Rural Retailing in Indiaby Udit Jain on June 20, 2007
The higher income group in rural India is growing at a phenomenal rate, and the concept of brands and quality are very much prevalent. These current consumption trends provide compelling opportunities for marketers to capitalize on the increasing mass market in India for almost all product categories. Both corporations and entrepreneurs are exploring the rural retailing. ITC’s Choupal Sagar, HLL’s project Shakthi and Mahamaza are some of the models that are being tried out. Many more such concepts are likely to be tested in the future.
Figure 5.1: Share of Urban versus rural markets
The case for Indian retailers to explore rural markets is strong. Given the size of the rural population and the agricultural income growth in rural India, the rural market is definitely an opportunity for retailers with an innovative retail proposition. A clear indicator of this potential is the share of the rural market across most categories of consumption .In the following, we describe three highly successful rural super market initiatives in India.
The company Mahamaza, ended the year with a turnover Rs 1.2 billion. The Mahamaza model is quite simple. Any person wishing to be a dealer can sign up with Mahamaza by making a one-time payment (around Rs 5,000). Then the dealer gets orders from his town or villages and places these orders with Mahamaza. The company further consolidates orders and gets discounts from durables and FMCG companies due to its bulk buying. A part of this discount is passed to the dealer as his commission.
Hariyali kisaan bazaar
Hariyali Kisaan Bazaar is a pioneering micro level retailing effort from DCM Shriram Consolidated Ltd.(DSCL), which seems to creating a positive impact in the way rural India shops and is also revolutionizing the farming sector. This is a chain of centers that aim at providing end-to-end ground level support to the Indian farmer to improve his profitability and productivity.
The first outlet came up at Del Pandarwa (near Shahjahanpur in Uttar Pradesh) in July 2002 and so far 15 “Hariyali Bazaars” have been set up: 6 in UP, 5 in Punjab, 3 in Rajasthan and 1 in Haryana. On an average, each centre is attracting 150-200 farmers a day. Each “Bazaar” operates in a catchment of about 20 km radius and approximately 15,000 farmers live in this area. Each center provides help to improve the quality of agriculture in the area through 24×7 support by a team of qualified agronomists. They provide a complete range of good quality, multi-brand agri inputs, access to modern retail banking and farm credit at reasonable rates of interest, farm produce buyback opportunities and access to new markets.
IT has been a critical backbone to these chain of centers. With support from Polaris Retail Infotech Limited, these outlets make use of IT to provide online support on latest technical advancements, weather forecasts and market prices. Maintaining extensive farmer databases with micro information about the farmers’ field to provide them customized services is another innovation. The first phase involves setting up of 30 Bazaars in 2006 and then scale-up to cover 200 locations in the next 6 to 7 years timeframe.
ITC International Business Division (IBD) embarked on a Rural Retail marathon with the launch of its first Hypermarket “Choupal Sagar” on 15 August 2004. IBD is creating a two-layered infrastructure for rural retail: the e-Choupal and the Sagar Choupal. Launched in June 2000, e-Choupal forms the first layer where farmers have access to Internet within walking distance from their villages. The ‘e-Choupal’ services today reach out to more than 30 lakh farmers in over 28,000 villages through its over 5,000 kiosks across six states (Madhya Pradesh, Karnataka, Andhra Pradesh, Uttar Pradesh, Maharashtra and Rajasthan). ITC plans to extend the initiative to 15 states over the next few years. The physical infrastructure of Choupal Sagar presents the second layer, which brings multiple services under one roof. The core function of this infrastructure is to ensure higher income to the farmer and availability of good quality product and services at most competitive prices.
Choupal Sagar, a farmer’s Mall of ITC, is a place where the rural consumer gets almost all of his requirements under one roof. From clothes, FMCG goods, watches, home furnishings and consumer durables to automobiles to tractors, pumping sets, fuel, pesticides, seeds to health care, retail banking to restaurants and much more are available in the Sagars. It also includes the Mandi, providing an ideal setting for farmers to offload their produce at best possible prices. ITC is planning about 25 such malls with investment of Rs.100 crore, in rural India soon. This first Choupal Sagar is located at Sehore, 38 km from Bhopal, the state capital of Madhya Pradesh.
ITC’s mall is thus substantially different from a typical urban hypermarket. It provides all allied activities, products and services at one place. The first 7,000 sq.ft mall at Sehore, housed in an eight-acre sprawling complex, has a buying centre for purchasing rural handicrafts as well as agricultural commodities, a hypermarket for selling goods to the rural consumers, a petrol pump, and a farmer facility centre consisting of cafeteria, bank, insurance Company, training centre and a primarily health centre. Reports indicate that the initial response to the hypermarkets has been encouraging and on an average each mall draws about 700-800 customers every day. By end of 2005, Madhya Pradesh is likely to have 25 such malls, and another 25 may come up in other states such as Rajasthan, Uttar Pradesh and Maharashtra.
Many more innovative concepts are likely to be tested in the future as marketers and retailers begin to acknowledge the power of the rural consumer. These concepts are likely to go a long way in bringing a huge rural population within the purview of organized retailing, thereby, increasing the size of the total market.