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Rural Distribution

Session 9 Sales & Distribution Prof. Avinash Mulky

The Rural sector in India (Census 2001)

Population T R U 1027 Mn 741.66 Mn 285.33 Mn % 27.78
Rural Sector < National Average Delhi Pondicherry Goa Tamilnadu Maharashtra Gujarat Karnataka 93% 66.6% 49.8% 43.8% 42.4% 37.3% 34%

Rural Sector > National Average Himachal Bihar Sikkim Assam Orissa Tripura, Nagaland UP 9.8% 10.5% 11.1% 12.7% 15% 17-18% 20.8%

The potential market : Rural


120 Mn Households ~ 12% of worlds population Almost as many upper middle income h/h ( 15.9 Mn rural; 16.6 Mn urban) { Rs. 45001-215000} More than twice the no. of middle income households ( 37.3 Mn rural ; 16.8 Mn urban) { Rs.22001 45000} Higher FMCG spend Rs.63,500 cr ( Rs. 49,500 cr urban) Source: NCAER, HLL

Rural Market contribution


50%+ HLL, Colgate, Toyota 40 to 50% Hero Honda 30 to 40% Kinetic , Godrej, Cavin Kare 25 to 30% Marico, Cadbury, Glaxo, SKB

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75%+ Bicycles, Radios 50% + Batteries, Tea. Salt, Washing cake, Fans 40 % + Audio 20 to 30% Refrigerators, Colour TV, Pharma 10 to 20% Paints, Cement, washing machines

Source: ETIG

How different is rural marketing ?

The 4 A s

Access Awareness Attitude Affluence


Rural Indians

Rural India is hard to reach

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Distribution of physical goods and services Credit Communication

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Poor Infrastructure limits mobility Connectivity on telephone is poor Connectivity on data is almost zero

Physical distribution
Factory (6)

Markets with Pop > 20,000 (2000) Distributors

Regional Depots / CFAs


Markets with Pop < 20,000

Super stockist (5000) Sub-stockist Wholesaler

(350,000) Retailers 900,000 Retailers

Advantages of super stockist in rural chain

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Increased coverage SS can split cartons, offer smaller lots Rotation at sub-stockist increases

SS does not wait for DD to arrive ( ~ 3 days) Reduction in lead times Lesser inventory locked up

Benefits at retailer level

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SS Profile for Company Z

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Location : Kolhapur , Maharashtra Average sales: Rs. 14 lakhs per month Average stocks held : 15 days SKUs handled : 22 Staff : 4

1 Supervisor, 1Billing, 1 Godown, 1 coolie

Comparative terms from other companies to SS

Ave sales ( Rs.L) Margin SKUs Payment to company Retail Credit Paid up stock 4.5 3% 24 Cheque 7 days 4 days

10 1.2% 21 Cheque 7days Nil

Dr. Morepen
1.25 3% 22 Cheque 15days Nil

Telecom infrastructure in rural areas

Telecom affordability in India


Telephones cost more than Rs. 32,000 per line to install


Yearly revenue must be at least 30% of above to service > Rs. 800 / month

If costs come to Rs. 10,000 per line then millions of households can be connected, especially in rural areas

TeNet Group at IIT Madras

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Incubated 5 product companies Developed a number of Access products Brought down cost per line to about Rs. 18000 Cor DECT WILL provides simultaneous
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35/70 kbps internet access Telephone connection supporting fax, PCO and speakerphone

Connectivity in villages

SARI Project : Provide telephone and internet connectivity to every village in Madurai District ( TN)
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Local Service partner operates the network DHAN Foundation a NGO working with villagers on micro- credit provides support

A joint project of MIT Media Labs, IIT Madras, Harvard, McKinsey and I-Gyan

Case Study


Vision Connect ( Voice and internet) small towns and rural India

Mission ( Why)

Existing Operators focused only on top 150 cities

N-LOGUE focus

Allover India other than top 150 cities

Source: TeNeT Group IIT Madras

Business Model..1

Leverage success of Cable operator and STD PCO business models


Have a Local Service Provider ( LSP) akin to a cable operator who runs the show from a small town and provides services to villages in a 25 km radius Drive public access kiosks from villages. They buy services from the LSP

Business Model 2
n LOGUE Services Revenues






Source: TeNeT Group IIT Madras

Key technologies
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Cor DECT Wireless in local loop ISP in a Box ( MINNOW) Low cost PC Reliable power back-up
Rs. 40,000 per kiosk providing telephone, internet, low end Pentium PC with colour monitor, speakers, microphone, 16 hour back-up for phone, 4-hour back-up for PC, Indian language software

Current Deployment
Nellikuppam Pudupettai

N-LOGUEs Nellikuppam Project Cuddalore District TN

Sponsored by EID Parry Buys sugarcane and sells fertilizer, confectionery and cycles Telephone and internet connections in 150 villages


DECT Interface Unit Relay Base Unit

Save time Save money Communication Easy access E-Governance Reduce middlemen Increase literacy Education Augment school education Source: TeNeT Group IIT Madras Entertainment Movies Music Photos Wealth CUSTOMER Reduce Cost Better Yield More Credit


Key awareness issues in rural markets


Only 10% of villages have access to C&S


DD reach is important Sent out to the shop for purchase, can influence brands Exposed to communication Cost per contact is high Scalability of haat promotion

Importance of 8 to 15 age group


200,000 haats
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Rural Relations..1
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Run by Pradeep Lokhande, Pune Rs. 1.5 cr in billings over last 4 years Contact with over 5.93 lakh households in 28,000 villages in Maharashtra, Gujarat, MP, Rajasthan & UP Clients include HLL and P&G, Tata Tea, Asian Paints, Marico Market Research, Rural Communication Concept selling

Oral Care, Hygeine Handwritten by college girls @15 paise per postcard

10,000 postcards mailed out a week to database


Rural Relations ..2

P& G Campaign l Distribution of free samples- 1lakh Camay soaps, 1 lakh sachets of Ariel and 250K sachets of Old Spice l 300 field representatives and 74 Jeeps used l Postcards given to households for feedback HLL Campaign l Lifebuoy soap promotion: Health signs put up in 4900 villages l Annapurna salt sampling+ educating villagers on benefit of iodine

Rural communication
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Video on Wheels Bazaar / Haat operation Wall Painting House to house sampling Fairs Outdoor publicity Print Media Electronic Media


India is poor because rural India is poor. Rural India is poor because rural people are drastically under employed. Unless rural families get employment, rural India cannot prosper M K Gandhi

Sensitivity : Rural Incomes

If rural incomes go up by 1%

Increase in buying power = Rs. 10,000 cr

Key Players

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Central State

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Banks and Rural Credit Organisations NGOs Commercial organisations SHGs Rural entrepreneurs