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Retail management TERM PAPER ON
Rural retailing opportunities and challenges Term paper submitted By Sana Pooja rani Rohela Haimath khan Sai chaitanya Vangaveeti Aswani Venkatesh Kanumilli Shirisha
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CONTENTS
PAGE NO.
1.
Objective of the study……………………………………………………………….03
2.
Introduction………………………………………………….………………………04
3.
Problems in Rural Marketing.………………………………………………..…….05
4.
Rural Retailing…………………………………………...........................……….05
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Opportunities in Rural Retailing.....................................................................06
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Rural Retailing and its challenges………………………...…...........…….………08
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Rural Retail Stores………………………........…………….………………….……10
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Recommendations and conclusion…………………..………….…….………….….24
9.
References…………………………………………………………….……………….25
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Objectives of the study: To understand the importance of rural retailing.
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To understand the challenges in rural retailing and rural markets. To understand the opportunities in rural retailing. To visit few organized rural retail stores and understand their practices. To suggest some recommendations if any.
1) Introduction Rural India is prospering, so must its population which depends on agriculture for many years, our rural people have not been getting their due share of the country's growth because much of the gains that are rightfully theirs have been taken away by brokers and middlemen. Certainly market-driven¸ technology-based agriculture will make India an economic superpower. The retail revolution is going to act as a catalyst. So the new concept that is hitting the market today is the "Rural Retailing". To start with, rural India accounts for over 50 per cent of India’s GDP.
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There is tremendous potential in rural India as the rate of disposable income is increasing, growing middle class, advent of IT infrastructure and enormous grouped population. Though sales are expected to be much lower in early stage, but the break even is reached in fourfive months of being set up, as against eight-nine months earlier. This is because of the advantages they enjoy of low rentals, lower operational costs with air-cooled smaller-sized store and good logistics of being close to the supply chain. But there are lot of potent associated threats and challenges as well, for making any retail or marketing operations successful and sustainable. The retailers find the rural physical and geographical expanse daunting. It is really a nightmare for any marketer to address the needs of 600,000 plus villages spread over a geographical area of over 3.2 million square kilometers, and that too hardly connected by all weather roads. Moreover lack of infrastructure and logistics together with multiple tax rates, restrictions on goods movement, among others increase inventories and, therefore, costs. Due to lack of scale and diversity in buying behavior, marketers are also forced to not only create multilayered distribution networks but also develop new packaging and price points. However increasing penetration of TV, rebirth of radio, through FM, availability of broadband internet, fast spread of mobile phones, and rural road development programmes could in a short span of time may apart from improving infrastructure, bridge gaps in behavioral patterns across the country.
2) Problems in the Booming Rural Marketing Although the rural market does offer a vast untapped potential, it should also be recognized that it is not that easy to operate in rural market because of several problems. Rural marketing is thus a time consuming affair and requires considerable investments in terms of evolving appropriate strategies with a view to tackle the problems. The major problems faced are: •
Underdeveloped People and Underdeveloped Markets:
• The number of people below poverty line has not decreased in any appreciable manner.
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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. •
Lack of Proper Physical Communication Facilities:
• Nearly fifty percent of the villages in the country do not have all weather roads. Physical communication of these villages is highly expensive. Even today most villages in the eastern parts of the country are inaccessible during the monsoon. •
Media for Rural Communication:
• Among the mass media at some point of time in the late 50's and 60's radio was considered to be a potential medium for communication to the rural people. Another mass media is television and cinemas. Statistics indicate that the rural areas account for hardly 2000 to 3500 mobile theatres, which is far less when compared to the number of villages. 1)
Rural Retailing:
Retailing is the final phase of the distribution channel and it is clear by now that it is availability and distribution that drives growth in rural Indian markets. Hence retailing will be significant and will undergo greater organization and maturity as is being witnessed in the urban markets, even in the rural markets. Innovative retail models which take into account the nuances of rural markets are the way forward. Study on buying behavior of rural consumer indicates that the rural retailers influences 35% of purchase decisions. Therefore sheer product availability can affect decision of brand choice, volumes and market share. India offers a huge, sustainable and growing rural market which can be tapped effectively through innovative distribution channels with retailing being the most critical element of this strategy as it is the final touch point and the actual touch point with the customer which can be the most critical influence in the buying process. For time being all what retailers need is the requirement for stores in these towns for getting the right merchandise mix in tune with the local community's requirements. 2)
Opportunities in Rural Retailing:
The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two-thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000
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villages, which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc. 70 % of India's population lives in 627000 villages in rural areas. According to the NCAER study, there are almost twice as many 'lower middle income' households in rural areas as in the urban areas. •
At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas.
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Middle and high-income households in rural India are expected to grow from 80 million to 111 million by 2007.
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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.
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As organized retail in rural India awaits the arrival of Reliance Retail, current majors like ITC, Godrej and DSCL are expanding their retail operations by setting up more stores, entering new states and offering newer product categories. A shift from selling agriinputs will help these stores target the non-farming segments. It is a little known fact that, while 25% of the rural population is not engaged in agriculture, it earns 50% of the rural income.
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When organized retail first made its presence felt in rural India, it wasn’t a pure retailing operation targeting the rural masses. Companies like DSCL and Godrej who had significant agri-business interests, set them up to meet the needs of farmers in a store’s catchments area. A typical agri-input store would have a catchment area of around 100 villages spread over 20-25 kms. Says Ashik Hamid, associate director, Technopak, “These stores are one-stop shops meant to meet the occupational needs of farmers by providing agri-inputs and fertilizers”. These stores, like DSCL’s Hariyali Kisan Bazaar, ITC’s Choupal Saagar etc. tend to be located in small towns that function as procurement hubs where the farmers come to sell their produce. Their earnings are tapped then and there, by getting them to combine their visit with shopping. These stores tend to target farmers with all sizes of holdings, “We build our offerings for everyone, from the farmer owning 20 acres to the one owning 200”, says Rajesh Gupta, business head, Hariyali Kisan Bazaar, “It wouldn’t be done any other way as there is a similarity on the application side, everyone needs the same inputs.”
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While organized retail centered on these stores, unorganized retail revolves around the local village shop and the haat. Shops are usually present in villages with a population of more than 500 people. They stock more product categories than what similar urban shops would, but there isn’t much variety offered within a category. Haats are weekly mobile
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supermarkets that are spread over 2-3 acres of land, with more than 300 stalls, selling anything from animal feed to local medicines. "Rising rural incomes, healthy agriculture growth, boost in demand, rising consumerism across India, better penetration of FMCG products in the rural market are contributing to high growth and rapid expansion of the FMCG industry in rural India," Traditionally, for the auto industry, the rural market has been largely restricted to tractors and two-wheelers, though the penetration of scooters and motorcycles in villages is only 10 percent, as compared to 25 percent in urban areas. Any marketer worth his salt knows that in the wild blue yonder of rural India lies a huge market for many products and brands. He will know that it accounts for over 50 per cent of the goods consumed in the country. For two-wheelers, colour TVs and fridges rural areas account for 30 per cent or more of the market. However, that’s at a broad, macro level; an acknowledgement of a vast market’s existence. But how does one plan to service this market; what do marketers base their planning on. There are many questions: how many rural retail outlets are there? What are the kinds of products they sell? How do these vary across the states? What is their size in terms of space and turnover? Are the numbers of rural outlets growing rapidly? At what rate are they growing? And, to add to that: What proportion of rural households patronise these shops for their different requirements? How does this vary across different product categories? Why do the rural folk prefer to shop at outlets in the village or in the towns or cities for different products (retail habits)? How do the number of outlets in the village vary depending on the size of the village, its distance from the closest city, its distance from the highway? How do the retailing habits of those in villages of different kinds and those from different states vary?
1) Rural Retailing and its Challenges: Some of the challenges faced by marketers and retailers in rural India are low per capita income, dependence on the monsoons for purchases, difficulties in communication and high distribution costs. Marketers are addressing these issues through the 4A's of Availability, Affordability, Acceptability, Awareness and coming up with innovative campaigns to address the rural segment. Understanding of rural customers and their needs is what will make the rural foray of retailers successful. The main difficulties faced by the retailers in rural markets are •
Large and scattered market.
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Major income from agriculture. Low standard of living. Traditional outlook. Diverse socio economic backwardness. Lack of proper physical communication and infrastructure facilities. Many languages and dialects. Dispersed Markets. Low per capita Income. Low levels of Literacy. Prevalence of spurious brands and seasonal demand.
Most of the modern retail opportunities are in the urban areas and the rural retail potential has remained untapped. While there is a large potential in rural areas, fragmentation and cost of market access are real deterrents. No doubt that rural retailing is gradually gaining grounds with the explorations by the corporates like ITC’s Choupal Sagar (rural hypermarket), HLL’s Shakthi and Mahamaza. However, the pace at which the retail sector has been expanding in rural areas should have been much more faster. The higher purchasing power in rural and semi-urban areas has significantly modified peoples’ lifestyle; for e.g. the sachet phenomenon is a thought to reach to the bottom of the pyramid. Lot of people in rural India are just not willing to buy a whole bottle of shampoo, but that doesn’t mean they won’t buy it. Thus, the key is in slicing the relevant customer segments and developing appropriate formats. If the specific needs of consumers are recognized, there would be a considerable market expansion, which would divert a part of retail business to rural areas and help in reducing rural-urban imbalance. In addition to these problems the number people below poverty line has not decreased in any manner. Vast numbers of rural people tend to be highly superstitious, are tradition bound, believe in old customs, traditions, habits, taboos and practices. Initial costs to penetrate into these markets will be very high. Increasing costs of land in the rural areas also add to retailers problems. Pace of expansion by competitors, High operating costs, supply chain problems, low margin on agri inputs and low purchasing power of the customers will further add to the challenges faced by the retailers. A huge and distinct rural market has emerged in the country. One needed to distinguish between a developed rural market and a developing rural market and adopt new strategies with an aspiring middle class in the scene. Inadequate data and poor infrastructure are still impediments on the way. The rural diversity, in terms of language and culture, among the States add to the challenges. The rural population has become very conscious of the value of money and cannot be taken for granted any more. Everything sold in metros cannot be sold in rural markets anymore.
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The biggest challenge in rural retailing is to ensure products are available across the 638,000 villages, which are spread out over three million sq km in India. The problem is further compounded by the geographical immensity of reaching the 12 million-strong kirana (neighborhood mom-and-pop) stores in the country. Most of these stores are small, and consumer goods companies have to reach out to them in villages only through a channel of distributors and wholesalers, adding to the costs of distribution. At the same time, these small retailers cannot be ignored about 90 percent of them are in towns that have no more than a million people and some are in areas that have less than 100,000 people. Companies are left with no choice but to start building a strong distribution system and adapting to innovative means of transportation to combat bad roads and poor connectivity. This challenge affects the pace of replenishments of sold goods as the supply system is too fragmented and increases inventory holding costs for retailers. Some companies had set up area offices which in turn manage smaller rural offices. Due to lack of reliable infrastructure for logistics and since the supply chain is just developing in the country, fast moving consumer goods companies have to plan their products in advance. So the supply pipeline becomes long and loaded. More often companies have to redesign their products and rework on their pricing strategy to succeed in the rural markets smaller pack sizes, product variants and perception of affordability are key to target rural markets. Examples include shampoo in sachets and dry food in smaller packaging. Using the media, which has deeper penetration in rural areas, goes a long way in building awareness and driving acceptance for products. The channels include the state-run broadcaster Doordarshan, radio channels, local language advertising, cinema, outdoor media such as posters, banners and wall writing and tapping all forms of local entertainment. The availability of more economical technology applications specific to rural markets will also help organize the fragmented retail formats.
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Rural Retail Stores:
7.1) Rural Malls: Chaupal Sagar Chaupal Sagar is one of the first organised retail forays into the hinterland. It was soft-launched on 15 August. It is actually a warehouse for storing the farm produce that ITC buys through its echaupals. The mall has come up in one part of this warehouse.It has been set up by the international business division of tobacco major ITC. It has been initiated as rural shopping-cum-
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information centres in Madhya Pradesh. The first rural mall has come up 40-odd kilometres journey from Bhopal towards Sehore. ITC Spent 3 years and Rs.80 crores on research and development of this concept including investments in E-choupal. Objective ITC describes the establishment as a set to create a high-quality, low-cost fulfilment channel for rural India. However, any organisation is driven by the profit motive which are served through this initiative: Reapbenefits from the market they have created Creating an entry barrier for other prospective players ITC has very effectively integrated its profit and social motives. Concept KSA Technopak - "It is definitely a pioneering venture because no other Indian company has yet entered rural retailing with the all-under-one-roof concept."Malls stocking wide variety of products with floor space of 7000 sq.ft plus a trading zone and information centre. It is a Hub cum Supermarket, which has been set up in a section of the ITC rural warehouses. Format Chaupal Sagar cannot be shoehorned into any of the existing retailing categories. At 7,000 square feet, it is too small to be a mall. It has opted for self-service, stocking its merchandise on shelves lining the neat aisles, it stocks a breadth of products no supermarket can. It offers almost everything - from toothpastes to televisions, hair oils to motorcycles, mixer-grinders to water pumps, shirts to fertilisers... It defies pigeonholing. It is just a very sharply thought-out rural store.Most of the brands it sells are national such as Marico, LG, Philips, torches from Eveready, shirts from ITC's apparel business, bikes from TVS, and tractors from Eicher.
Facilities Spread over 5 acres of land at Sehore in Madhya Pradesh: •
Rural shopping malls will be open from 6 am to 9 pm.
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Features and facilities at these ITC malls can overshadow those in the metros. The ITC store sells everything that a rural consumer may ask for - sarees to kurta-pyjamas to shirts (in the range of Rs 99-500), footwear, groceries, electronic durable from TVs to
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microwaves, cosmetics and other accessories, farm consumption products like seeds, fertilisers, pumps, generators and even tractors, motorcycles and scooters. •
Banking and automated teller machines will be standard at the malls.
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Insurance products for farmers.
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Entertainment facilities, restaurants, public facilities and parking space will also be available.
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There is even a fuel pump in tie-up with BPCL and a cafeteria.
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Parking lot for 160 tractors.
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There will be a primary healthcare facility to be serviced by a private healthcare service provider.
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Information centres: The company will create the facility for providing online information on commodity rates and weather.
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Shopping malls will have a training facility on modern farm techniques.
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Farmers can come and log on to the Internet and check the pricing and sell their commodities.
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There will also be godowns for storing the wheat and soybean and also for stocking products retailed at the mall.
Business Model The business model of Chaupal Sagar is linked closely with the E-chaupal initiative of ITC. Role of ITC is to create infrastructure such as space, computers, and building. ITC will charge a fee for the services and items sold at the mall. E-CHAUPAL: E-Chaupal is the backbone of these rural malls. While the first layer (EChaupal) provides the farmers necessary information about weather and prices, this hypermarket initiative will provide them another platform to sell their produce and purchase necessary farm
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and
household
goods
under
the
same
roof.
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The e-Choupal model required that ITC to make significant investments to create and maintain its own IT network in rural India and to identify and train a local farmer to manage each e-Choupal.
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E-Choupal combines a Web portal in the local language and PCs with Internet access placed in the villages to create a two-way channel between ITC and the villagers. The project started with a pilot in June 2000 in Madhya Pradesh with Soybean farmers. Currently, it covers six states, and multiple commodities like prawns, cotton and coffee with 4000 Choupals.
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Plans are to reach 15 states by 2010, covering 100,000 villages with 20,000 Choupals.
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Each e-Choupal (equipped with a PC with Internet connectivity, printer and UPS) typically housed in the farmer's house, is linked to the Internet via phone lines or, increasingly, by a VSAT connection, and serves an average of 600 farmers in 10 surrounding villages within about a five kilometer radius. Using the system costs farmers nothing, but the host farmer, called a sanchalak, incurs some operating costs (The IT part of each e-Choupal costs about Rs 1.3 lakh, each e-Choupal is estimated to pay back for
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itself in 4.5 years) and is obligated by a public oath to serve the entire community; the sanchalak benefits from increased prestige and a commission paid him for all e-Choupal transactions. The farmers can use the computer to access daily closing prices on local mandis, as well as to track global price trends or find information about new farming techniques-either directly or, because many farmers are illiterate, via the sanchalak. They also use the e-Choupal to order seed, fertilizer, and other products such as consumer goods from ITC or its partners, at prices lower than those available from village traders; the sanchalak typically aggregates the village demand for these products and transmits the order to an ITC representative. At harvest time, ITC offers to buy the crop directly from any farmer at the previous day's closing price; the farmer then transports his crop to an ITC processing center, where the crop is weighed electronically and assessed for quality. The farmer is then paid for the crop and a transport fee. "Bonus points," which are exchangeable for products that ITC sells, are given for crops with quality above the norm. In this way, the e-Choupal system bypasses the government-mandated trading mandis. •
Farmers benefit from more accurate weighing, faster processing time, and prompt payment, and from access to a wide range of information, including accurate market price knowledge, and market trends, which help them decide when, where, and at what price to sell. Farmers selling directly to ITC through an e-Choupal typically receive a higher price for their crops than they would receive through the mandi system, on average about 2.5% higher (about US$6 per ton). The total benefit to farmers includes lower prices for inputs and other goods, higher yields, and a sense of empowerment. At the same time, ITC benefits from net procurement costs that are about 2.5% lower (it saves the commission fee and part of the transport costs it would otherwise pay to traders who serve as its buying agents at the mandi) and it has more direct control over the quality of what it buys.
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By building a network of warehouses near the production centres and by providing inputs to the farmers and test output at the individual farm level, ITC is able to preserve the source and quality information of produce purchased. By helping the farmer identify and control his inputs and farming practices and by paying better for better quality, ITC is able to improve the quality of produce that it purchases. In the commodities market, these two combine to help ITC create the differentiator that it set out to establish in the beginning.
ITC gains additional benefits from using this network as a distribution channel for its products (and those of its partners) and a source of innovation for new products. It is also being used to provide services like rural market research to those interested.
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Strategy for Success •
Use of ITC warehouses : This will help in cost control as well as better utilisation of space in these warehouses. It will also provide convenience and familiarity with the target customer.
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Targeted at Farmers selling to ITC warehouse through E-chaupal : With its network of echaupals, ITC communicates its latest commodity prices to the farmers via the Internet or VSAT lines. If they find these attractive, they sell their produce to ITC. The sanchalak (the person who operates an e-chaupal; most of them are farmers) of villages near these malls reckons that half the farmers in his village deal only with ITC. Now, by setting up the mall next to the warehouse, ITC is trying to monetise the footfalls from farmers; that is every time sanchalaks- and farmers visit ITC's soybean factories in MP to sell their produce, they also have the opportunity to spend their freshly earned cash. ITC realised that the farmers had just got money, that they would spend it anyway, and that they had an empty vehicle with which they could lug the stuff back.
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ITC intends to capture the rural folks' out-of-village shopping: The warehouse is one bulwark of its strategy, obviously. But the farmers will come here only after every harvest. To ensure that they keep coming to Chaupal Sagar even at other times, the company is offering a slew of other goodies. Another building is coming up next to the main warehouse. When completed, it will house a bank, a cafeteria, apart from an insurance office and a learning centre. ITC has tied up with agri-institutes to offer farmer training programmes. Then, plots of land have been earmarked to display large agricultural machinery like threshers. Other parcels of land have been earmarked for pesticide and fertiliser companies for demonstrating their products. A petrol pump is coming up as well. To attract footfalls during the lean season, ITC plans to organise various activities and events including melas,training programs, demonstrations. The hubs are strategically located to attract suburban crowds as well.
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Retail channel for its own brands as well as for other brands : Working through the sanchalaks, ITC first pushed its own products, like salt, into the hinterland, and then invited others like Parachute and Philips to ride on this distribution chain. Today, it plans to similarly create revenue streams around its warehouses.
Financing Scheme •
ITC is investing initially Rs 3 crore (Rs 30 million) in each such shopping mall. However it is working out a strategy to make it cost-effective for them.
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To keep its own investment to the minimum, ITC is encouraging the samyojak - a local broker or middleman co-opted by ITC - to pick up equity and manage these shops as part owners.
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Assisted by four ITC salesmen, the samyojaks will assess demand, ensure just-in-time delivery, manage customer service and keep accounts.
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Uniqueness Of the Model: lies in the fact that it works equally well for ITC as the buyer of farm produce and ITC as the seller of desirables.
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Charge fees from the brands being showcased at the mall as well as for the services being provided at the Mall.
Results & Expectations •
During the peak season, a hub sees traffic of about 200 tractors per day on an average, as farmers come to sell their crops at the hubs.
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Initial response: On the first day the store notched up a business of about Rs 70,00080,000. Footfall of about 700-800 people on weekdays and soaring to 1,000 on weekends with conversion levels of 35%.
Future Plans •
ITC chairman Yogi Deveshwar has promised his shareholders that the company would open 1,000 rural malls in India. This is the first one to have come up.
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Encouraged by its image as a fair and reliable buyer of farm produce, ITC decided to invest in 5-acre malls, costing between Rs 3-5 crore each, across 15 states. The first five four in Madhya Pradesh and one in UP - will be inaugurated by March 2004.
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The first shopping mall is being set up near Sehore, and the second one will come up in June near Itarsi in Oshangabad distric
7.2)
Coramondal Internatioal: Mana Gromor
Coramondal international is a part of Murugappa groups and are in diversified business like reailing, fertilizers, cements, infrastructure. Their retail stores are known as Mana Gromor .The setting up of over 400 MGCs, a low-cost hub-and-spoke model, across Andhra Pradesh, has helped the company sell its products directly to farmers. Total revenues from these centres stood at Rs 204 crore (excluding turnover from the sale of the company's own products) in 2008-09.
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“Coromondel have about 400-plus Mana Gromor Centres (MGCs), rural retail stores, in Andhra Pradesh and are focusing on consolidating these operations during this year. They are going to expand the stores initiative to other states such as Tamil Nadu, Karnataka and Maharashtra. During the financial year, CFL, part of the $3 billon Murugappa Group, plans to introduce new agri and lifestyle products for sale through theses MGCs. At present, around 150 stores are selling lifestyle products and the company plans to increase this to 300 during the year. The range of products sold through MGCs include apparel, consumer durables, footwear and mobile re-charge coupons, among others, besides fertilisers, pesticides and specialty nutrients. CFL also plans to add toys and stationery items to the list of products sold by these stores. “The name change to Coromandel International reflects a global corporate image because the company is expanding globally. They are no longer a fertiliser company; They are into fertilisers, pesticides, specialty nutrient products and are also looking at other growth areas. Their focus both geographically and in terms activity is much wider .
Visit to Mana Gromor: We visited Mana Gromor center in jammikunta (Karimnagar Dist).We asked some structural questions on supply chain, market selection, advertising, promotion strategies, and store design, merchandise pricing to store manager . we interviewed some of the customers who purchased in the store about store services, Their satisfaction levels, Purchase patterns, Decision making process. We observed the consumer behaviors, store layout and design and also we observed number of walk in customers ,real customers.
Observations and findings from Mana Gromor: Supply chain management: They import their life style products from regional distribution Centers (Warangal).15 MGPs import their life style products from this RDC. Andhra Pradesh has 9 RDCs. Lead time for getting the products is one week. Transportation and unloading is taken care by the RDC. Store manager is responsible for Storing and sorting of merchandise. Lead Time= 1 week
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Inventory carrying cost= 5000 Rs per month Safty stock=20 % more than the demand Other costs= 1000 Rs Lead time fluctuations= Twice or thrice in the year. Demand fluctuations = Most probably in festival seasons. Total cost for supply chain for the store is =6000 Rs Factors which are affecting the store sales: a) Behavior of consumers: Most of the customers who come to the MGC are farmers. They come for buying the pesticides then the sales persons offer them to have a look at the life style product store which is also attached to their pesticide store. But most the people have perception that the products which are in the modern retail stores are more expensive and there would be no credit policies. So it is difficult task to the store manager to change the perceptions about prices of lifestyle merchandise in the stores.
b) Behavior of competitors: Most of the kirana stores and mom & pop stores spread negative roomers about the MGP and some times competitors have given offers to attract their customers. c) Socio Economic Environment:
Most of the people in rural are middle class people so their purchasing power is low so they don’t go for branded products. And they are also more price conscious about their products. Location selection: This MGP is 1 km far from the center of the town in out skirts. So it is disadvantage to them because farmers they spent 10 Rs. for auto to reach the store. So according to the store manager they are losing 20% of the customers due to wrong selection of the place. Advertising and promotions:
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To attract the customer and pull the customers they implemented different strategies like Wallposters, Pamphlets’, banners. Their promotion mantra is word of mouth and their Field assistants also promote their products when they visit their fields. And also they displayed some posters at POS . Coming to the advertising part they advertise about their store in local TV channels and slide shows in film theatres. Store layout and design: MGC is in the area of 170 feet* 200 feet and this is divided in to two parts one is for Pesticides store and second half is for the life style products store. Customer who enter in to the pesticide store can also enter in to the life style products store through the door which is between these two stores. They have enough shelfs to accommodate the products and they have the space for every product. They have enough parking place for the vehicles. They fixed CFL bulbs and tubes for lighting and they painted the walls in the mixture of orange, green and white colours, which is Mana Gromor Theme. This is the layout form of KOHL’s Layout.
Observations about Customers: No of walk-in in the Pesticides store is: 74 people in 3 hours(12.00 p.m-3.00 p.m) No of customers who purchased in pesticide store: 68 people No of people who visited the LSP store through pesticide store: 31 people No of people who purchase from the 31 people (impulse purchase): 3 people Pesticide store graph:
No of people who directly come to the LSP store in three hours: 12 Real purchasers in the LSP store: 8 No of people visited pesticide store trough LSP store: 1 Purchasers in Pesticide store ( impulse purchase) : 0
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Coromondel Mana Gromor store pictures:
Picture 1: Visual merchandicing and aisle space in coramondel store
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Picture 2: Store design,wall paintings,lighting, store room in the picture.
7.2)
Haryali Kisan Bazaar
Haryali Bazaars Bring Organised Retailing to Farmers •
Having successfully pioneered a new concept of Haryali Kissan Bazaars in 2002 in Hardoi, agri-inputs focused DCM Sriram Consolidated Ltd. (DSCL) opened eight more (Ladwa in Haryana, Ferozepur in Punjab, Kota in Rajasthan and four locations in UP).
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The store complex is spread over 2-3 acres and caters to all the farmers requirements (both DCM Sriram products & other sources): farm inputs (fertilizers, seeds, pesticides, animal feed), farm implements, spare parts, irrigation equipment, spraying equipment. Further, the uniformed salesman, an agricultural graduate, gives free agricultural related advice in personal interactions or through mobile phones (averaging 20 calls a day). Twenty such stores, each catering to 100 villages, are planned.
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Hariyali Kisaan Bazaar - a rural business centre, is a pioneering micro level effort, which is creating a far-reaching positive impact in bringing a qualitative change and revolutionizing the farming sector in India. It is also an example of how well meaning corporates can contribute to development of agriculture by building sustainable business models. The "Hariyali Kisaan Bazaar" chain, seeks to empower the farmer by setting up centres, which provide all encompassing solutions to the farmers under one roof. Each "Hariyali Kisaan Bazaar" centre operates in a catchment of about 20 kms. A typical centre caters to agricultural land of about 50000-70000 acres and impacts the life of approx. 15000 farmers. Each centre is engaged in: •
Bridging the last mile: Provides handholding to improve the quality of agriculture in the area. Provides 24X7 support through a team of qualified agronomists based at the centre.
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Quality Agri-Inputs: Provides a complete range of good quality, multi-brand agri inputs like fertilizers, seeds, pesticides, farm implements & tools, veterinary products, animal feed, irrigation items and other key inputs like diesel, petrol at fair prices.
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Financial Services: Provides access to modern retail banking & farm credit through simplified and transparent processes as also other financial services like insurance etc.
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Farm Output Services: Farm produce buyback opportunities, access to new markets & output related services.
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Other Products and Services:Fuels, FMCG, Consumer Goods and Durables,Apparels etc.
These centers provide the much needed respect/dignity and freedom to the Indian farmer. In the near future, Hariyali Kisaan Bazaars plan to move beyond agri to meet the other needs of farmers as customers.
Visit to Haryali Kissan Bazar: We visited Haryali kissan Bazar in Jammikunta (Karimnagar Dist).We asked some structural questions on supply chain, market selection, advertising, promotion strategies, and store design, merchandise pricing to store manager . We interviewed some of the customers who purchased in the store about store services, Their satisfaction levels, Purchase patterns, Decision making process. We observed the consumer behaviors, store layout and design and also we observed number of walk in customers ,real customers. Observations and findings from Haryali Bazar:
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Supply chain management: They import their life style products,agri products,apparels,tyres, tubes from zonal ware houses. Lead time for getting the products is 5 days.Transportation and unloading is taken care by the ZWS. Store manager is responsible for Storing and sorting. Lead Time= 5 days Inventory carrying cost= 10000Rs per month Safty stock=30 % more than the demand Other costs= 2500Rs Lead time fluctuations= Twice or thrice in the year Demand fluctuations = Most probably in festival seasons,craft seasons, fertilizing seson. Total cost for supply chain for the store is =12500 Rs Factors which are affecting their store sales: a) Behavior of consumers: Most of the customers who come to the Haryali are formers they feel discomfort to come to this store because this store is 3km far from the town so customers would spend 10-15 rs to come here. And they bargain in the store because they sell all products which are useful to the farmers. b) Behavior of competitors: Coramondel is the biggest competitor for Haryali .Coramondel is in the town so most of them prefer to go coromondel. And coromondel promotion strategy and personnel relationship with customers are good.
c) Socio Econpmic Environment:
Most of the people in rural are middle class people so their purchasing power also low so they don’t go for branded items most of the times and also they are more price conscious about their products.
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Place selection: This Haryali is 3 km far from the center of the town and it is at the out of the town and it is between two towns so it is disadvantage to them because farmers spend 15 rs for auto to reach the store. So according to the store manager they are missing 50% of the customers due to wrong selection of the place. Advertising and promotions: To attract the customer and pull the customers they implemented strategies like Wall posters, Hordings , Pamphlets’, banners, slide shows in film theatres
Store layout and design: MGC is in the area of 250 feets* 300feets and this is divided in two 4 categories • • •
Store, ware house, Petrol pump, • Tractor spare parts, • cultivating plows. The store house is the design of spiral design they have circle, rectangular type of fixtures they have and any body can go to every department very easily. They have huge aisle space and the width of the shelf also very wide Observations about customers: No of walk-in in the store is: 14 people in 2 hours(10:00 a.m-11:45 a.m) No of people who visited the petrol pump : 16 people No of people who purchase from the 14 people: 13 people
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Pictures of Haryali Kisan Bazaar
Picture 3: Haryali kisan bazaar store in Jammikunta
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Picture 4: spiral store design of Haryali Kisan Bazaar in Jammikunta
1)
Recommendations and Conclusion
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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 met for it to be acceptable.
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Selection of location of the store is very important. Selecting a store in the locality will pay off than having it at the out skirts of the village.
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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.
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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 ruralurban 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.
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1) References Websites: 1. 2. 3. 4.
www.echoupal.com www.dscl.com http://www.murugappa.com/companies/coromandel/s ubsidiaries.htm www.indiaretailing.com
Books: 5.
Bhupesh Bhandari:The reign of rural retail
6.
Berman Barry and Evans Joel.R., Retail Management- A Strategic Approach-Ninth Edition, PHI Cox, Roger and Brittain, Paul., Retailing-An Introduction- Fifth Edition, Pearson Education.
7.
