Even as stock markets plummet, companies nurse forex losses, profits wilt and jobs are cut, rural consumers continue to buy soaps, tractors, mobile phones, shampoos, packaged food, etc.
Mint has been reporting on this phenomenon from the trenches in March, through a special series named Bharat Shining, with case studies on how companies have struck profits in India’s villages.
Illustration: Jayachandran / Mint
But there are two broader lessons that need attention if the current boom in rural sales has to be sustained.
One, rural consumers often have different motivations and constraints than their urban counterparts. It is important for firms to evolve business models that can fit with the consumer’s needs—be it new price points, different product designs, smaller pack sizes or innovative modes of selling.
Our reporters wrote on the use of biometric identification used by State Bank of India for its zero-balance accounts in unbanked villages; Hero Honda’s attempts to win trust by getting its rural sales staff to be “more of a friend of the villagers than a bike salesman”; Dish TV’s push into sparsely populated areas where cable operators struggle with very high costs; Hindustan Unilever’s use of local self-help groups to sell its products.
Two, both the government and companies will have to figure out whether the current strength in rural demand is sustainable.
Marketing experts Rama Bijapurkar and Rajesh Shukla wrote in an opinion article on 25 March that the recent spurt in rural growth “is owing to a combination of acts of God and acts of government, both of which have a tendency towards erratic behaviour”. In other words, a combination of good rains, higher food prices and schemes such as the National Rural Employment Guarantee Scheme have put a lot of money in the hands of rural households. Can these be sustained?
The robustness of rural demand as well as profitable opportunities for companies that are rushing into this market will be tested in the years ahead. To win this battle, both the government and companies will need to get their act together.
The government will have to ensure that rural incomes rise because of higher productivity and a diversification of the rural economy rather than good rains and government handouts. Companies will have to keep innovating to ensure that their products and marketing strategies keep pace with the structural changes in the rural economy.
These will be the long-term challenges.
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