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Pitch Exclusive: Organised retail turns to Bharat

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Pitch Exclusive: Organised retail turns to Bharat

While retail majors like Big Bazaar, Shoppers Stop, Westside, are touching new levels and scripting successes in metros and urban markets, organised retail is also emerging as new fancy in rural India.

Big players like ITC, Godrej and DCM Shriram Consolidated Ltd (DSCL) have not only entered the space, but they are building on smart marketing strategy to tap the huge potential of rural market. So, what makes these players to enter the rural space and what is it that they are tapping on in rural retail?

Dr Prafulla Y Agnihotri, Director, IIM, Tiruchirappalli, and co-author with Marketing Guru Philip Kotler, feels, “increasing media exposure has made rural consumers familiar with national and international brands and rural retail chains are cashing on the rising aspirations of these price sensitive consumers by offering them variety and convenience.”

Pitch brings insight from Hariyali Kisaan Bazaar, a rural retail chain with 275 stores across eight states, into the marketing strategy of these players and challenges they face while retailing to rural consumers.

Price sensitivity in rural areas is something that these retail chains cash on. But an increased level of brand awareness is also helping them a lot. According to Nirmallya Roy Chowdhury, Head, Marketing, Hariyali Kisaan Bazaar, “With increasing penetration of mobile phones, people who have emigrated to urban areas, exchange more information with their family members and influence the purchase behaviour of their family back home. They also help increase awareness about brands that they use in the city.”

On a broader level, these companies have a two-pronged approach for the rural market. First, they enter the rural space to help farmers increase their income and then sell branded products to them. Initially, on offer are products like agronomical services, fertilisers, pesticides, seeds, animal feeds, irrigation equipment and tractor parts, cattle feed, and gradually these players enter the retail space with FMCG, consumer goods and durables, apparel and other products.

For example, Aadhar, an agri service-cum-rural retail venture of Godrej Agrovet, interacts with farmers on a daily basis and educates them on best farm practices. Beside agricultural solutions and products, on offer are commodities including food, grocery, apparel, footwear, home appliances, furniture, kitchenware and hardware. Each Aadhar outlet services around 20 villages in its radius.

Similarly, ITC’s ‘Chaupal Sagar’, offers a diverse product range from FMCG to electronic appliances to automobiles. DSCL too offer retail banking, LPG outlets and even a motorcycle showroom.

Some brands that can be seen on the shelves at these stores include a mix of both national and local brands - Lux, Dove, Rin, Coca Cola, Pepsi, Levi’s, RC Cola, and Usha Micro among others.

The next step is to sell private labels. Though farming products constitute major part of their sales, Chowdhury says that it’s FMCG and textiles, food and grocery items that bring in a large chunk of customers. Branded cookware and consumer electronics is another area, where these retail chains see huge opportunity.

These marketers in rural areas are also bringing in consumer benefits that are mostly confined to metros and big cities. Even the loyalty programmes are moving beyond swanky malls and stores to rural areas. ‘Hariyali Kisaan Bazaar’, has introduced a loyalty programme, ‘Hariyali First’.

“This programme strives to add value to modern shopping experience of the customer by allowing earning and redemption of points on merchandise categories like food and groceries, household and lifestyle products.” says Rajesh Gupta, President, Hariyali Kisaan Bazaar.

‘Hariyali First’ is a point based programme that has differential point systems for different categories. For example, consumers stand to gain two points on buying a product worth ` 100 in FMCG category, while the same amount would fetch one point in some other category. Once the threshold of 100 points is achieved, the points can be redeemed against a product worth ` 50.

Experts feel that such loyalty programmes are only the beginning of how rural retail is changing and evolving. Organised players in rural areas are not only offering one-stop-solutions at lower prices than what is offered at nearby kirana shops, but also using new tactics to increase customer frequency.

Challenges nonetheless
But, according to Dr Agnihotri, setting up an organised retail business in rural areas has its own set of challenges. “Setting up infrastructure, a proper supply chain, and operating in fluctuating rural incomes amidst a credit culture with local kirana stores are some of the major challenges.”

Unlike the metros, where purchases happen throughout the month, spending in rural areas depends a lot on factors like, rain and good agri-produces.

The second big challenge for these chains is to establish communication with a fragmented population, which largely has to be ‘direct’, as people take personal attention more seriously in rural areas. So, efficacy of any other traditional media to reach out to a rural population could come under doubt. Utilising the fact that mobile density in rural areas has gone up dramatically, Hariyali Kisaan establishes communication with consumers through voice messages. “We communicate to our potential customers through 15 second voice messages, as rural consumers might not be comfortable with reading out the SMSes,” says Chowdhury.

The majority of footfall to these stores constitutes of male consumers. The challenge here is to make housewives visit these stores. Chowdhury says that his chain is already working on that and cookery contests for women and contests for kids on special days are being organised at each store.

Also, according to him, “Majority of the consumers belong to a community of large and medium land holders, and traders. Making marginal land holders to visit a store still remains a challenge.”

Dr Agnihotri feels that there is a huge growth opportunity in the rural retail, provided players prepare themselves well. “Storage capacity is less in rural households and frequency of buying is more so, the challenge for the retail chains is to understand this consumer pyche and bring customised packets,” he says, adding that, “Credit culture which is long engrained in the village kirana shops need to be adopted in some manner by these retailers so that people can comfortably buy and pay according to their convenience.”

According to industry estimates, approximately 10,000 out of 600,000 villages in India have access to organised retail services. Also, while 25 per cent of the rural population is not engaged in agriculture, it earns half of the rural income. So, a shift from selling agri-inputs to non-farming segments may help these chains earn better revenues, feel experts.

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