INNOVATION IN RURAL RETAIL: A NEW FOCUS

ARUN KUMAR SINGH

Assistant Professor Accurate Business School Greater Noida, Uttar Pradesh

Dr. P.K. AGARWAL

Management Professional & Consultant Meerut, Uttar Pradesh

INTRODUCTION
Innovation is the key to success and is the specific instrument of entrepreneurship the act. That endows resources with a new capacity to create wealth Peter F. Drucker

OBJECTIVE OF THE PAPER

This paper explores the interventions in the rural market, to increase the inclusive growth, which ultimately will result in a stable social structure.

 The market potential of the poor in both rural and urban India has become a powerful motif. Indias poor are increasingly represented and celebrated as an emerging market, a fortune at the bottom of the pyramid as C.K. Prahalad has famously put it. As the state looks to maintain recent levels of growth and as businesses look to expand rural markets for goods and services in the fields of health-care, energy, telecom and banking, the large rural population of the country has drawn the attention of organized retailers looking for new areas of growth. Recognizing the huge potential of this untapped market, a slew of supermarket chains, including those from top business houses such as the Tata group, ITC and DCM Shriram Consolidated Limited (DSCL) have set up shop. With home-grown chains such as Reliance Fresh and Spencers buying farm produce directly from farmers (and even multinational chains such as Walmart, which has entered India Through its tie-up with Bharti Enterprises).

INTRODUCTION

RURAL RETAIL SCENARIO IN INDIA

Rural India accounts for roughly 70% of the population. Almost 6, 27,000 villages are home to 790 million Indians today. At present 85% of the organized retailing takes place in Indias urban areas. But the good thing is that the retail focus has already shifted to the rural areas. The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countrys consumers live in rural areas and almost half of the national income is generated here.

RURAL RETAIL SCENARIO IN INDIA

15% of rural population lives in 20,000 large non urban areas with population more than 5,000 people. 63% of rural population lives in villages of 1000 to 5000 people. Remaining 3, 90,000 villages have fewer than 1000 people accounting for 22% of the population.

For a retailer it is essential to see in which segment it is catering in the above division of villages. For example HUL Shakti caters to villages with a population of 500 or above. Where in Eveready considers even the remotest of village as its target customer. It operates through more than thousand company-owned vans and has over 4,000 distributors to directly providing service to 6,00,000 retail outlets.

OPPORTUNITY FROM CHANGING DEMOGRAHICS IN INDIA

OPPORTUNITY FROM CHANGING DEMOGRAHICS IN INDIA

In 2005: Number of Aspirers= (32*790/100) million= 252.8 million in 2015: Number of Aspirers= (47*875/100) million= 411.2 million that is roughly 158 million people will be added to the aspirers class. In 2005: Number of Deprived= (65*790/100) million= 513.5 million In 2015: Number of Deprived= (46*875/100) million= 402.5 million This depicts that 111 million people will shift from below poverty line to the aspirers class.

OPPORTUNITY FROM CHANGING DEMOGRAHICS IN INDIA

OPPORTUNITY FROM CHANGING DEMOGRAHICS IN INDIA

By 2015 the aspirer class of household will be the largest group at 47% of rural population or 80 million households and will control 55% of the spending. In 2015, 47% of rural population (aspirers) will account for 55% of the rural consumption. Wherein in 2025 onefifth of the population (seekers) will account for roughly one-third of the rural consumption. The shift in rural population from one segment to another will shift rapidly. Hence it will be important for the retailer to keep a track of this and change the merchandise mix in the store accordingly.

REGULATIONS AND POLICIES FRAMEWORK FOR THE RURAL RETAIL

1. APMC

2. Essential commodity act: The fertilizer industry is centrally regulated by the government through an administered pricing mechanism & sales allocation under Essential Commodities Act (ECA). In the year 2002-03, the government announced a long term pricing policy for urea. 3. Indian Land Acquisition Act 1894 4. Urban Land (Ceiling and Regulation) ACT, 1976 5. Agricultural Produce (Grading & Marking) ACT, 1937 (ACT No. 1 of 1937) (as amended up to 1986)

REGULATIONS AND POLICIES FRAMEWORK FOR THE RURAL RETAIL

6. Non Agricultural Use Clearance 7. Under PN4/2006 100% FDI is allowed through the automatic route in - Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, aqua-culture, cultivation of vegetables,, mushrooms, under controlled conditions and services related to agro and allied sectors 8. Intra state agricultural land taxes vary, prompting the current finance minister to moot for a common GST (Goods and services tax) which would help in bringing all the various state taxes under a common fold including the agricultural income taxes levied individually state to state.

MAJOR PLAYERS IN RURAL RETAIL

Hariyali Kisaan Bazaar (DSCL) Aadhaar (Godrej Agrovet Ltd.) Project Shakti (HUL) E-Choupal and choupal Sagar (ITC) Kisan Seva Kendra (IOC India)

IMPEDIMENTS
Lack of literacy and awareness Low per capita income Wide geographic spread. Gaps in road and Telecommunications connectivity. Lack of reliable electricity and water supply Limited Distribution network for example cold storage. Competition from local players

CONCLUSION
Across most of the developing world, a supermarket revolution has been underway since the early 1990s. The experience of rural retail in India, as well as in economies like China and Australia, has demonstrated that modern retail in rural markets is potentially viable only if it combines marketing of agri inputs and services for farmers, while also catering for non-farming households. Hence, quality extension work (advice and inputs), multi-brand agri-inputs such as fertilizers, seeds, pesticides, farm implements and tools, veterinary products, animal feed, irrigation items at fair prices become essential. In addition, farm output services, such as farm produce buy-back opportunities, access to new markets and output related services also become essential.

RECOMMENDATIONS
The initial success notwithstanding, a number of challenges have to be addressed if rural retail is to be successfully scaled up. Some of these are: lack of accurate and updated information about consumers and the competition; absence of any comparable benchmark for rural retailing; complex legal processes; the scattered nature of the market when compared to the urban market; and the role of intermediaries in the supply chain connecting farmers with consumers/processors. The government needs to supplement private efforts with more public investment to improve farmers access to assets, services, training and information. The government must frame guidelines for retailersupplier relations so as to promote fair commercial practices, wholesale market up gradation, and creation of physical infrastructure such as cold chains, logistics, and uninterrupted supply of electricity. There are approximately more than 30 government permissions required to set up an organised rural retail chain; this needs to be simplified to make entry into the segment easier.

RECOMMENDATIONS
Besides the enabling policy environment, companies looking to expand into the rural market need to build collaborations with non-competing companies already present in that space. That will provide them the opportunity to quickly scale up and get quicker returns. For instance, consumer Electronics Company Samsung has partnered with the Indian Farmers Fertilizer Cooperative to market its mobile phones, leveraging the latters presence in rural areas. Innovating models will remain the key for this market, Integration of rural initiatives into business model like ITC. Innovative & Exciting Initiatives such as Village BPO should be given impetus to tap the talent in the rural India.

RECOMMENDATIONS
These individual cases apart, this format has enormous potential in enabling service delivery across the rural hinterland. Banks and other institutions, which face high costs of last mile delivery to the vast rural population, can make use of the infrastructure of organized retail to access this segment. With the use of technology, the model can also be used to offer services such as education and healthcare. FDI should be allowed in rural retail as it would help integrate the agriculture-driven economy of rural India with urban markets and assist in improving the rural supply chain which is in dire need of up gradation and modernization.

THANK YOU!