Rural Retail in India

Indian Rural Retail:

Rural retail contributes a major chunk of the total retail market in India with two-thirds of the Indian consumers living in rural areas, generating almost half the national income. Indian rural retail is mostly agro-based and unorganised, leaving lots of scope and opportunities for the organised retail companies to set up shop. There has been encouraging trends in different parameters that are paramount for rural retail such as literacy, accessibility, degree of penetration, income levels, distance from major commercial and business hubs etc. in recent years. High income levels, brand awareness, and concepts of quality have led to increasing consumerism among the nouveau rich middle class in rural areas.

Rural marketers and other stake holders in the organised rural retail have the opportunity to capitalize on the huge potentials that are available across various retail categories taking into account the nuances and dynamics of the Indian rural retail market.  The sheer size of the population makes the Indian rural markets a perfect opportunity for retailers, with resourceful retail propositions, to break new grounds.

Challenges of Rural Retailing in India:

Opportunities galore in the India rural retail market with multiple areas of untapped potential and resources, though they do come with a rider. Rural marketing is a time consuming long-term exercise that requires a substantial amount of investment in terms of strategy, vision, patience and a deep understanding of the rural psyche. According to a study conducted by National Council of Applied Economic Research (NCAER), the major hindrances retailers face in penetrating the rural market can be attributed to inadequate infrastructure, low income levels and an entirely different lifestyle.  Phenomenal improvements in the income level, infrastructure, and the living standard of the rural folks have been observed in the last few years. However, retail companies should be adept at strategising innovative marketing plans to overcome the following glitches and challenges in the otherwise booming rural retail sector:

Overcoming the Challenges of Indian Rural Retailing:

The 4As:

Many MNCs in the retail business have already put their thinking caps on, devising inventive plans and strategies to overcome the challenges posed by the rural market.  Most of the successful initiatives  implemented in rural retailing focus on four important aspects, availability, affordability, acceptability and accessibility, generally known as the 4As Approach to overcome the four important Ps (4Ps) of Place, Pricing, Product and promotion.

Availability: India is a land of villages with 70 %( 70 million) of the people living in rural areas spread over 3.2 million sq km. Reaching out to the rural folks is a cumbersome process, in fact a Herculean task. In developing a successful retail network, the first and foremost step in the chain is ensuring the availability of the product or service to the consumer. Retailers and suppliers need to have a water-tight rural retailing strategy that takes into account the spread and size of the market, the distribution models, supply chain management systems, distribution hubs, distributors, stockists or agents, frequency of supply etc. In the rural market, sheer availability of a product can be a successful criterion in building brand loyalty. The monopoly of Colgate as toothpaste (powder) of choice or the recent examples of Coca-Cola making huge inroads in the rural markets of Kerala significantly proves that availability by itself can be a winning stroke in the rural retail business.

Affordability: Pricing is a big challenge as affordability of buying the product or service is the sole determinant. With low disposable incomes, and brought up in the age old Indian village ethos of living with the bare minimum, rural retailers should be able to come up with smaller packs at lower rates, keeping affordability in mind. HLL's Lifebuoy brand available at Rs. 2 for 50 gm packs, and the 25 gm single-serve ready to mix sachet of Sunfill from Coca-Cola priced at Rs 2 are stellar examples of MNCs playing the affordability game.

Acceptability: Bending to fit in is of vital importance to gain acceptability in the rural market. Producers and retailers must conduct a basic ground level research to zero down on the niche areas that would suit the rural market. LG Electronics' Sampoorna, a customized TV made exclusively for the rural market was a great hit, so is Coca-Cola's introduction of low-cost-ice-boxes instead of refrigerators, as electricity is not a premium in the rural areas.

Awareness: Mass media has limited reach in the rural areas, with the conventional mass media able to penetrate only 57 % of the total rural population. The retail players with an eye on the Indian rural market would have to utilize unconventional media to create awareness of the products. Promotional events like rural trade fairs and festivals, village road shows, Haats, etc are some of the more commonly used modes of introducing new products and services to the people. Putting up posters and stickers on cinema vans, village marketplaces, wells and other public arenas can also increase brand visibility.

Retail Players (local & global)

A few Pioneering MNCs have the foresight to successfully venture into the vast yet generally neglected expanse of the Indian rural retail space and have reaped rich dividends. Though many rival enterprises call it a first time advantage, these companies have invested heavily in terms of time, and stratagem to make huge inroads into a sector that is at the point of becoming a global hub of organized retail. FMCG major like P&G, MNCs like HLL, DCM Ltd., ITC, Tatas have already established strong footholds and taken deep roots in the Indian rural retail industry, while other corporate giants (both Indian and foreign) like Reliance, Bharti, Wal Mart and a host of biggies have plans either in place or in the pipelines to take rural retail in India by storm.

The established rural retail companies have come up with exciting and groundbreaking business models to exercise monopoly in this rather virgin market, with the potential to shake up the global retail scene. Some of the pioneering efforts made by these retail companies and suppliers are ITC's e-Choupal, DCM’s Hariyali Kisaan Bazaar,Mahamaza, Hindustan Lever’s Project Shakti, Tata’s Tata Kisan Sansar etc.