Organized Retail in Rural India


By

Neha Verma
Lecturer
Amity Institute of Telecom Technology & Management
Amity University
Sector-125 C- block, Noida-201303
 


INTRODUCTION

India, like Britain, is also a nation of shopkeepers. With over 12 mn retail outlets, India has one of the highest densities of retail outlets in the world with one retail outlet for ~90 persons. Retailers inspired by the Walmart story of growth in small town America are tempted to focus on smaller towns and villages in India. However, a careful analysis of the town strata-wise population, population growth, migration trends and consumer spend analysis reveals a very different picture for India.

After a long spell of shortages, which shackled consumer buying for decades, retail is becoming India's new mantra. The Sanskrit word "mantra" is not just "hymn" or "slogan"; it embraces aspiration and encompasses new India's way of life. While the retailing industry itself has been present through history in our country, it is only the recent past that has witnessed so much dynamism.

We have entered the 21st century at a time when the demography of our population is changing significantly to drive organized retail growth. India now has a large young working population with a median age of 24. The number of nuclear families in urban areas is growing fast. Then there is the increase in working women population. Add to these the emerging opportunities in the service sector. Lifestyle habits are shifting from austerity to complete self-indulgence and Indians are now unapologetic about spending lavishly on non-essential goods such as luxury watches, cars, and hi-tech products.

India can be said to have entered the second phase of retail growth when there is high-speed growth.

There are retail chains like Tata's Westside, Pantaloon's Big Bazaar and Rahejas' Shoppers' Stop, to name a few, along with global players such as McDonald's and Benetton, trying to tap country's vast potential. Bringing all these under one roof are mega malls such as Lifestyle, Fun Republic and Big Bazaar. Now, top names in international malls such as Marks and Spencer and Mango are also eying the Indian market. It is only later that the retailing scene will move to the other phases when the fruits of rapid growth will result in economies of scale and greater efficiency leading finally to consolidation through mergers and acquisitions. Thus, retailing in India has a very long haul ahead.

Quantum jump in rural retail outlets

In India for a long time a large chunk of retail outlets were grocery shop. This pattern had been changing in recent years, in urban and rural markets.

Of late, India's largely rural population has also caught the eye of retailers looking for new areas of growth. A slew of supermarket chains, including those of the Tata and ITC, are set to storm the rural areas of the country as corporate realize the huge potential of the untapped market ITC launched the country's first rural mall 'Chaupal Sagar', offering a diverse product range from FMCG to electronic appliances to automobiles, attempting to provide farmers a one-stop destination for all of their needs. Companies such as Godrej and DCM Shriram Consolidated are launching `one-stop shops' for farmers and their communities. Godrej Agrovet, for instance, is planning to set up 1,000 Aadhar stores across rural India by 2010. DCM Shriram plans to set up 35 rural/semi-urban utility marts over 2006-07. Positioned as a one-stop shop, the Hariyali Kisaan Bazaar Chain will cater to a variety of farmers' needs by providing access to retail banking, LPG outlets and even a motorcycle showroom.

As clear from the story on Reliance Fresh and Metro, organized retail sector can bring a revolutionary change in rural India unless it goes for quick short-term gains. With Wal-Mart famous for its 'Always Low Prices' coming in India with Bharati as equal partner, Indian farmers and rural craftsmen can hope for a better direct deal. Retailing does not benefit just the consumer. It can give huge benefits to other industries, to government, and to the entire economy.

The rural market is no longer a non-player in the retail game. It is now accounting for over one-third of the market for most durable and non-durable products. Even manufacturers are developing new products with the rural consumer in mind besides using village-oriented marketing strategies for brand promotions. Whether it is Rani Mukherjee promoting the chocolate Munch or master batsmen Sachin wowing village lads with a soft drink, both ad makers as well as top company honchos know where to put their money and how. The rural market is no longer of hypothetical empirical value but is well researched and reached by most companies looking to tap India's vast and abundant bounty.

Conclusion

The Indian retail scenario is poised for a quantum leap. Not only are newer names set to dot the retail landscape but also new and emerging retail formats will drive the diversity of the fast-changing retail backdrop. Organized Retail means 'Big Stores' a common myth…nothing can be further then the truth. In its very essence, organized retailing is about "aggregating value" and what shape, size and configuration your customer facing entity takes is largely a function of your offer and proposition. A growing population, a young workforce and zooming consumer confidence will fuel the expansion of the retail sector. As organized retail in rural India awaits the arrival of Reliance Retail, current majors like ITC, Godrej and DSCL are expanding their retail operations by setting up more stores, entering new states and offering newer product categories. A shift from selling agri-inputs will help these stores target the non-farming segments. It is a little known fact that, while 25% of the rural population is not engaged in agriculture, it earns 50% of the rural income. The retail market is the next growth frontier for corporate India. It offers an opportunity for a large player to build a Rs. 40,000 Cr retail business spanning multiple categories by 2015 (at current prices). However, to capitalize on the opportunity, a player needs to be aggressive in its outlook and build scale quickly.

References:

* Business World
* The Economic Times
* Hindustan Times
* www.thehindubusinessline.com
* www.researchandmarkets.com/reports/236028/indian_retail_industry_strategies_trends_and.pdf
* http://www.indiaretailing.com
* http://www.tsmg.com/download/article/TSMG_Tata_Review-June_2006.pdf

ACKNOWLEDGEMENT

I would like to express my gratitude to all those who gave me the possibility to complete this article. I want to thank my Institute for giving me permission to write this article. I have furthermore to thank my Director General who encouraged me to go ahead with my article.

I am deeply indebted to my HOD Prof. M.Sahni from whose help, stimulating suggestions and encouragement helped me in all the time of writing of this article.

Especially, I would like to give my special thanks to my husband Mr. Manish Sandow whose patient love enabled me to complete this work.
 


Neha Verma
Lecturer
Amity Institute of Telecom Technology & Management
Amity University
Sector-125 C- block, Noida-201303
 

Source: E-mail June 6, 2008

           

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