Organised Retail in Rural India- Opportunities and Challenges


By
Garima Srivastava
Student
Jaipuria Institute of Management
Lucknow
 


According to the provisional data released by Census India (2011), the population of India is 1.21 billion comprising rural and urban population that is 68.84 percent and 31.16 percent respectively. Which means more than double the population of urban India resides in rural India. Organised way of modest retailing started in Indian in 1990's  metros  but now India is witnessing high growth not only in big cities but also  in tier I and tier II cities. After exhausting the urban market companies are looking towards the rural areas as it comprises of almost half of  the domestic retail.

With rising income level and improving lifestyle of rural consumer, the retail sector is promising a huge growth in rural India.

Approach towards Rural retailing

Companies should go to the producers directly and middle men should be removed from this process. Knowledge exchange centres should be set up where both companies and consumers can talk about their problems and solutions it will help companies to know there consumer need in a better way. For improving sales they need to first earn respect and confidence of the locals and also they should respect farmers and non-farmers with respect. Their outlets should cater to the needs of the locals at cheap and best price.

Opportunities

Around 70% of Indian population lives in rural india and with growing economic power and education development purchasing power of rural population is also increasing.

More than eighty per cent of rural markets in India still do not have access to any sort of organized marketing and distribution. So, there is sea of opportunities for retailers to serve shoppers in rural and semi-urban India. India Brand Equity Foundation (2011) said that rural India is set to witness an economic boom, with per capita income having grown by 50% over the last 10 years, mainly on account of rising commodity prices and improved productivity. For many years, rural India was not much acknowledged by the retailers. But as the 'bottom of the pyramid' is getting empowered with education, higher purchasing power and awareness, companies are looking for opportunities in hinterlands and this will open market further.

Also government focus on agricultural policies will increase rural earning.

With exposure to literacy young crowd is becoming brand conscious and this all are positive signs for opening up of opportunities in rural india.

Challenges

Setting up organised retail outlet in rural India is itself is a challenging task as initial penetrating cost is really high.

For a retailer, before entering rural markets, it is very important to gain knowledge and insight of target consumers as well as markets. They need to formulate their strategies, that could be different from urban markets like rural population is mostly dependent on crop cultivation, livestock, forestry or fishing etc. Whereas, the main livelihood drawn by urban population is mainly within the continuum of non-agricultural production or making/selling goods or services. By understanding these differences, the retailers can decide a merchandise-mix that matches the needs of rural consumers.

Increasing cost of land is other major challenge retails have to face if they plan for expansion in future.

Because of low level of literacy, different languages and dialects and more traditional outlook a better trained staff will be required to understand the needs and demand of rural population which will result in high operating cost.

Since per capita income of rural in India is very low catering to the need of the rural customers will be challenging task.

Products of rural market must be built or modified to suit lifestyle and needs of rural customer.

Some of the organised retail model working in rural India

Hariyali Kisaan Bazaar

It is the division of DCM Shriram Consolidated Limited (DSCL)'s Agri-Business. The company (DSCL) operates in two lines of business Agri/Rural, Chemicals and polymers. Their Agri-business offerings comprise agricultural inputs, both manufactured and merchandised, outputs, distribution and services. The company initiated a 'Rural Retailing' initiative with the objective to move towards providing total solutions to the farmers. Hence, it can be said one-stop shop for meeting farming and family needs of the rural population. It has 264 outlets in many villages of eight different states Haryana, Punjab, Uttar Pradesh, Rajasthan, Uttrakhand, Madhya Pradesh, Maharashtra and Andhra Pradesh.

Range of Products and Services in 'Hariyali Kisaan Bazaar'

Retailing

* Agri-inputs Fertilizers, Pesticides, Diesel and Petrol (under alliance with BPCL)
* Farming Farming instruments, Contract farming
* Others FMCG, durables, apparels, Seed Processing etc.

Services

* Insurance Agriculture, Agronomy advisory, Insurance, Credit etc.
* Others Output Procurement & Trading

Source: www.dscl.com

Aadhaar

Started in December 2003, Aadhaar Retailing was Godrej Agrovet's rural retail initiative catering to the growing consumption demand in rural India.Godrej Agrovet Ltd., a part of the Godrej Group, is a market leader in animal feeds, branded chicken, innovative agri- products & oil palm development in India. In March 2008, Aadhar Retailing entered into a joint-venture between Future Ventures India Limited (FVIL) which held 70 percent stake and Godrej Agrovet which held rest of the 30 percent stake in Aadhar Retailing Limited. FVIL is part of Future Group an established leader in Indian retail sector. It had purchased the stake for Rs 30.18 crore from its promoter Godrej Agrovet.

Range of Products and Services in 'Aadhaar'

Retailing

* Agri-inputs Fertilizers and Pesticides
* Durables Mobile phones & accessories, appliances, Kitchenware etc.
* Others Furniture from Godrej Interio, Toys, Cosmetics, Stationery and gift items, fresh fruits & vegetables etc.

Services

* Credit and Financing Agriloans to the farmers (by HDFC Bank), Life insurance (ICICI Prudential) etc.
* Others food-court, Soil testing and provide advice to farmers.

Source: www.financialexpress.com

ITC Choupal Saagar

ITC launched the Choupal Saagar in 2004 and it is one of the first organized retail forays into the hinterland. Choupal Sagar is a rural hypermarket which is managed by ITC's agri-business division. Farmers can sell their commodities and can buy almost everything including cosmetics, garments, electronics, appliances and even tractors. Currently, there are 24 Choupal Saagars: 11 in Madhya Pradesh, 5 in Maharashtra and 8 in Uttar Pradesh. With the success of e-Choupal (world's largest rural digital infrastructure), ITC is engaged in scaling up the rural retailing initiative to establish a chain of 100 Choupal Saagars in the near future. Local sourcing of vegetables and fruits allows the company to deliver fresh and save on the expense of a cold chain. Moreover, ITC's procurement centers functions to provide farmers the option of selling their produce directly to ITC instead of bringing it to the mandi. ITC's Agri Business Division conceived e-Choupal as a more efficient supply chain aimed at delivering value to its customers around the world on a sustainable basis. It is an initiative to link directly with rural farmers for procurement of agricultural/ aquaculture produce like soybeans, wheat, coffee and prawns (Dangi & Singh, 2010). Launched in June 2000, 'e-Choupal', has already become the largest initiative among all Internet-based interventions in rural India.

Among those discussed above, there are few others: HUL's Shakti, Reliance Retail's Fresh & Fresh Plus, Mahindra & Mahindra's Shubhlabh and Tata's Kisan Sansar, who are capitalizing on rural India's potential by partnering with farmers and establishing rural retail chains.

References

Economic times
The Hindu
http://www.slideshare.net/san8904/rural-retailing-in-india-by-alok-sharma
http://www.slideshare.net/MohitMalviya/godrej-aadhar
www.tjprc.org/download.php?
 


Garima Srivastava
Student
Jaipuria Institute of Management
Lucknow
 

Source: E-mail June 22, 2012

 

           

 

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