DISTRIBUTION STRATEGIES IN RURAL MARKETS

Distribution strategy A one of the ways could be using company delivery vans which can serve two purposes it can take the products to the customers in every corner of the market and it also enables the firm to establish direct contact with them and thereby facilitates sales promotion. The mediocre companies with sizable resources may chip in for syndicated distribution. Haats and Melas could also be a great platform to display merchandise. Also, every region consisting of several villages is generally served by one satellite town termed as Mandi where people prefer to go to buy their durable commodities. f marketing companies use these feeder towns they can have a vast coverage of rural arena.

Delivery Vans Companies can use their own delivery vans to reach the rural consumers. There are certain advantages of using delivery vans. They take the products to customers and retail outlets in every corner of selected rural markets and enable the company to establish direct contact with the consumers which helps in sales promotion. We can take the example of HLLs distribution strategy in rural market. In !!"# HLL landed $%peration Harvest$ with an ob&ective to increase penetration# increase brand awareness# encouraging trials and identification of key distribution points and retail points. 'round ()#))) villages having high growth potential# having a population of at least *)))# and well connected by roads# were selected. The vans were retrofitted with a public address system and their audio+visual e,uipment. These vans covered six villages a day for six days in a week. The cycle was repeated couple of times in the same villages. %n reaching the villages# they would play audio+cassette and video+films. These cassettes and films had songs and se,uences from popular films with advertisement of HLL coming at some intervals. Company representatives distributed free samples. -mall shops of villages were provided with HLL products like Lifebuoy and Wheel. This helped company to understand the potential of the market. Joint Distribution by Non-Competing Companies Companies having lesser distribution reach in rural areas can collaborate with companies already having wide network in rural market. This type of tie+up can prove to be beneficial as one can reach to large number of retail outlets by utilising the network and the other one can earn better revenue. 'lso# this type of &oint collaboration can help both companies to reduce distribution costs and can convert operation which seems to be unviable into financially viable operation. -ome examples of effective distribution tie+ups in rural market. +
-amsung

has tied+up with the Indian /armers /ertili0er Cooperative 1I//C%2. Thus# -amsung will use I//C%3s cooperative network for marketing the hand+sets to rural consumers over a wide area. 4okia has entered into a partnership with HCL for distribution of its hand+sets. 5otorola and 4okia have partnered with ITC e+Choupal which gave them wider reach in rural market. 6rocter 7 8amble had tie+up with 8odre& and 5arico Industries# and now it is planning one with 4irma as well for distribution of Camay -oaps. 8odre& has tie+up with 9yothi Labs to use its extensive distribution network for marketing 8odre& Tea across the country.

Distribution up to Feeder Towns / Mandis Companies can cater to the needs of rural consumers by making their products available upto feeder towns or mandis. /eeder markets or mandis provide excellent scope for distribution of products like consumer durables# clothes# kitchen e,uipment# agri+inputs and tools. The rural consumers visit these towns at regular intervals not only for selling their agricultural produce but also to purchase clothes# &ewelry# hardware# radio# and other consumer durable products. Haats 'long with permanent retail outlets# haats can also be utilised to make the products available to rural consumers. Haats are held on a particular day of every week. Typically# an average haat has ()) stalls. ' haat usually serves around :))) visitors. -o if we consider average population of an Indian village to be )))# then one haat caters to the needs of : villages. There are almost ;<#))) haats in India. The sale per haat per day is =s. *.*: Lakh 1approximately2 and average sale per outlet is =s. !)) 1approximately2. large number of retailers also buy products from haats for their village stores. 'bout !)> of sales on haats are on cash basis. The participation fees at haats are a flat =e. to =s. : per stall which is very low. These figures show that targeting haats for distribution purpose can prove to be beneficial for companies. Companies can tap the rural consumers for clothes# cosmetics# /5C8s# kitchen e,uipments and agricultural tools at these haats. Leading manufacturers are introducing sachets of tea# blues and washing powders in these haats to create a demand and then meet the demand in affordable packages. Melas %ver *:#))) melas are held every year all over the country. %ut of these# :))) are commercial melas# *#))) are cultural melas and "#))) religious melas. The following facts regarding melas will help us to understand their importance to marketers. + 4umber of visitors per mela is approximately <.: lakh. %n an average# ":) outlets are set+up in every mela. 'verage sale per day in a mela is =s. *: Lakh. ?isitor turn+out in a mela is very high. ' large part of the visitors in these melas are women and children# which is significant because rural women are restricted to leave village often.

Melas are generally used to sell durables# high+priced items and new products launched. @xamples of effective use of melas by marketers are. + 'ctive participation of 5aruti in rural melas like the kisan mela 1Ludhiana2# -onepur mela 1Aihar2# Bila =aipur sports mela 16un&ab2 and 6ushkar mela 1=a&asthan2. The melas provide both a platform for demonstration and improving product awareness# and also booking new sales.

In *)) # HLL ran a campaign at the 'llahabad Kumbh Mela to demonstrate to the visitors the importance of usage of soap for better health and hygiene. =ural people in general believe that washing hands with water alone is enough# so there is no need to use soaps. HLL representatives educated them about use of soap for better health and hygiene. This awareness campaign has helped HLL to increase the sales of Lifebuoy in rural market.

Hub & po!e Met"od o# Distribution The urban model of distribution in which the products are transported directly from the bottling plant to retailers is not very effective in rural markets as taking stock directly to retail point would be costly due to the long distance to be covered. -o Coca Cola has opted for a hub and spoke method of distribution system. It worked this way. + Coke bottles were transported from the bottling plants to the hubs 1large distributors2 and from hubs to spokes 1smaller distributors2 situated in small towns. These spokes then distribute the stocks to village retailers who cater to the demand in rural market.

$ural Mar!et
IA@/. 'ugust * # *))"

%T servi&es Indian villages are finally getting to benefit from the IT revolution in India. @+6anchayats are slowly taking over rural India and an 3@+medicine3 scheme for rural areas has been launched by the 8u&arat government3s health department in 5ay *))". ' study by internet research firm 9uxtConsult reveals that one out of every seven regular internet users is from the rural belt and surprisingly# the rural net users are younger than their urban counterparts. 5oreover# A6%s are slowly growing roots in rural areas.

Comat Technologies 162 Ltd# a Aangalore+based global business solutions organisation has ")) rural business centres in Barnataka and *!) centres in Haryana. It will soon open centres in -ikkim# Tripura# Cttarkhand and Cttar 6radesh. -erWi0-ol# a Tata enterprise# has a *:)+seater A6% at @thakota in rural 'ndhra 6radesh# and one in rural 8u&arat in 5ithapur which is a ))+seater. -=@I -aha& e+?illage Ltd will set up *:#))) IT kiosks to be known as common service centers 1C-C2 across West Aengal# Aihar# %rissa# 'ssam# Cttar 6radesh and Tamil 4adu# by *) ).

'utomobiles The Indian automotive industry currently has a turnover of C-D (; billion. However# the automobile market remains untapped in rural India which has a strong purchasing power. 4early :) per cent of the Indian rural market# which includes **) million households# is potential car buyers. Two+wheeler penetration in rural belts is still very low with less than ) per cent households owning a two+wheeler. -ensing a huge opportunity many automobile companies are trying to woo the rural consumer.

Hyundai 5otors India has introduced a new marketing initiative E 38har 8har Bi 6ehchaan3++ to tap the India rural car market. The company has rolled out special schemes for government employees in rural areas and members of gram panchayats on the purchase of -antro. 'fter establishing a strong foothold in urban and semi+urban markets# 5aruti -u0uki has launched a pan+India campaign + 35era -apna 5eri 5aruti3 + to tap the rural market. Hero Honda has devised a ma&or expansion strategy for the rural markets and is planning to strengthen retail financing to support the initiative# which could lead to setting up of its own finance arm. 575# Aa&a& 'uto and T?- 5otor have also launched special marketing schemes for rural markets.

Consumer durables ' survey carried out by the /ederation of Indian Chambers of Commerce and Industry 1/ICCI2# indicated that the consumer durable goods sector is all set to witness * per cent growth in *))". The rural market is growing faster than the urban markets# although the penetration level in rural area is much lower. The rural Indian market# which accounts for nearly <) per cent of the total number of households# witnessed a *: per cent annual growth while the urban consumer durables market reflected an annual

rate of < to ) per cent. 5any leading companies are now increasing their presence in rural India.

L8 has set up ;: area offices and :! rural and remote+area offices. -amsung rolled out its 3Fream Home3 road show which was to visit ;" small towns in )) days in an effort to increase brand awareness of its products.

T"e road a"ead The rural revolution is fuelled by rising purchasing power# changing consumer habits# increased access to information and communication technology# better infrastructure and increased government programmes to boost the rural economy. The recent study by 'ssociated Chambers of Commerce and Industry of India 1'--%CH'52# disclosed that around *)) million out of <)) million rural population in India are engaged in agricultural and non+ agricultural activities# and have a decent per capita income. ' large section of the rural population is choosing dairy# food processing and packaging as professions# beyond traditional farming. /urthermore# large retail players like =eliance# -pencer3s and -ubhiksha are procuring farm commodities in bulk directly from farmers# giving them better money for their produce. The rural population is now looking at better options beyond post offices and commercial banks for higher returns on their surplus earnings. However# =ural India lacks a good distribution system. =ural Indian purchasing habits exhibit an $earn today# spend today$ mentality. 5ost rural homes have restricted storage space and no refrigeration so villagers tend to only buy their immediate re,uirements. To succeed# corporations need to understand the psyche of the rural family along with the rural distribution network. /or example# Hindustan Lever used a strategy of volume driven growth in rural markets# which was hugely successful. %nsuran&e 'ccording to a report# 3Insurance in 4ext * Gears3# by The 'ssociated Chambers of Commerce and Industry of India 1'--%CH'52# in 5ay *))"# the insurance sector si0e was estimated at C-D *." billion# and it is likely to see an unprecedented growth of *)) per cent# touching C-D : .* billion by *))!+ ). =ural India may offer a business opportunity worth C-D *( billion for the insurance companies if the segment can be wooed with innovative saving schemes at affordable premiums. 6resently# only eight to ten per cent of rural Indian households are covered by life insurance. The remaining ninety per cent offer a huge potential for insurance companies. India3s untapped rural market holds tremendous growth opportunities for life insurance companies with business worth C-D *( .H< million for insurance firms. 'ccording to international consultancy firm Celent# the rural market will grow to a potential of C-D .! billion by *) : from the current C-D ;"< million.

5etLife India Insurance Company Ltd is planning to launch 35et-uvidha3# an affordable endowment life insurance plan# aimed at tapping the rural market through ?iswas# a rural retail chain of agricultural inputs. Life Insurance Corporation of India 1LIC2 has set a target of selling four million policies in rural areas in the current financial year.

'nother opportunity lies in offering low+interest personal loans to the rural population# at the rate of six to seven per cent compared to ) E * per cent in the urban areas# for renovating or modernising their houses and at the time of marriages of family members or relatives. ("arma&euti&als The Indian pharmaceuticals market is regarded as one of the fastest growing in the world. In *))H+)<# this market was valued at over C-D < billion with the rural segment having a remarkable share of this

market. Friven by factors such as rising rural incomes and a strong distribution network# India3s rural pharmaceuticals market is also experiencing strong growth. Industry estimates say that while small towns contribute *) per cent to the country3s pharmaceuticals market# rural areas account for * per cent. In *))H+)<# the rural Indian market was estimated at around C-D .; billion# having grown at about ;) per cent in *))H+)< against * per cent in the previous year.

5ost of the pharmaceuticals companies use local post+offices as their distribution platform. -ome companies are conducting health+care workshops in the rural areas by tapping the local doctors. 4icholas 6iramal has focused on general practitioners to cater to rural markets to increase its penetration with a field+force of ")) people.

Tele&om ' 8artner forecast revealed that Indian cellular services revenue will grow at a C'8= 1compound annual growth rate2 of ".; per cent to touch C-D *:.H billion by *) # with most of the growth coming from rural markets. With the next )) million mobile subscribers expected to come from non+urban areas# many Indian mobile service providers are targeting the rural market with aggressive tariffs and low+cost handsets.

$etail

4okia has announced that it is taking up several initiatives in the areas of microfinance# distribution and value+added services specifically for farmers# as part of its strategy to address India3s rural market. A-4L plans a C-D *:.("( million spend on its rural telecom infrastructure in West Aengal# over the next one year. -pice Telecom will be launching local market rates for commodities across Barnataka to connect with rural customers. -pice has locali0ed contents available in 6un&abi and Bannada. 'irtel has tied up with I//C% to reach farmers directly. /armers will receive free voice messages twice daily on farming techni,ues# weather forecasts# dairy farming# rural health initiatives# fertili0er availability# loan information and market rates. 'dditionally# farmers can also call a dedicated helpline# manned by experts from various fields# to get answers to their ,ueries. 'irtel3s new initiative will offer mobile handsets bundled with 'irtel mobile connection ranging from C-D ().< to C-D (H.";(. =eliance Communication has also targeted the rural segment in a big way with its low tariff initiative like the 8rameen 6rogramme for rural subscribers.

'ccording to a study# conducted in -ep *))<# by the Confederation of Indian Industry 1CII2 on the Indian rural retail sector# opportunities in rural retail were estimated to be over C-D (; billion in *))<. This figure is expected to touch C-D ;( billion in *) ) and go up to C-D :" billion by *) :. The rural markets in *))" have grown at *: per cent compared to the <+ ) per cent growth rate of the urban consumer retail market. The retail sector offers opportunities for exploration and investment in rural areas.

ITC launched India3s first rural mall# 3Chaupal -agar3# which offers products ranging from /5C8 to electronics appliance to automobiles. ITC has *( stores across India. The 3Hariyali Aa0aar3 by the FC5 -riram 8roup had initially started off by providing farm+ related inputs and services and now plans to introduce the complete shopping basket soon. It has ") stores across India. The centres are also IT+enabled and provide farmers critical data like inputs and access to weather forecasts# market prices and other technical knowledge. Tata Chemicals with Tata Bisan -ansar has set up agri+stores to provide products and services. Indian %il Corporation 1I%C2 is planning to invest C-D "!. )( million in rural areas during the financial year *))!. =eliance# -pencer3s and -ubhiksha are also expanding in rural areas.

!ural ndia " the key to fortunes

' mention of rural India may con&ure up an image of ab&ect poverty in the minds of many people. This# however# does not hold true in the case of a few fast moving consumer goods 1/5C82 companies that have over the years been giving their rural operations a renewed thrust. Why would these companies be tapping into the rural markets in the first placeI /irst# let3s take a look at the distribution networks of three leading /5C8 companies in India + Hindustan Lever Limited# Colgate 6almolive and Aritannia. These three companies are market leaders in their core areas and much of their success has to do with the intricate marketing networks they have developed over the years. Hindustan Lever# as would be expected# has the largest reach in terms of the markets serviced. Colgate# on the other hand# has adopted a concentrated approach by focusing on fewer markets. Aritannia# compared to the first two# has a much smaller reach.

These companies# however# have one thing in common. ' desire to step up their presence in the relatively virgin rural markets. The facts reveal it all + Hindustan Lever ha stepped up the share of rural turnover to :)> of total# while Colgate and Aritannia now derive (:> and ()> respectively of their turnover from rural markets. Why this infatuation with the rural marketsI =ural India accounts for over <:> of India3s population and this in itself offers a tremendous opportunity for generating volume driven growth. Contrary to general perceptions# incomes in rural India have improved dramatically over the years mainly due to the eleven successive normal monsoons and increasing crop yields. /oodgrain production topped *)) m tonnes in financial year !!! as compared to a production level of only <H m tonnes in financial year !! . /urther# the tax benefits associated with incomes in rural areas boost spending power of the average rural family. These factors have created a vast market that has led to a rush amongst companies to tap this latent demand. /irst off the block was Hindustan Lever# which identified the potential of the rural market some years back. It launched 3%peration Aharat3 to tap rural demand# focussing on personal care products. The benefit of the strategy was apparent over the last three years. While demand in urban India suffered due to an industrial slowdown# rural demand continued to remain buoyant as a result of the sustained improvement in rural incomes. The company was thus successful in attaining its growth targets + double profits every three years and revenues every four. The advantages were apparent and the rush inevitable.

Aritannia and Colgate# apart from Hindustan Lever# are the only /5C8 companies in India that derive over ()> of their revenues from rural markets. Aritannia has re&uvenated its rural thrust by the launch of Tiger biscuits# while Colgate has been attempting to woo the rural masses by offering low priced products in convenient packaging. The success of these companies has as much to do with understanding the psyche of the rural family as it has to do with a rural distribution network. ' typical rural family is a price conscious consumer and this is where the key to success lies. Hindustan Lever# for example# extended its strategy of volume driven growth into rural markets and met with much success. Aritannia on the other had launched Tiger to take on the existing economy brands in the market. The Indian rural markets are today witnessing competition in almost all product segments. However# companies that have the first mover advantage# are still leading their peers in terms of market shares. Whether the rural markets will meet with the expectations of the ever increasing number of companies seeking to grab a chunk of the rural markets is yet to be seenI %ne thing# however# is for sure. rural markets are set to play an important role in the strategies of the /5C8 companies.

Distribution 'daption) %ndi&ative*

Hub and -poke 5odel# @xample. Coca Cola Cse of 'ffinity groups# @xample. 6ro&ect -hakti Haat 'ctivation# @xample. Colgate -yndicated distribution# @xample. Cavin Care 7 'mrutan&an Cse of marketing co+operatives# @xample. Warna Aa0aar in =ural 'reas 5obile traders# @xample. /5C8 companies