roads, warehouses, communication system, financial facilities are inadequate in rural areas. Hence physical distribution becomes costly due to inadequate Infrastructure facilities.
The rural bazaar is booming beyond everyone's expectation. This has been primarily attributed to a spurt in the purchasing capacity of farmers now enjoying an increasing marketable surplus of farm produce. In addition, an estimated induction of Rs 140 billion in the rural sector through the government's rural development schemes in the Seventh Plan and about Rs 300 billion in the Eighth Plan is also believed to have significantly contributed to the rapid growth in demand. The high incomes combined with low cost of living in the villages have meant more money to spend. And with the market providing them options, tastes are also changing.
Problems in the Booming Rural MarketingAlthough the rural market does offer a vast untapped potential, it should also be recognized that it is not that easy to operate in rural market because of several problems. Rural marketing is thus a time consuming affair and requires considerable investments in terms of evolving appropriate strategies with a view to tackle the problems.
The major problems faced are:
Underdeveloped People and Underdeveloped Markets:
The number of people below poverty line has not decreased in any appreciable manner. Thus underdeveloped people and consequently underdeveloped market by and large characterize the rural markets. Vast majorities of the rural people are tradition bound, fatalistic and believe in old customs, traditions, habits, taboos and practices.
Lack of Proper Physical Communication Facilities:
Nearly fifty percent of the villages in the country do not have all weather roads. Physical communication of these villages is highly expensive. Even today most villages in the eastern parts of the country are inaccessible during the monsoon.
Media for Rural Communication:
Among the mass media at some point of time in the late 50's and 60's radio was considered to be a potential medium for communication to the rural people. Another mass media is television and cinemas. Statistics indicate that the rural areas account for hardly 2000 to 3500 mobile theatres, which is far less when compared to the number of villages.
Many Languages and Dialects:
The number of languages and dialects vary widely from state to state, region to region and probably from district to district. The messages have to be delivered in the local languages and dialects. Even though the number of recognized languages are only 16, the dialects are estimated to be around 850.
Dispersed Market:
Rural areas are scattered and it is next to impossible to ensure the availability of a brand all over the country. Seven Indian states account for 76% of the country's rural retail outlets, the total number of which is placed at around 3.7 million. Advertising in such a highly heterogeneous market, which is widely spread, is very expensive.
Low Per Capita Income:
Even though about 33-35% of gross domestic product is generated in the rural areas it is shared by 74% of the population. Hence the per capita incomes are low compared to the urban areas.
Low Levels of Literacy:
The literacy rate is low in rural areas as compared to urban areas. This again leads to problem of communication for promotion purposes. Print medium becomes ineffective and to an extent irrelevant in rural areas since its reach is poor and so is the level of literacy.
Prevalence of spurious brands and seasonal demand:
For any branded product there are a multitude of 'local variants', which are cheaper, and, therefore, more desirable to villagers.
Different way of thinking:
There is a vast difference in the lifestyles of the people. The kind of choices of brands that an urban customer enjoys is different from the choices available to the rural customer. The rural customer usually has 2 or 3 brands to choose from whereas the urban one has multiple choices. The difference is also in the way of thinking. The rural customer has a fairly simple thinking as compared to the urban counterpart.
The 4A ApproachThe rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media.
However, the rural consumer is not unlike his urban counterpart in many ways.
The more daring MNCs are meeting the consequent challenges of availability, affordability, acceptability and awareness (the so-called 4 As).
AvailabilityThe first challenge is to ensure availability of the product or service. India's 627,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. However, given the poor state of roads, it is an even greater challenge to regularly reach products to the far-flung villages. Any serious marketer must strive to reach at least 13,113 villages with a population of more than 5,000. Marketers must trade off the distribution cost with incremental market penetration. Over the years, India's largest MNC, Hindustan Lever, a subsidiary of Unilever, has built a strong distribution system, which helps its brands reach the interiors of the rural market. To service remote village, stockists use auto-rickshaws, bullock-carts and even boats in the backwaters of Kerela. Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which who act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas. LG Electronics defines all cities and towns other than the seven metros cities as rural and semi-urban market. To tap these unexplored country markets, LG has set up 45 area offices and 59 rural/remote area offices.
Study on buying behaviour of rural consumer indicates that the rural retailers influences 35% of purchase occasions. Therefore sheer product availability can affect decision of brand choice, volumes and market share. Some of the FMCG giants like HLL took out project streamline to significantly enhance the control on the rural supply chain through a network of rural sub-stockists, who are based in the villages only. Apart from this to acquire further edge in distribution HLL started Project Shakti in partnership with Self Help groups of rural women.
Affordability
The second challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of whom are on daily wages. Some companies have addressed the affordability problem by introducing small unit packs. Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50-gm packs, priced at Rs 4-5 meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh - the so-called `Bimaru' States.
With large parts of rural India inaccessible to conventional advertising media - only 41 per cent rural households have access to TV - building awareness is another challenge. Fortunately, however, the rural consumer has the same likes as the urban consumer - movies and music - and for both the urban and rural consumer, the family is the key unit of identity. However, the rural consumer expressions differ from his urban counterpart. Outing for the former is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Consumption of branded products is treated as a special treat or indulgence.
Hindustan Lever relies heavily on its own company-organised media. These are promotional events organised by stockists. Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language.
Coca-Cola uses a combination of TV, cinema and radio to reach 53.6 per cent of rural households. It doubled its spend on advertising on Doordarshan, which alone reached 41 per cent of rural households. It has also used banners, posters and tapped all the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media.LG Electronics uses vans and road shows to reach rural customers. The company uses local language advertising. Philips India uses wall writing and radio advertising to drive its growth in rural areas.
The key dilemma for MNCs eager to tap the large and fast-growing rural market is whether they can do so without hurting the company's profit margins. In case of nestle, company's product portfolio is essentially designed for urban consumers which cautions companies from plunging headlong into the rural market as capturing rural consumers can be expensive.
Role of Rural RetailingRetailing is the final phase of the distribution channel and it is clear by now that it is availability and distribution that drives growth in rural Indian markets. Hence retailing will be significant and will undergo greater organisation and maturity as is being witnessed in the urban markets, even in the rural markets. Innovative retail models which take into account the nuances of rural markets is the way forward.
FormatChaupal Sagar cannot be shoehorned into any of the existing retailing categories. At 7,000 square feet, it is too small to be a mall.
It has opted for self-service, stocking its merchandise on shelves lining the neat aisles, it stocks a breadth of products no supermarket can. It offers almost everything - from toothpastes to televisions, hair oils to motorcycles, mixer-grinders to water pumps, shirts to fertilisers... It defies pigeonholing. It is just a very sharply thought-out rural store.
Most of the brands it sells are national such as Marico, LG, Philips, torches from Eveready, shirts from ITC's apparel business, bikes from TVS, and tractors from Eicher.
FacilitiesSpread over 5 acres of land at Sehore in Madhya Pradesh: -
Rural shopping malls will be open from 6 am to 9 pm.
Features and facilities at these ITC malls can overshadow those in the metros. The ITC store sells everything that a rural consumer may ask for - sarees to kurta-pyjamas to shirts (in the range of Rs 99-500), footwear, groceries, electronic durable from TVs to microwaves, cosmetics and other accessories, farm consumption products like seeds, fertilisers, pumps, generators and even tractors, motorcycles and scooters.
Banking and automated teller machines will be standard at the malls.
Insurance products for farmers.
Entertainment facilities, restaurants, public facilities and parking space will also be available.
There is even a fuel pump in tie-up with BPCL and a cafeteria.
Parking lot for 160 tractors.
There will be a primary healthcare facility to be serviced by a private healthcare service provider.
Information centres: The company will create the facility for providing online information on commodity rates and weather.
Shopping malls will have a training facility on modern farm techniques.
Farmers can come and log on to the Internet and check the pricing and sell their commodities.
There will also be godowns for storing the wheat and soybean and also for stocking products retailed at the mall.
Business ModelThe business model of Chaupal Sagar is linked closely with the E-chaupal initiative of ITC.
Role of ITC is to create infrastructure such as space, computers, and building.
ITC will charge a fee for the services and items sold at the mall.
E-CHAUPAL: E-Chaupal is the backbone of these rural malls. While the first layer (E-Chaupal) provides the farmers necessary information about weather and prices, this hypermarket initiative will provide them another platform to sell their produce and purchase necessary farm and household goods under the same roof.
The e-Choupal model required that ITC to make significant investments to create and maintain its own IT network in rural India and to identify and train a local farmer to manage each e-Choupal.
E-Choupal combines a Web portal in the local language and PCs with Internet access placed in the villages to create a two-way channel between ITC and the villagers. The project started with a pilot in June 2000 in Madhya Pradesh with Soybean farmers. Currently, it covers six states, and multiple commodities like prawns, cotton and coffee with 4000 Choupals.
Plans are to reach 15 states by 2010, covering 100,000 villages with 20,000 Choupals.
Each e-Choupal (equipped with a PC with Internet connectivity, printer and UPS) typically housed in the farmer's house, is linked to the Internet via phone lines or, increasingly, by a VSAT connection, and serves an average of 600 farmers in 10 surrounding villages within about a five kilometer radius. Using the system costs farmers nothing, but the host farmer, called a sanchalak, incurs some operating costs (The IT part of each e-Choupal costs about Rs 1.3 lakh, each e-Choupal is estimated to pay back for itself in 4.5 years) and is obligated by a public oath to serve the entire community; the sanchalak benefits from increased prestige and a commission paid him for all e-Choupal transactions. The farmers can use the computer to access daily closing prices on local mandis, as well as to track global price trends or find information about new farming techniques-either directly or, because many farmers are illiterate, via the sanchalak. They also use the e-Choupal to order seed, fertilizer, and other products such as consumer goods from ITC or its partners, at prices lower than those available from village traders; the sanchalak typically aggregates the village demand for these products and transmits the order to an ITC representative. At harvest time, ITC offers to buy the crop directly from any farmer at the previous day's closing price; the farmer then transports his crop to an ITC processing center, where the crop is weighed electronically and assessed for quality. The farmer is then paid for the crop and a transport fee. "Bonus points," which are exchangeable for products that ITC sells, are given for crops with quality above the norm. In this way, the e-Choupal system bypasses the government-mandated trading mandis.
Farmers benefit from more accurate weighing, faster processing time, and prompt payment, and from access to a wide range of information, including accurate market price knowledge, and market trends, which help them decide when, where, and at what price to sell. Farmers selling directly to ITC through an e-Choupal typically receive a higher price for their crops than they would receive through the mandi system, on average about 2.5% higher (about US$6 per ton). The total benefit to farmers includes lower prices for inputs and other goods, higher yields, and a sense of empowerment. At the same time, ITC benefits from net procurement costs that are about 2.5% lower (it saves the commission fee and part of the transport costs it would otherwise pay to traders who serve as its buying agents at the mandi) and it has more direct control over the quality of what it buys.
By building a network of warehouses near the production centres and by providing inputs to the farmers and test output at the individual farm level, ITC is able to preserve the source and quality information of produce purchased. By helping the farmer identify and control his inputs and farming practices and by paying better for better quality, ITC is able to improve the quality of produce that it purchases. In the commodities market, these two combine to help ITC create the differentiator that it set out to establish in the beginning.
ITC gains additional benefits from using this network as a distribution channel for its products (and those of its partners) and a source of innovation for new products. It is also being used to provide services like rural market research to those interested.
Strategy for SuccessUse of ITC warehouses
This will help in cost control as well as better utilisation of space in these warehouses. It will also provide convenience and familiarity with the target customer.
Targeted at Farmers selling to ITC warehouse through E-chaupal
With its network of e-chaupals, ITC communicates its latest commodity prices to the farmers via the Internet or VSAT lines. If they find these attractive, they sell their produce to ITC. The sanchalak (the person who operates an e-chaupal; most of them are farmers) of villages near these malls reckons that half the farmers in his village deal only with ITC. Now, by setting up the mall next to the warehouse, ITC is trying to monetise the footfalls from farmers; that is every time sanchalaks- and farmers visit ITC's soybean factories in MP to sell their produce, they also have the opportunity to spend their freshly earned cash.
ITC realised that the farmers had just got money, that they would spend it anyway, and that they had an empty vehicle with which they could lug the stuff back.
ITC intends to capture the rural folks' out-of-village shopping
The warehouse is one bulwark of its strategy, obviously. But the farmers will come here only after every harvest. To ensure that they keep coming to Chaupal Sagar even at other times, the company is offering a slew of other goodies. Another building is coming up next to the main warehouse. When completed, it will house a bank, a cafeteria, apart from an insurance office and a learning centre. ITC has tied up with agri-institutes to offer farmer training programmes. Then, plots of land have been earmarked to display large agricultural machinery like threshers. Other parcels of land have been earmarked for pesticide and fertiliser companies for demonstrating their products. A petrol pump is coming up as well.
To attract footfalls during the lean season, ITC plans to organise various activities and events including melas,training programs, demonstrations.
The hubs are strategically located to attract suburban crowds as well.
Retail channel for its own brands as well as for other brands
Working through the sanchalaks, ITC first pushed its own products, like salt, into the hinterland, and then invited others like Parachute and Philips to ride on this distribution chain. Today, it plans to similarly create revenue streams around its warehouses.
Financing SchemeITC is investing initially Rs 3 crore (Rs 30 million) in each such shopping mall. However it is working out a strategy to make it cost-effective for them.
To keep its own investment to the minimum, ITC is encouraging the samyojak - a local broker or middleman co-opted by ITC - to pick up equity and manage these shops as part owners.
Assisted by four ITC salesmen, the samyojaks will assess demand, ensure just-in-time delivery, manage customer service and keep accounts.
Uniqueness Of the Model: lies in the fact that it works equally well for ITC as the buyer of farm produce and ITC as the seller of desirables.
Charge fees from the brands being showcased at the mall as well as for the services being provided at the Mall.
Results & ExpectationsDuring the peak season, a hub sees traffic of about 200 tractors per day on an average, as farmers come to sell their crops at the hubs.
Initial response: On the first day the store notched up a business of about Rs 70,000-80,000. Footfall of about 700-800 people on weekdays and soaring to 1,000 on weekends with conversion levels of 35%.
Future PlansITC chairman Yogi Deveshwar has promised his shareholders that the company would open 1,000 rural malls in India. This is the first one to have come up.
Encouraged by its image as a fair and reliable buyer of farm produce, ITC decided to invest in 5-acre malls, costing between Rs 3-5 crore each, across 15 states. The first five - four in Madhya Pradesh and one in UP - will be inaugurated by March 2004.
The first shopping mall is being set up near Sehore, and the second one will come up in June near Itarsi in Oshangabad district.
ITC is planning to set up 40 rural shopping centres in those. states where it has a presence through its e-chaupals and IT hubs spread across rural Madhya Pradesh and Uttar Pradesh.
Haryali Bazaars Bring Organised Retailing to FarmersHaving successfully pioneered a new concept of Haryali Kissan Bazaars in 2002 in Hardoi, agri-inputs focused DCM Sriram Consolidated Ltd. (DSCL) opened eight more (Ladwa in Haryana, Ferozepur in Punjab, Kota in Rajasthan and four locations in UP).
The store complex is spread over 2-3 acres and caters to all the farmers requirements (both DCM Sriram products & other sources): farm inputs ((fertilizers, seeds, pesticides, animal feed), farm implements, spare parts, irrigation equipment, spraying equipment. Further, the uniformed salesman, an agricultural graduate, gives free agricultural related advice in personal interactions or through mobile phones (averaging 20 calls a day). Twenty such stores, each catering to 100 villages, are planned by 2005.
Innovative Rural Retail ModelsIndian FMCG firms with rural experience have typically used three rural retail methods--direct distribution structures, van operations and super-stockist structures. Each of these methods need to be evaluated taking into consideration the current network, cost impact of the proposed structure and quality control issue associated with each of these structures.
Direct Retail/Distribution StructuresProject Shakti
Project Shakti - Hindustan Lever Ltd's (HLL) rural self-help group initiative to push the penetration of its products to reach areas of low access and low market potential.
Objective
HLL's conventional hub-and-spoke distribution model, which it uses to great effect in both urban and semi-urban markets, wouldn't be cost-effective in penetrating the smaller villages.
The effort is to create a WIN-WIN SITUTAION.
Through a combination of micro-credit and training in enterprise management, women from self-help groups have turned direct-to-home distributors of a range of HLL products and helping the company plumb hitherto unexplored rural hinterlands.
Concept
The Project is a retail/distribution model that HLL established in late 2000 to sell its products through women self-help groups who operate like a direct-to-home team of sales women in inaccessible areas where HLL's conventional sales system does not reach.
Strategy for Success
1. Social Angle
Create "income-generating capabilities for underprivileged rural women by providing a sustainable micro-enterprise opportunity".
To improve rural living standards through "health and hygiene awareness".
2. Commercial Angle
For HLL, it is "enlightened self-interest".
Creating opportunities to increase rural family incomes puts more money in their hands to purchase the range of daily consumption products - from soaps to toothpastes - that HLL makes.
It also enables HLL access hitherto unexplored rural hinterlands.
How Does It Work?
To get started the Shakti woman borrows from her SHG and the company itself chooses only one person. With training and handholding by the company for the first three months, she begins her door-to-door journey selling her wares.
A Shakti entrepreneur receives stocks at her doorstep from the HLL rural distributor and sells direct to consumers as well as to other retailers in the village.
Each Shakti entrepreneur services 6-10 villages in the population strata of 1,000 - 2,000 people.
Typically,a Shakti entrepreneur sets off with 4-5 chief brands from the HLL portfolio - Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic Plus. Other brands which find favour with a rural audience are: Lux, Ponds, Nihar and 3 Roses tea.
The women avail of micro-credit through banks. Some of the established Shakti dealers are now selling Rs. 10,000 - Rs. 15,000 worth of products a month and making a gross profit of Rs. 700 - Rs. 1,000 a month. Each Shakti dealer covers 6-10 villages, which have a population of less 2,000. The company is creating demand for its products by having its Shakti dealers educating consumers on aspects like health and hygiene.
HLL-SHG Business ModelHindustan Lever Ltd (HLL) India's largest consumer goods company has a large distribution network comprising 5,000 re-distribution stockists and 40 C&FAs (Clearing and Forwarding Agent). Yet this network covers only 75,000 villages directly out of the total 6,00,000 villages in India. A tie up with SHGs can take HLL products to many more villages directly.
Trading opportunities with stable companies with established rural brands (Lifebuoy, Lux, Wheel, Clinic and 3 Roses tea etc) could be a boon to women members of SHGs.
How Does It Work?
A pilot project (christened Project Shakti) was launched in Nalgonda in December 2000 in a small cluster of 50 villages with 50 SHGs and 3 MACTS (Mutually Aided Co-operative Thrift Society, a federation of around 20 SHGs).
There are 3 partners and their roles are: -
MACTS/SHGs: sell/retail HLL products
HLL: supplies products, provides marketing and promotion support
MART: facilitates the process, provides business training inputs
Capacity Building of MACTS and SHGs
Achievement Motivation Training programmes have been conducted to create a desire among women for starting their own business.
Formal training of group leaders and other members have been conducted to help them become successful entrepreneurs.
Level 1: Basic orientation to HLL business and brands.
Level 2: Enterprise management and marketing.
Animators have been appointed (stipend paid by HLL) to promote sale.
'Shakti Day', an artificially created market place in the village with specially devised communication kits is conducted regularly where special discounts and schemes are offered to increase sale.
Results & Expectations
Accounts for 10-15 per cent of HLL's rural sales. The statistic assumes significance as the rural market constitutes over 40 per cent of HLL's total sales of about Rs 10,000 crore.
HLL has seen 15 per cent incremental sales from rural Andhra, which contributes 50 per cent to overall sales from Andhra of HLL products.
Lot of consumer understanding and insights comes from an exercise like Project Shakti, which in turn can lead to product innovation.
I-Shakti', an IT-based rural information service that will provide solutions to key rural needs in the areas of agriculture, education, vocational training, health and hygiene.
Future Plans
Given the success of the model piloted in Nalgonda in Andhra Pradesh in 2001, the company has plans to expand Project Shakti in 400 districts by 2006. By the end of 2004, it plans to cover 100 districts. At the moment, it reaches about 10,000 villages in Andhra Pradesh, Madhya Pradesh, Gujarat and Karnataka and works through 800 self-help groups (SHGs).
The company intends to extend the model across Madhya Pradesh, Gujarat and UP and TamilNadu markets. The Shakti vision, is to have by 2007 at least 10,000 Shakti dealers, covering a lakh villages and touching at least 100 million consumers.
Company is in dialogue with non-competing companies like Philips (bulbs) for a partnership to distribute their products through the network that HLL has established. The company is in talks with insurance companies such as ICICI Prudential and Max New York Life to sell policies through its `Shakti dealers'. Sources said that a battery maker is also in talks with the company as it is not a product in the HLL portfolio.
Super-Stockist ChannelProject Streamline
The company had earlier also launched Operation Streamline to further increase its rural reach with the help of rural sub-stockists. It had appointed 6,000 such stockists, the distribution network directly covering about 50,000 villages reaching about 250 million consumers. HLL conceptualised Project Streamline to enhance its control on the rural supply chain through a network of rural sub-stockists based in these villages. This gave the company the required competitive edge, and extended its direct reach to 37 per cent of the country's rural population.
Key Points
To increase the reach in rural areas.
Rural Distributor will have around 20 stockists attached to him who performs the role of driving distribution in villages using unconventional means of transport such as tractor, bullock, etc.
This gave the company the required competitive edge, and extended its direct reach to 37 per cent of the country's rural population.
This strategy has supposed to increase the market share of HLL in rural areas by about 3%.
Control on the rural supply chain through a network of rural sub-stockists, who are based in the villages only.
Others
Marico launched a major initiative into rural markets by appointing 2,400 sub-stockists in the last two years. Recently, Dabur also finished a pilot project for its super-stockists in Patna and has now rolled it out in Bihar, Madhya Pradesh and Rajasthan. Reckitt has also adopted the super-stockist system in Tamil Nadu and plans to set up such a system all over the country in the next year, with the target of covering one million outlets in the next three years.
Van Operations
Project Bharat
In 1998 HLL's personal products unit initiated Project Bharat, the first and largest rural home-to-home operation to have ever been prepared by any company. The project covered 13 million rural households by the end of 1999.
During the course of operation, HLL had vans visiting villages across the country distributing sample packs comprising a low-unit-price pack each of shampoo, talcum powder, toothpaste and skin cream priced at Rs 15. This was to create awareness of the company's product categories and of the affordability of the products.
The personal products unit subsequently rolled out a second phase of the sampling initiative to target villages with a population of over 2,000.
Project Bharat, a massive rural sampling initiative in two phases. They have carried out one of the largest sampling exercises for this purpose to overcome barriers like lack of brand awareness, ignorance of product benefits and complete absence of any first-hand experience of usage.
RecommendationsThe business model for rural retail can be successful only when integration between the profit and social motive is apparent. The social angle needs to be pronounced for it to be acceptable.
Empowerment in terms of economic power, purchasing power, knowledge and information dissemination is crucial for rural retail ventures to succeed. The model should empower the rural consumer and at the same time take advantage of this empowerment through creation of demand for its own products and that of its partners.
The level of penetration except for certain products, has been negligible so far. However, so far as the rural share in consumer expendables like cooking oil, tea, electric bulbs, hair oil, shampoo, toilet soap, toothpaste, washing cakes and washing powder is concerned, their share on an average, is much higher than consumer durables. Though the rural-urban differentials are not so pronounced in the case of durables, the rural market penetration is low with respect to urban areas. However, in case of health beverages and cosmetics like shampoos, nail polish and lipsticks, large gaps exist. Hence these products provide substantial opportunity to enter the rural markets.
Definitely there is lot of money in rural India. But there are hindrances at the same time. The greatest hindrance is that the rural market is still evolving and there is no set format to understand consumer behaviour. Lot of study is still to be conducted in order to understand the rural consumer. Only FMCGs with deeper pockets, unwavering rural commitment and staying power will be able to stay longer on this rural race and hence should venture into this territory.
