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.
.
