Retailing in India: A Cross Country Studyby Udit Jain on June 20, 2007
India as we all know lives in villages but this market has always been underestimated. Substantial improvement in purchasing power, increasing brand consciousness, changing consumption patterns and rapid spread of communication networks in rural areas has presented a growing potential for the corporate sector.
According to a National Council of Applied Economic Research (NCAER) study, the consuming class households in rural areas equals the number in urban. For a number of Fast Moving Consumer Goods (FMCG) companies in the country, more than half their annual sales come from the rural market.
A rising trend has also been observed in terms of rural networking. For instance, of the two million BSNL mobile phone connections, 50 per cent are in small towns and villages. In other words, the rural share in both FMCG and durable categories, which was only around 25 per cent of the total market in the 1980s has been growing rapidly and exceeds 50 per cent today.
The rising importance of the rural markets reflects not only the saturation in urban markets, but also the huge potential, which rural markets have to offer, both in terms of the emerging middle class and the impressive growth rates of the rural consumer market. According to ASSOCHAM, the consumer and household products market in India will expand to 1.23 trillion rupees, or $27.6 billion, by 2012 from about 700 billion rupees now and about 60 percent of all household products will be consumed in villages and small towns.
Demand for unconventional products like toothpaste, instant coffee and deodorants in Indian villages, towns and small cities is expected to increase by 60 percent by 2012, said the Associated Chambers of Commerce and Industry of India,
Problems in the Booming Rural Marketing
Although 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.More…
· 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 numbers 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.
Recent Developments in Rural Retail in India:
Eyeing the vast rural market many major players are already in the field and many are planning to enter it.
- ITC’s Choupal Saagar has 12 stores in rural areas of Madhya Pradesh, Uttar Pradesh and Maharashtra.
- DSCL has plans to go national with HKB, even as it aims to transform them into complete rural malls, At present, DSCL has 50 HKBs in Rajasthan, Punjab, Haryana, Uttar Pradesh, and Uttarakhand.
- Triveni Engineering and Industries’s Khushali Bazaar has 33 stores spread across UP and Uttaranchal.
- Godrej’s Aadhar has 31 stores in Maharashtra, Gujarat, Punjab, Haryana, Andhra Pradesh, Orissa and West Bengal.
Apart from these players, rural retail has also attracted Tatas who are present with their Kisan Sansar stores and Mahindras who have opened Shubh Labh stores.