1. Rural Retailing in India and its
Challenges
Understanding various formats, needs and
opportunities
By:
Alok Sharma
alok_sharma1@yahoo.com

2. Current Face of Rural Retailing

3. Complete utilization of space
in traditional outlets

4. Consumption Contribution of Rural India
• 46% of Soft drink sales,
• 49% of motorcycle sales,
• 59% of Cigarettes sales,
• 59% of consumer durables sales,
• 53% of FMCG sales,
• 50% of BSNL mobile connections
June 5, 2009 4

5. An Example of Successful Rural
Retail Model in Indian Context

6. E-Choupal
• Initial Objective:
– To develop a Channel directly linking Farmers to Organization,
thereby achieving access to target Soya producing markets and
achieve organized buying over the current Indian Soya
procurements systems in long term.
• Mid Objective:
– To develop a Channel directly linking Farmers to Organization,
thereby achieving access to key agricultural/ products producing
markets and achieve organized buying and selling in Key Indian
Rural Markets.
• Current Objective:
– To expand the network further and offer a complete package to
serve rural customer daily needs and develop the platform for
the future ( to get services like ITES, web tourism, etc)

7. Approach Towards Rural Retailing
• Go to the producer directly,
• Set up knowledge exchange centers,
• Earn respect and confidence with locals,
• Provide a rewarding platform for there agricultural
output,
• Treat farmers with respect and serve them as
customers,
• Reduce middleman to share the benefit to the producer,
• Provide a retail environment with local flavor and needs,
• Be instrument to develop the local economy

9. ITC- EChoupal
INPUT SUPPLY
MARKETING
ASSISTENCE
TECHNCAL
GUIDANCE
FARMERS AGRI-INPUT
INSURANCE COMPANY
COMPANY
TRAINING
AGRICULTURE UNIVERSITIES/STATE
AGRICULTURE DEPT
June 5, 2009 9

10. Benefits to Farmer from E-Choupal-
Sagar
• Option of selling to Choupal sagar or mandies.
• In some crops farmers earn 25% higher prices
then selling to mandies,
• Profit realization increased up to 60%
• Difference in net earning will be high if saving on
commission to middle man and cost of transport
are considered.
• Availability of Brands / quality products at best
prices.
• Availability of loan facilities,
• Exposure of latest information on various things.

11. Benefit to ITC
• Alternate procurement channel,
• High quality agricultural output availability,
• Platform to develop and sell rural focused products,
• Additional earning from other like minded organization/
brands who wants to sell and need platform in those
markets,
• Additional earning to exports division
• Additional distribution network,
• Introduction of new categories – Match box, Incense
sticks, soaps, shampoo etc to cater to new channel
requirement.

12. Bundled Offer to Farmers
• Information / Interaction
– Current market rates,
– Information on Weather, Best practices, FAQ, etc
• Selling of Crop
• Buying Point:
– Various categories like FMCG, Durables, Bike, Tractor,
– Services- Fuel Selling, Tractor / Bike servicing,
– Food Court,
– Medical consultation, Path Labs,
– Soil Testing Facility,
– Banking & ATM,
– Insurance,
– Photography,
– Pharmacy,
– Loans, etc
• Storage facility for crops on rent

13. Positioning of the Format
Community Store
• Emotional Affinity- Rational Benefit
• Relationship with the customers beyond
products and price

14. Main Competitors
• Hariyali Bazar – DCM Sriram,
• Godrej Aadhar – Godrej,
• Kisan Seva Kendra – IOC,
• Tata Kisan Sansar- Tata Chemicals,
• Mahindra Subh Labh – M&M,
• Parry’s Corner – Murugappa Group
• Rural Business Hub- Reliance Industries
• TRIVENI – Triveni Eng & Ind Ltd. (UP)

15. SWOT Analysis of Indian Rural
Retail Market

16. Strength
• 70 % of India's population lives in 627000 villages in
rural areas
• At the highest income level there are 2.3 million urban
households as against 1.6 million households in rural
areas
• Middle and high-income households in rural India is
expected to grow from 80 million to 111 million by 2007.
• In urban India, the same is expected to grow from 46
million to 59 million. Thus, the absolute size of rural India
is expected to be double that of urban India.
• Young Population,
• Increasing purchasing power

17. Weakness
Large and Scattered market
Major income from agriculture
Low standard of living
Traditional Outlook
Diverse socio-economic backwardness
Infrastructure Facilities
Lack of Proper Physical Communication
Facilities
Many Languages and Dialects
Dispersed Market
Low Per Capita Income
Low Levels of Literacy
Prevalence of spurious brands and seasonal
demand
Different way of thinking

18. Opportunity
• 3 times more families lives in Rural India,
• rural India has a large consuming class with 41
per cent of India's middle-class and 58 per cent
of the total disposable income.
• There purchasing power is increasing,
• Exposure and increase in literacy rates will open
market further,
• Govt focus on agricultural policies will increase
in rural earning,
• Population is becoming brand conscious,

19. Threat
• Improper / Oversupply of the format in same key market.
• Shifting of young generation from rural to urban cities,
• Entry of small time players
– Study on buying behavior of rural consumer indicates
that the rural retailers influences 35% of purchase
occasions. ,
• Underdeveloped People and Underdeveloped Markets:
- The number of people below poverty line has not
decreased in any appreciable manner. Thus
underdeveloped people and consequently
underdeveloped market by and large characterize the
rural markets. Vast majorities of the rural people are
tradition bound, fatalistic and believe in old customs,
traditions, habits, taboos and practices.
• Substitution : Direct distribution model- HLL Shakti,
– Mobile Model- HLL Project Bharat,

20. Key Challenges
• Fortune is “AT” the bottom of the Pyramid
But
• Organization has to spend Fortune “FOR”
the bottom of the pyramid
Initial cost to penetrate such a vast
market is very high

21. Other Challenges
o – Increasing costs of land
o – Pace of expansion
o – High operating costs
o – Low margin on agri-inputs
o – Low purchasing power of
consumers

22. What should keep in mind to get
success in Rural market?
The 4A Approach
• Availability
• Affordability
• Acceptability
• Awareness

23. Recommendations
• The business model for rural retail can be successful only when integration between
the profit and social motive is apparent. The social angle needs to be pronounced
for it to be acceptable.
• Empowerment in terms of economic power, purchasing power, knowledge and
information dissemination is crucial for rural retail ventures to succeed. The model
should empower the rural consumer and at the same time take advantage of this
empowerment through creation of demand for its own products and that of its
partners.
• The level of penetration except for certain products, has been negligible so far.
However, so far as the rural share in consumer expendables like cooking oil, tea,
electric bulbs, hair oil, shampoo, toilet soap, toothpaste, washing cakes and washing
powder is concerned, their share on an average, is much higher than consumer
durables. Though the rural-urban differentials are not so pronounced in the case of
durables, the rural market penetration is low with respect to urban areas. However, in
case of health beverages and cosmetics like shampoos, nail polish and lipsticks,
large gaps exist. Hence these products provide substantial opportunity to enter the
rural markets.
• Definitely there is lot of money in rural India. But there are hindrances at the same
time. The greatest hindrance is that the rural market is still evolving and there is no
set format to understand consumer behaviour. Lot of study is still to be conducted in
order to understand the rural consumer. Only FMCGs with deeper pockets,
unwavering rural commitment and staying power will be able to stay longer on this
rural race and hence should venture into this territory.

24. 1. 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.
2. Indian Land Acquisition Act 1894
3. Agricultural Produce (Grading & Marking) ACT,
1937
(ACT No. 1 of 1937)(as amended up to 1986)
June 5, 2009 24

25. 4. 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.
5. 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.
June 5, 2009 25