Rural Distribution

Summary
Indian Rural Market ( Potential)
Challenges in Rural distribution
Distribution in Rural India ( Traditional)
Distribution in Rural India ( Modern Retail)
Some distribution Models
Indian Rural Market
The Fast Moving Consumer Goods Rural FMCG Market
(FMCG) sector in rural and semi- 120
urban India is estimated to cross
US$ 100 billion by 2025 100
100

The rural FMCG market is

anticipated to expand at a CAGR of 80

17.41 per cent to US$ 100 billion

during 200925 60

Rural FMCG market accounts for 40 40

per cent of the overall FMCG 29.4

market in India, in revenue terms 20 14.8

18.92
12.1
Amongst the leading retailers,
Dabur generates over 40-45 per 0
2012 2013 2015 2016 2025
cent of its domestic revenue from
rural sales. HUL rural revenue
accounts for 45 per cent of its
Challenges in Rural Distribution

Large No. of small Markets. Distribution chain requires large no.

of Intermediaries. It increase cost of distribution.
Dispersed population and Trade.
Poor Connectivity.
Non Availability of suitable dealers.
Low Density of Shops per Village.
Inadequate credit facility.
Poor Storage System.
Low Investment Capacity of Distributor.
Poor Visibility and display of product on rural shop shelves.
 Distribution in Rural India- Wholesaling
More than 50% consumption is routed through
wholesalers because they are Located in nearby
market, which are frequently visited by village
retailer.
Indian wholesaler is trader rather than a
distributor. Supports a brand in boom and
withdraw support during period of slump.
Rural markets were neglected by most companies
due to the low density of retail outlets and small
off- take per retailer. Wholesaler took advantage of
this situation as village retailer found it convenient
to buy from them.
This resulted in the hold of market by these
wholesaler, who often indulged in trade
malpractices in channel.
Distribution in Rural India- Vans
Salesman loads the Van with
Stocks from the nearest
stockiest or company stock
point and works the
surrounding market.
Model of Everyday Torch and
batteries. Includes 1000+
vans,4000+ distributor, and
50+ warehouses. Company
ensure that the Van revisits
the retailer in every 15
days.
 Rural Retail Shelves
Rural retail shelves are
flooded with local and
counter freight products
as they are promising
higher margins and
longer credit periods.
Distribution in Rural India-
Traditional Method
Haats Branded
products in Haats
 Distribution in Rural India-
Traditional Method
Mela Company
stalls in Mela
Distribution in Rural India- The Last
Mile distribution
Mobile trading Own brand
mobiles
Distribution in Rural India- Public
distribution System
Distribution in Rural India- Modern
Retail
Distribution in Rural India- Modern
Retail
Distribution in Rural India- Modern
Retail
 Distribution Model- Corporate SHG
Linkage
Aself-help group(SHG) is a
village-based financial
intermediary committee usually
composed of 1020 local women or
men. There are basically organized
by Government,NGO. SHGs were
formed to support poverty
alleviation programs in rural areas
after the success of the model in
Bangladesh, where this concept
originated.
HULs project Shakti was targeted
at strengthening the companys
FMCG rural distribution drive.
Interested women from SHGs were
appointed as Shakti Entrepreneurs,
They provide service to 6-10
Distribution Model- Satellite
Distribution ( The Hub and Spoke
system)
Stockiest are appointed in major towns and feeder
towns. By and large they discharge the below functions.
A) Financing B)Ware housing C) Sub
distribution
Retailers in and around the town get attached to these
stockiest. The manufacturer supplies good to these
stockiest either on a consignment basis or on a cash or
credit purchase basis.
The stockiest take care of sub distribution on the terms
and conditions determined the manufacturer or as
agreed upon by the parties. Often, the stockiest operate
Coca Cola hub and spoke model
Coca Cola modified their
distribution channel by shifting
from a centralized system to a
three tier hub and spoke model.
Invested in glass bottles and new
vehicle.
Large stocks were used to move
stocks from bottling plant to
hubs, Medium commercial
vehicle used to move stock from
hub to the spoke and after that
auto rickshaw were used to cater
the requirement of Village.
Syndicated distribution
Syndicated distribution is a Novel and viable approach to gain entry
in rural market. Under this approach two or companies come
together to form a syndicated trading organization, to jointly
distribute a collective group of household products by sharing the
distribution cost.
The solution for small companies to tie up with a leading company,
that already have a presence in rural market, In order to distribute
products through its distribution network.
The golden rule is that the small company should not deal in the
same products, that the leading company sells.
Eg. P&G uses rural distribution channel of Marico to sell Ariel,Tide
etc.
Calvinkare used the distribution network of Amrutanjan pain balm
for Chick Shampoo.
ITC Distribution Model

ITC has taken the initiative

to reach rural consumers
through its E-choupal
model for backward and
forward linkage for its agri-
related business, for direct
procurement of agri-
produces from farmers and
for selling a range of
products through Choupal
Sagar.
Other Channel- ( The Hero Honda
Model)
Hero Honda has more than 500 dealers in country. The
company has reported the emergence of an unofficial
channel of distribution- Village Mechanics, Local real
estate agents and shopkeepers.
These people take the motorcycles, usually in twos and
threes ,from company dealers after providing adequate
security deposits and display them outside their
premises for closing the sale. The paperwork however,
is left to the dealer to complete.