Saturday, May 31, 2008

Some attempts to penetrate into rural markets : a look at Rural distribution systems

Rural India lacks proper distribution systems. For example, observe this: even though unprecedented growth in mobiles exist in urban India, but rural India remained with marginal growth. And in order to cross 100 million subscribers mark, each of these Mobile service providers: Airtel, Reliance, vodafone, BSNL, Tata Indicom, etc know very well that its all about how to catch rural peasants. Here, obviously rural distribution channels become the key.

The following sector-wise distribution details (of various corporates) describe the recent attempts/strategies followed in India:

1. Telecom Sector: Recently Airtel and Samsung have tied up with IFFCO to sell their mobiles and services. IFFCO is (the world's largest) Indian farmers co-operative of fertilizers. It has about 37,000 member units spanning all-over India. Some of the other telecom giants & DTH service providers are looking at dying PCOs as a channel of distribution.

2. Automotive sector: Hero Honda wants to change the rural market dynamics which is hovering around 10% (of households owing a two-wheelers). Its strategies include selling during festive seasons, tying up with new dealers, providing finance with local co-operative institutions (guess the number of such institutions, it is 1,08,779). Meanwhile, Bajaj is launching a Bike, specifically to suit rural Indian youth needs. It is setting up 20 outlets in affluent, but severely underpenetrated, rural districts. Moreover, it has created specialist dealerships for rural markets, called 'Rural Dealerships'. Bajaj wishes to train the sons and daughters of village VIPs, who are also the opinion makers and thought leaders of their respective villages. Bajaj’s non-banking financial arm, Bajaj Auto Financial Ltd (BAFL), is trying to involve the rural self-help groups (along with specific controls, on this micro-financing, to avoid the end-buyer not to use the credit amount for other purposes).

3. FMCG sector: Indian part of Unilever, HLL, sells its goods through rural women who become its sales-representatives. These women are trained by HLL and usually supported by Microfinance or local self-help groups. ITC has created a supply chain infrastructure something called "e-choupal" system. E-choupal is run by an agent, typically covers about surrounding 10 villages (within 5 KM radius).

4. Financial Services sector: More or less, all the banks are using at agent-based model as the typical branch-based model does not work here due to cost economics. Some of these banks including ICICI are looking at tying up with micro-finance institutions and local self-help groups (or creating them if already do not exist). Many banks have solutions for Mobile-based services to reach rural consumers directly into their hand. ICICI has gone further in tying up with large corporate majors having significance presence rural India and providing loans/banking services to their distributors/traders and also it is working in tandem with postal department.

5. Soft drinks: Pepsi and Coke have mastered something called "Hub and Spoke" model. Using this system, initially the goods are transported to hubs (towns) from the plant and later the stock is transported to spokes (using all types of transport vehicles: Cycle, Rickshaw, Auto, hand-cart, camel-cart, etc). They also use annual haat and village fairs.

6. Pharma sector: Nicholas Piramal has focused on general practitioners, to cater to rural markets to increase its penetration with a field-force of 800 people. Most of the pharma companies are looking at post-office as their distribution platform. Some of these companies conduct health-care workshops in the rural areas by tapping the local doctors.

7. Medical Care: Telemedicine is the direction for all the top hospitals in India are headed to. ISRO, Narayana Hrudayalaya, SRMC -Chennai, AIMS -Kochi, Apollo hospitals, Aravind Eye hospital, etc have championed this telemedicine system using VSAT/WiFi/BroadBand/etc for the past 6 years.

8. Consumer Electronics: LG has set up 45 area offices and 59 rural/remote area offices. Samsung rolled out its 'Dream Home' roadshow which was to visit 48 towns in 100 days in an effort to increase brand awareness of its products.

9. Media: Newspapers are sold using auto-drivers, boat-drivers in Kerala.

Other sectors will be updated later.

1 comment:

lokesh said...

Hi, a very insightful article. Would be waiting for your next update. Do you have something on the best practices/ success stories of some of the cos in the rural front. If yes please do mail me at