Tuesday, March 18, 2008

Perspectives on Retailing in India and Rural Marketing - III

If you are coming here for the first time, I'd suggest you to read the first two posts in this series. For others, welcome back. To put things in perspective, by now, with the two servings in this series you have already read about trends in retailing in India & how rural markets are an essential ingredient for retail growth. The second post dealt with why rural markets are gaining prominence. This post essentially classify retail operations in rural areas in to 2 categories, viz, Proactive and Reactive.

Needless to say, these are my opinions, you may or you may not have divergent view.

Perspectives on Rural Retailing

Employment, income & consumption trends are now becoming sufficient portends for organized sector initiatives in rural areas, yet still, reaching out to rural consumers is not as easy as it seems. Retailing in rural areas is fraught with challenges like inadequate & poor infrastructure and erratic incomes, hence call for separate marketing strategies to cash in on the potential that rural markets have. These marketing strategies can be generally be classified in to two types: Reactive and Proactive.

Reactive marketing can be termed as pure retailing as they focus on the consumption needs of the people. Proactive marketing, on the other, focus on productive capacities of the people, how these productive capacities can be enhanced so as to increase the incomes of the consumer and consequently the consumption of goods and services. More so, reactive marketing, in crude terms, focuses on tapping the potential that rural areas have. Proactive marketing, rather, lays stress on creating this potential.

Marketing to Rural Consumers – Reactive Approach

The commonly understood notion of marketing is that companies market to segments, which have the potential for profit; in other words, the environment (i.e. demography, infrastructure status, income levels etc) influence marketing. This influence is in the form of redesigned products or services that would cater to taste, preference of the target population and most importantly offering these products and services at levels affordable by people. Marketing essentially invokes restructuring of product lines by taking into consideration the above and further by cost rationalization & realignment of supply chain. These interpretations have been further reinforced by examples of marketing practices initiated by HLL and later on followed by others, which included appointment of redistribution stockists in every market to feed smaller or more remote customers, card board light delivery boxes etc. A rather nascent example of marketing being guided by environment is 3A Bazaar[1], which presently operates out of Uttar Pradesh and Punjab. The idea behind 3A Bazaar is that rural people do have disposable income and do not mind spending it for better quality products. 3A Bazaar follows a very simple modality, every morning five vans stuffed with nearly 13000 items ranging from food items to FMCG & clothes, worth Rs 2 – 2.5 lakhs, visit its neighboring villages, roughly about 700, some once a week and others once a month. 3A Bazaar effectively tries to tackle some of glaring deficiencies of rural India, which include, absence of adequate infrastructure, inability to push sales on a regular basis due to restrictive incomes available with rural people and problems of attracting people from neighboring villages unless some promotion activity is undertaken. The average daily sale of 3A Bazaar is about Rs 8 - 10 thousands. 3A Bazaar has been considerably successful in tapping the rural marketing potential.

Wipro GE Healthcare[2]: Wipro Ltd and General Electric Co. have joined hands to introduce a wide array of high-end medical technology products in India at a fraction of their global costs. These products targeted mostly at rural population include digital X-rays, computed tomography devices, portable ultrasounds, and maternal-infant care etc. Through this initiative Wipro-GE are trying to address three basic parameters for serving the rural consumers, which are, cost, mobility and ability to run on limited power. This assumes enhance significance as a result of the fact that only 24 percent of rural areas have health care facility, further as much as 90 percent of these are manned by sole practitioners, creating problems of reach (which adds to consumer costs and service delivery). The launch of a mobile unit Cathlab on Wheels, where GE Healthcare had partnered with a leading Bengaluru based cardiologist, registered more than double the patients from rural areas primarily due to reduction in costs by as much as 50 percent and comfort of medical facility nearer to home, thereby saving time.

Rs 5 Sachets of Fortune (edible oil)[3]: Adani Wilmer, a joint venture between Adani group and Wilmer International, has recently announced that it’s flagship brand Fortune (Soybean oil) is set to roll out in sachets of Rs 5 each. Such a move according to Adani would help them make inroads into rural India. Soybean oil presently occupies 40 per cent of the total edible oil market in India valued at Rs 75000 crore. Fortune, which occupies the leading position in Soybean oil market at 25 per cent, in Rs 5 sachets is expected to further consolidate the brand in the market. Soybean oil is 30 per cent cheaper than Sunflower oil. Such a move is in line with the assertion that consumers prefer better quality at lesser price. Incidentally, Bunge India, the owner of Dalda, was the first to initiate such a strategy.

In all, reactive marketing strategies focus on addressing three basic parameters while reaching to rural consumers, these include, cost to the consumer, income of the consumer and accessibility issues. Many of the policy prescriptions like Bottom of Pyramid essentially revolve around these issues and much research has been undertaken to understand the psyche of this class. A new terminology, The Next Billion[4], goes on to suggest 6 potentially striking factors of this market, these include, their being smart shoppers with fluctuating incomes, domestic constraints, unfamiliarity with many products, their search for trusted advice and their demand for respect. Reactive marketing strategies as such reflect the presence of an aspirer class, a segment, which is willing to consume what urban India does and emphasizes on ways and means to serve such consumers.

Continued in the next post with Proactive Marketing.....

[1] Retail on Wheels in Rural India
[2] ‘In India, for India,’ GE Health eyes rural market, The Mint, November 07, 2007
[3] Edible oils shampoo their way into sachets, Business Standard, December 11, 2007
[4] Decoding the Next Billion Consumers, Boston Consulting Group, November 2007

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