RETAILING IN RURAL MARKETING

 

RETAILING  IN  RURAL   MARKETING

 

THE RISE OF ORGANIZED RETAILING

Ø  Rural retail includes FMCG, durables, agricultural inputs & vehicles such as tractors.

Ø  The rural retail market forms around 40 % of the total size of the retail market of India, which according to reports of ASSOCHAM is worth USD 280 billion.

Ø  Accordingly, the size of the rural retail market will be about USD 112 bn (Rs 5,000 billion).

Ø  Growing at the rate of around 10 % of the size of Indian GDP, it has the potential to double in size in the next 4-5 years.

 

Present scenario

–     The present retail scenario is not very encouraging.

–     The penetration of organized retail is very low.

–     Approximately, 10,000 out of the 0.6 million villages in India have access to organized retail services.

–     Owing to the low density of shops per village, uneven concentration of shops and very small size of retail outlets, multiple tiers of distribution have become necessary.

–     As a result, distribution has become inconvenient and costly. In most cases, consumers do not have the opportunity to be exposed to various brands.

–     The reason is that the retailers do not have the resources to stock multiple items and they will stock the brand that sells the most.

 

 

PROBLEMS  OF  RETAILERS-

 

Problems of retailers-

Ø  Many people would be unwilling to start their own stores in smaller villages due to a number of reasons.

Ø  Procurement of goods In the absence of proper connectivity with the feeder town from where the retailer collects goods, there is a constant problem of maintaining adequate stock-keeping units.

Inventory-

–     The retailer has to deal with a large number of stock-keeping units.

–     This results in a large inventory & high inventory holding costs.

Irregular sales-

–     Inability to push sales on a regular basis due to restrictive incomes available with the rural populace is another problem.

Cost of Pull strategy-

–     Another problem relates to attracting customers from neighboring areas. Unless a repeated promotional tool is used, people from neighboring villages cannot be attracted.

Thin margins -

–     The retailer cannot charge a higher mark-up as the consumers cannot afford to pay higher prices'

–     Retailers have to travel frequently to the feeder town to collect products. As stated above, the retailers

–     pick up their stocks from the nearest company stock point or wholesalers' The cost of travelling cannot f. tot"tty passed on to the custolners. The margins will be thin in such cases.

Credit sales

–     Major purchases are made by rural consumers on the basis of credit. As a result, the retailer faces working-capital problems.

 

 

 

DRIVERS  OF  GROWTH

 

Drivers of growth

–     The drivers are growing population, rising incomes, investment by the Government for development and entrepreneurial initiatives by individuals and corporate enterprises.

Growing population

–     Population of village households is expected to rise to 153 million in 2009-2010 from 135 million in 200!-2002,probably making rural India the largest potential market in the world

•      Rising incomes

–     The rural per capita income would be Rs 14,000 (usD 350) by 2012 as more families switch to the commercial

–     form of subsistence farming, a big enough jump to spur demand for a wider range of products'

•      lnvestment by the government for development

–     In view of the iarge investments made by the government in rural infrastructure pushing the income

–     and demand levels, the prospects for organized retail are seen to be bright for rural India' Empowering

–     rural people with education, .-ploy-..tt, higher purchasing Power' better media exposure and better

–     ..o.rn.cti\rity with the world outside, provide a massive unexplored pool of consumers'

Entrepreneurial Initiatives-

–     Entrepreneurship has been a prime cause of economic development.

–     The same is true in case of the Indian rural economy.

–     Enthusiastic young persons and enlightened corporate enterprises are starting their own outlets.

–     These outlets are revolutionizing retailing because they are comparable to the urban malls.

–     Today, with many positive changes taking place in the rural economy' rural retailing is on the path of development.

   

RETAILING  BY  URBAN PLAYERS

 RETAILING BY URBAN PLAYERS

 

–     Some enterprises have started retail outlets taking advantage of their core competencies (like the

–     Raheja group) or connections with villages (like Hatsun Agro Products)

  

       RAHEJA  GROUP

 VALUE RETAIL OF THE RAHEJA GROUPRS

–     The Raheja group has adopted the internationally popular concept of value retail in its new venture called Inorbit Mall.

–     It introduced a "village" mall in August 2008 as a value-retail showroom at Pocharam village, located about 12 km from Uppul, a suburb of Hyderabad city in Andhra Pradesh.

–     The products sold here are offered at discounts in the range of 20-50 %

–     The company considers the "village mall" a family destination that offers an excellent shopping and entertainment experience.

–     The company has invited local, national and international brand players to set up shops at Pocharam.

–     The "village" mall at Pocharam occupies an area of 4 lacs sq. ft

The company wants to replicate this initiative in other Indian cities.

The rural consumers can go to the village mall in the

•      morning for shopping while their children play in the entertainment area.

•      It will also have cultural shows with popular artists representing various streams performing there through out the year.

 

HATSUN  RETAIL  OUTLETS

 Hatsun retail outlets

 

–     Hatsun Agro Products is a leading MILK AND DAIRY products company having around 5,000 rural logistics

   centres for milk collection and related activities.

–     The company decided to enter the rural market

     after having found that it had a cumulative spare             capacity of 400,000 sq. ft lying idle.

–     As it can use its existing manpower, the setup cost will be 20 % of the business expense for the company &

            Hatsun Retail will have zero expense.

–     The company decided to operate the rural retail outlets with minimum overheads & sell household

    goods at low margins.

–     Hatsun has designed plans to sell readymade garments, textiles and household utensils in addition to the Arokya and Komatha milk brands and Arun brand of ice-cream.

–     This has been hailed by market analysts as a fantastic move by Hatsun though the margins will be low.

  

PPP  MODEL

 

•      PPP MODELS

 

–     Many companies have realized the significance of partnering with people and private social organizations  in rural areas.

            Such initiatives have been taken by HUL,  ITC and CFCL.

–     HULs Project Shakti and ITC's e-choupal have already been discussed 

–     We will now examine how CFCIs Uttam Bandhan operates.

–     Many companies have realized the significance of partnering with people and private social organizations in rural areas such initiatives  have been taken by HUL, ITC, CFCL

–     HUL project Shakti and ITC e choupal have already been discussed

–     Now we will examine how CFCL Uttam Bandhan operates

 

Uttam Bandhan-

Ø  Uttam Bandhan initiative was started in 2000 by Chambal fertilisers and Chemicals CFCL

Ø  The flagship company of KK Birla Group

Ø  It is community welfare initiative that originated in its present name in the state of Rajasthan where the company has its urea plant

 

Aim

Ø  Chambal Uttam Bandhan is a community welfare initiative that tries to enhance the FARMER'S INCOME and QUALITY OF LIFE.

Ø  It further seeks to provide EMPLOYMENT to the educated rural YOUTH. Employment-

Ø  Under the auspices of the initiative, the unemployed local youth are trained by the company as EXTENSION WORKERS, who are otherwise called UTTAM KRISHI SEWAKS.

Ø  About 300 educated, unemployed youth from a rural background are at present, acting as UTTAM KRISHI SEWAKS.

Ø  The extension workers earn from COMMISSION on the sale of specialized products.

SERVICES-

Ø  These extension workers are obliged to interact with the farmers  and render the required assistance in their agricultural practices.

Ø  SOIL AND WATER TEST -  Soil and water samples are collected and tested for micro-nutrients and balanced inputs.

Ø  Soil test reports are explained and the farmer is educated on the importance of proper soil health and  micronutrients.

Ø  Based on thousands of samples tested over the years, soil mapping is being done.

Ø  The Agriculture Development Laboratories are located at Agra and Sriganganagar and satellite soil testing facilities have been set up elsewhere.

Ø  The company does not charge any testing fee from the member farmers of Uttam Bandhan.

Farm education-

–     Crop and product demonstrations, field demonstrations and farmer meets are conducted regularly to educate farmers on the LATEST FARM PRACTICES.

–     Farmers are given training on specialized services that

 vary from cultivation of medicinal to horticulture crops, vermi-culture and the use of bio-fertilizers.

Alternate source of income

–     Uttam Bandhan is keen on finding alternative ways to improve income-earning opportunities.

–     Besides the land and water avenues, the scope to earn from animal and bird rearing are explored.

–     Some of the income-earning sources identified are- goat rearing, turkey farming, bee keeping, backyard poultry,

–     As a step in this direction, breed improvement and animal healthcare camps are organized to educate farmers on the proper feed and mineral mixtures for good returns.

 

FARMERS  WEB SITE-UTTAM KRISHI.COM- 

–     Chambal set up UTTAMKRISHI.COM, a Web site for farmers, in the year 2001.

–     Uttamkrishi.com was one of the FIRST WEB SITES TO BE SET UP FOR THE BENEFIT OF THE FARMING COMMUNITY.

–     It has a bottom-up approach to farming solutions as the Web site has been designed region-wise to address the local issues.

–     Broad information on crops and agronomy has been posted. Farmers can access it free and post queries that are answered by experts

 

Farmers' helpline-HELLO UTTAM-

 –     Telephonic helplines, called "Hello Uttam", have been set-up.

–     Farmers can raise issues over the phone by calling one of the local numbers of the "HelIo Uttam" helpline.

–     Though the number of centers are limited at the moment, experts are prompt in their response.

–     Information about the HELPLINE is widely circulated and for areas where the helpline is not operational, the farmers are urged to seek clarity from the Dept. of Agriculture, GOI Farmers' Call Centre facility.

–      

Mailers  

–     Chambal is particular about the proper dissemination of information.

–     For that it has a quarterly mailer "CHAMBAL KI CHITTHI" that is hand delivered to every Uttam Bandhan farmer.

–     It contains valuable farm-related information on activities pertaining to that quarter, Handouts, leaflets, farm calendars, farmer diaries, etc. are distributed extensively.

–     It arranges radio talks & programmes for farmers    on Doordarshan.

–     Uttam Bandhan is spread out in 10 states with around 80,000 farmers as its members.

–     Services provided are customized taking a farmers‘ preference & packaging them according to the agro-climatic zones.

–     Through proper training, demonstrations, expert opinion, quality inputs and non-farm income, the Uttam Bandhan farmer has been a gainer in terms of not just increase in income but also quality of life.

–     Chambal has always believed in  (PPP) in knowledge dissemination.

–      

E-TAILING

 

E-TAILING- 

–     Information and communication technology has reached the rural consumers and is transforming the life of rural people.

–     Now they are able to sell and buy with an understanding of the international markets.

–     Many agri-input companies and NGOs have introduced their Web-based initiatives.

–     We will now consider some of the well known E-tailing proiects.

–      

ITC's  e-Choupals-

ITC's e-Choupals-

•      ITC launched three Web-based initiatives (e-Choupal) in the year 2000, namely-

Ø  www.aquachoupal.com

Ø  in Andhra Pradesh for shrimp farmers

Ø  www.soyachoupal.com

Ø  in Madhya Pradesh for soya farmers

Ø  www.plantersnet.com

Ø  in Karnataka for coffee farmers

–     ITC has placed computers in the houses of Sanchalaks (lead-farmer).

–     Each computer is linked to the Internet via telephone or by a VSAT connection.

–     Proper training is provided by ITC to Sanchalaks about the use of computer and the Internet.

–     Each Sanchalak serves an average of 600 farmers in

     10 surrounding villages within a radius of 5 km.

–     Solar- charged batteries are provided by ITC for uninterrupted power supply to the computers.

The following services are provided by the e-Choupals to the farmers:

–     Information- Information on daily closing price of local mandis, weather forecasts, etc.

–     Knowledge- Knowledge about new farming techniques, soil-testing, expert advice, etc.

–     Purchase-  To place order for seeds, fertilizers, pesticides, tractors, bicycles, and other products and services of ITC & its partners

–     SaIe- At harvest time, ITC offers to buy the crops from farmers at the previous day's closing price.

–     The farmers then transport their crops to an ITC processing centre where the crops are weighed electronically, and the farmer is then paid for the crop and transportation fee.

 

 

EID Parry

EID Parry's Indiagrilinele

–     This is an IT initiative developed by EID Parry in 2001, based on its concept of "Parry Farmers."

–     The initiative mainly concentrated in rural Tamil Nadu by focusing on 271 villages around EID Parry's Nellikuppam sugar factory near Cuddalore.

–     It fashioned a franchise-based business model "Parry Corners" to meet the demand for information & connectivity.

•      These kiosks are owned and operated by franchisees trained to operate the system.

•      They provide advisory services, finance facilities & other occupational information to farmers.

•      The company has been approached by financial services companies for partnering with the channel.

 

Goals

–     The strategic goals of the initiative are as under-

–     Distribution infrastructure- To create bi-directional distribution of products & services into & out of rural India.

–     The infrastructure helps in establishing and managing the distribution channel in an inexpensive and cost-effective manner

–     Trading infrastructure-  To serve as a PLATFORM for trading agricultural commodities and rural industry-manufactured goods as well as provide varied services.

–     It aims at providing the farmers with information on the prevailing prices in local and distant markets for the agricultural products besides guiding and educating them through complex risk-transfer mechanisms.

 

Range of services-

 

–     The different services facilitated by the Indiagriline initiative are given here.

–     Procurement- Relaxation of restrictions on buying, selling and holding of certain commodities including varieties of rice by the Indian Government has opened up a whole new opportunity for EID Parry.

–      

•      Marketing products and services-

•       

–     The same network that brings produce from the village can be used to transfer goods to the villages.

–     EID intends to leverage this network to sell products in rural India.

 

•      Desktop & publishing services-

–     Desktop and publishing services are a key source of revenue for the franchisee.

–     As part of Project e-Inclusion, EID Parry, in partnership with Hewlett-Packard, has deployed all-in-one print/scan/fax/copy devices and digital cameras.

–     These devices enable the franchisee to provide a range of services to the villagers.

–     Communication services- A Parry's Corner kiosk doubles as the local Internet cafe.

–     Franchisees usually charge customers an access fee for surfing the Web.

–     Information accessed at these kiosks relate to current affairs, education, health, entertainment and the weather. In addition to a data line for Internet access, the kiosks get a telephone line as well.

•       

Education services-

 

–     EID Parry has used its Parry Corners to launch adult literacy & computer education programmes.

–     In partnership with NIIT Ltd, a pioneer in the field of IT education, EID Parry organized computer education programmes.

–     In partnership with Tata Consultancy Services, it also conducts an adult literacy programme to educate illiterate women.

–      

•      Farm extension services

 Providing farm extension services is central to EID Parry's business model.

•      The extension services provided in the Cuddalore district focus on paddy, banana, groundnut, tapioca and cashew For the cane farmers in the region, EID Parry provides the following farm-advisory services:

•      Expert visits & crop seminars

•      Soil sampling &analysis

•      The Indiagriline initiative has a good network of partnerships with a wide range of organizations such

            as Tamil Nadu Agriculture University (TNAU) and its         research stations, Tamil Nadu University for

            Veterinary and Animal Sciences (TANUVAS), National      Horticulture Board, AMM Foundation, and Murugappa      Chettiar Research Centre.

•      The agriportal (wwwindiagriline.com) was developed using in-house expertise (EID Parryt Sugar and Farm Inputs Division and Corporate Research and Development

            Lab).

  

TARAhaat

 

•      TARAhaat Information and Marketing Services Ltd

•      (TARAhaat), promoted by development alternatives

            group (an alliance between Hughes Escorts   Communication, Hewlett Packard, Oracle, KLG

            Systel, Jaldi.com, Global Development Gateway      (sponsored by World Bank and Gates Foundation),

            Excelsior Ventures Management, LLC and |ames Martin      (one of the world's leading NGOs)],

            is an organization that focuses taking the benefits of   technology to the rural population.

•      www.TARAhaat.com is an Internet portal that was launched in 2000, in Bundelkhand near Jhansi

            in MP.

•      It aims to connect rural India to the external world.

•      Since then, it has expanded to UP, Punjab and Haryana.

•      The services provided by TARAhaal are as follows:

•      Literacy (TARAakshar)

         A literacy programme (in Hindi) to make village people literate,

 

 

Education (TARAgyan)-

 

•      Educational courses are developed and delivered through ICT Centres in UP MP Haryana, Punjab, Bihar and Jharkhand.

 

Information-

 

•      Information regarding health, nutrition, first-aid, diseases, government schemes, water, agriculture, entertainment, etc. is provided to rural people.

 

Agri-Advisory-

 

–     Farmers are provided advice on farming & related issues.

 

Rural entrepreneurship-

 

–     Rural youth, women & self-help groups are provided information and guidance.

 

Purchase and sale of products-

 

–     TARA haat provides opportunity to rural consumers to order a wide range of TARA approved products.

•      TARA vans that are franchised to local people are used to deliver the products ordered by the villagers at their door-step.

•      TARA cards are provided to regular users enabling them to make transactions without paying money in advance.

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