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India Inc sets its eyes on rural retailing

India Inc sets its eyes on rural retailing

New Delhi: Organised retailing may have not set its foot firm in metros and other major cities yet, but Corporate India is already firming up concrete plans to tap the $100 billion-dollar rural retail market with innovative schemes and human resource policies.

What have prompted India Inc’s to turn its energies to rural retailing are a slew of facts that rural markets are growing at double the rate of urban markets, more than 60% of the country’s 1.12 billion population live in rural areas and 87% of rural markets do not have access to any sort of organised marketing and distribution, said YES Bank Country Head, Food and Agribusiness Strategies, Kalyan Chakravarthy.

While a number of products on the rural retail shelf are agro-based, companies are eager to make available products varying from cricket bat to customised credits in association with banks) in rural areas, following the expansion and entry of new players into this emerging sector.

Bharti-Wal-Mart joint venture, for example, plans to invest substantially in the next 3-4 years for establishing supply-chain network in rural India. Reliance Retail’s Rural Hubs (procuring-cum-processing hub & one-stop farmer shop) has plans for Punjab, Maharashtra, West Bengal, Andhra Pradesh and Gujarat. Pantaloons also plans a similar procuring-cum-processing hub for setting up farm input malls in rural areas.

A few others are already off the block. DCM Shriram launched its Hariyali Kisan Bazar in 2002 in Punjab, Haryana, Rajasthan, Madhya Pradesh, Uttar Pradesh and Uttarakhand. It has more than 70 stores with an average store area of 9000-1000 square feet and a catchment radius of 25 kilometre.

"Our focussed expansion is into Northern and Central India and eventually into Southern states. We plan to add another 200-250 stores in the next 12-15 months,“ said said DCM Shriram Consolidated President Rajesh Gupta.

“Our stores are one-stop shop for farmers with agricultural consultancy as an add-on service by sales executives who are agronomists and not smart executives as in urban retail. We also have produce buyback arrangements," he added.

Even public sector companies entered the fray. Indian Oil Corporation’s (IOC) rural retail initiative was launched last year in UP, Madhya Pradesh, Punjab, Tamil Nadu, Karnataka and Bihar with more than 1,400 stores and an average store area of 4,400 sq. ft covers a radius of 10-15 km.

“Ours is a low-cost and de-risk model and leverages on IOC network for fuel and non-fuel retail. Our thrust is mainly agricultural inputs and FMCG products. We have plans to add 3,000 stores in the next 4-5 years," said IOC General Manager, Retail Sales, K R Suresh Kumar.

Tata Chemicals too launched its Tata Kisan Sansar (TKS) three years ago in Punjab, Haryana, UP, Bihar, West Bengal and has already more than 800 TKS franchisees with an average store area of 300 sq. ft and cover 10 km.

“The thrust of TKS is a link to states where TCL has a majority market share in fertilizer business. Our success is due to factors like strong relationships and brand awareness among farming community. Focussed approach on agricultural inputs and consultancy, produce buyback and farmer credit arrangements," said Tata Chemicals COO (Agribusiness) Lakshaman S Rathore.

The corporates are taking special efforts to ensure the quality of products and services offered to rural customers. The ‘trust´ factor has been highlighted to their employees in rural retail.

“Unlike urban retail customers, in rural retail there are fix set customers. The area that would be addressed is within 25-30 km range. And again unlike urban retailing, customers come from far-flung areas and are visitors from other states," said Gupta.

Hypercity Retail (India) Category Manager, Perishables, Jaymin Shah agreed and pointed out that “the relationship factor is stronger in rural and smaller towns. They just keep coming to you or stop if they are not convinced about the quality, price or service."

‘Rural Retail: The Next Phase in Retailing´, a report prepared by CII-YES Bank has pointed out that once the rural retail grows there would be a slew of positive implications like in boost in employment, infrastructure, increased revenue and tax generation and check rural migration.

However, poor infrastructure, seasonality of demand, heterogeneous population, complex buying behaviour and price sensitivity are the main challenges that needs to be overcome by the companies planning to enter the rural retails, said the report.

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