Even as organised retail in cities slows, some firms say that business in rural areas is maintaining a steady growth of 20-25%. Vikram Shriram, vice-chairman and managing director of DCM Shriram Consolidated Ltd that operates 300 rural outlets in eight states, spoke in an interview of the challenges, aspirations and evolution of the rural retail market that accounts for almost 40% of India’s about $300 billion annual retail business. Edited excerpts:
Rural penetration: DSCL’s Vikram Shriram thinks the budget has inspired the Hariyali business model to improve further on. Ramesh Pathania / Mint
How the latest budget being viewed by a rural retailer like you?
The budget certainly gives us further encouragement that there will be further money going into the rual India and that will increase the buying power of rural India. It will improve the business plan and improve the business case of the Hariyali business model. So it gives us further encouragement. We already have strong plans and we are committed to the business.
What is your roadmap for the coming months?
One is increasing the penetration of our agri-advisory. We are beefing them up and we are focusing on that in a very big way. Second is increasing our product range and third is improving our systems, processes and back-end—getting them in a much more robust way. But the focus is agri-advisory.
We provide information about weather, mandi (market) prices for different crops, but much more important than that is agronomy practices. Every store and outlet has a trained agronomist whose only job is to advise the farmers. In the larger outlets there are two or three people and in the smaller outlets there is one person. Their job is to advise the farmers how to improve his yield, how to improve his product quality and ultimately, how to improve his profitability.
The underline theme of Hariyali Kisaan Bazaar is to improve the profitability of the farmers. We believe the last-mile delivery of agronomy is the missing link today in India. We have seen that on the ground through our interaction with farmers through our many businesses, whether its sugar, agri-inputs, fertilizers or hybrid seeds. It’s the last-mile adviceon a package of practices.
You have been doing it for several years. What are the results?
We have seen that this is creating an impact. We have seen its actually improving the profits of the farmers. Its actually creating a stickiness and creating a reason for the farmers to come back to Hariyali. Otherwise, it’s just another store.
But this is one place they know that they will be given the right advise—not just we have a particular product which has a higher profit margin. We tell them this is the chemical you should use and there are three brands available and you choose what you want. We tell them, for example, this is the time when north-west India is going through a severe drought-like condition.
We feel that the agri-advisory will be critical for advising the farmers how to retrieve the crops and how to use different of fertilizers and fertilization techniques to maximize their profitability.
Have you done any survey to see how much the farmers profitability has improve through such services?
In fact, we have got a survey underway that is conducted by an outside party, IFPRI (International Food Policy and Research Institute). Its been being sponsored by USAID (United States Agency for International Development). They are doing a survey to see the impact Hariyali is having on the ground.
Some of the foreign aid agencies have been impressed by what Hariyali is doing on the ground so they said let’s do a scientific survey on what is the impact Hariyali is creating. We have our own anecdotal evidence and we have the statistics.
You have mentioned extending your product portfolio. We know you have gas stations, ATMs (automated teller machines) and banking services at many of your outlets.
Because of NREGA (National Rural Employment Guarantee Act that ensures 100 days of employement for one person from a poor rural household across the country), there is generally a shortage of farm labour. So we are looking for low-cost mechanization opportunities to see how we can use them to the farm. We have got an in-house team looking all over the country to look out for what is used and where.
We are also looking in countries where have businesses such as Thailand, the Philippines, Vietnam, China and Indonesia on what are the low-cost technologies in use there and if we could bring those technologies and implements here—whether its tools mechanization, mini-tractors, tillers. So the whole idea is that this is increasing the product range that you will fill the gap. You will find the farmer needs something and how you make it available.
You have been in the business for several years now. How did you see rural retailing evolving over the years?
We have seen two or three macro trends. Number one is that the purchasing power of rural India is increasing. There has been a significant change in the purchasing power in rural India (in two-three years). This is brought about by several factors. One is the government has substantially increased the minimum support price on wheat, rice and a variety of products over the last four-five years. So the farmers are getting that much higher prices.
Second is the overall economic development. Third is the NREGA. The fourth is overall infrastructure development—the road development programmes, the electrification programmes—all these things are happening. If a particular area gets better electrification, the yields in that are going to go higher. If the yields go higher, the farmers are going to be more prosperous and the overall economy of that district goes up. So it’s visible on the ground.
When we put up our first sugar business eight-nine years ago in Ajbapur (district in central Uttar Pradesh), we didn’t see a single pucca (brick and mortar) house or a single television or a motorcycle on the roads around our sugar factories.
How is it now?
Now (there are) more pucca houses, TVs all over the place, motorcycles are booming. The other thing that is incidently booming is guns. Over there it’s a status symbol to have a gun. For example, if somebody sells 500 tractors in six months, they will sell 2,000 guns in that particular period. We have seen anything that improvements in farm profitability does have an impact on the complete upliftment or changing the character of that area.
Has consumption patterns changed?
Someone who might have come to buy fertilizes also buys dal (pulses), atta (flour) and masala (spices). The wife is coming with the kids to buy kids’ clothes. So someone coming to buy clothes might also buy chips and chocolates.
What are the latest aspirations of the villagers?
The biggest aspiration is banking and that is not working out. In that sense, we are trying different pilots and there are different pilots running but we don’t yet have a model which is robust. Unfortunately, the banks are reluctant to give credit because once (in a while) the government comes out of the blue and announces waiving of loans.
What are the other options you are looking at?
Now we are looking at entertainment—on whether we can have any offering at entertainment.
What kind of entertainment you are looking at?
Can we have a multiplex or a single-screen theatre? We are looking at that as an option and we are in discussions with players. Also, (we are) looking at if there is any opportunity in education.