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INNOVATION IN RURAL MARKET INNOVATION IN RURAL MARKET
INNOVATION IN RURAL MARKETINNOVATION IN RURAL MARKET
Indian Rural Market- an overview
• 46% of the soft drinks sales happen in the rural areas
• Rural India accounts for 49% of motorcycle sales
• Rural India accounts for 59% of Cigarettes sales
• 53% of FMCG sales happen at Rural India
Continued…
• Lipsticks are used by more than 11% of the rural women and less than 22% of the urban women
• Close to 10% of Maruti Suzuki’s sales come from the rural market
• Hero Honda, on its part, had 50% of its sales coming from rural market in FY’09
Continued…
• By 2010 rural India will consume 60% of the goods produced in the country
• In India, 70% of DTH Connections are from Rural and Small Towns
» Will any company dare to ignore such market??????
Opportunities are already there......
What next?What next?
INNOVATION!!!INNOVATION!!!
Innovation
• Exploiting new ideas leading to the creation of a new product, process or service
• It lowers the cost and/or increases the benefits of a task
Innovation: Two types
• Product/Service innovation
• Process Innovation
Key challenges in Innovation in Rural Market
• Physical Distribution• Channel Management• Promotion and Communication• Poor Infrastructure• Uneconomical Market Size• Consumer Profile
Role players in India
• Corporate India• Governmental Bodies
Andhra Pradesh e-Gov
• 5th largest state• 8% complete high school, 48% illiterate• 70% agriculture dependent• 50% has no electricity, 69% no piped water• High level of corruption
ICT
• Marketers• Retailers & Intermediaries• Consumers
Benefits of IT driven business strategy Ease of access Up-to-date content Layout, design, consistent theme Easy navigation Higher interactivity Access through multiple media Higher use of non-textual information Multiple languages Lower transaction cost
ICT Initiatives in Rural Market
• ITC’s e-Choupal• n-Logue Communications• Project i-Shakti• Inagriline by EID Parry• Gyandoot• TARAhaat• Grameen Sanchar Society (GRASSO)
Initiatives of Information and Communication Technology in Rural
Distribution
Inagriline by EID Parry
• Private corporation- Murugappa Group• 16 franchised internet kiosks.• Kiosks- business hubs of respective villages. • Provision for online registration, easy access
to transaction records with the company.• Operators trained to use PCs, to surf the
portal and the Net.
The strategic goals of the Murugappa Group
• Distribution infrastructure: This infrastructure would be capable of supporting bidirectional distribution of products and services into and out of rural India.
• Trading infrastructure: This would serve as the foundation to a platform for trading agricultural commodities and rural industry manufactured goods.
Gyandoot• Initiated by government of Madhya Pradesh –
January 2000• E-commerce and E- governance operation with
aim of providing information and interface between the government and the people.
• Project includes installation of a rural intranet connecting 20 kiosks in the village panchayat centres in 5 blocks.
• Kiosks-soochanalayas• Kiosk operator- soochaks.
Each soochanalyas has a computer, modem, printer, UPS,furniture and stationary.
The kiosk have dial-up connectivity through the local exchanges, running on optical fibre or UHF links.
Server hub is a Remote Access Server housed in district panchayat centre.
Cost of establishing one kiosk-Rs.75000 Financed by panchayat and community , no
contribution from the government. Managed by local entrepreneurs referred as
managers, who charge users fees for the services offered by the kiosks.
The first 20 kiosks was handed over to respective managers after one year of operations.
Village panchayat maintains the building and the fixtures.
Managers are responsible for all operational expenses and revenue collection.
Manager does not receive any salary. He pays 10% of the income as a commission to
the district council for maintaining the Net. For the 11 centres started as private
enterprises, the owners each pay Rs.5000 as a license fee for one year to the district council.
Features offered by Kiosks• Agricultural produce rates• Land records• Grievance redressal services• Online application of certificates• Village auctioning• PCOs• Photocopying services
TARAhaat (2000)• An ICT Company, established by the
Development Alternatives Group• Connects the rural community to the national
economy and the rest of the world. • Model to bring relevant information, products
and services via internet to the rural market .• Launched in Bundelkhand, MP and UP and has
46 centres.• Provides training and management support to
its networks• Enables to provide standardized services.• Acts as central provider of the products and
services
• TARAcard- photo ID for each villager, a local credit card.
• Revenue comes from payments received for services, commissions on sales, fees for advertising and entertainment, royalties and other sources of earnings.
• Ensures the need of wide range of users are met also the revenues are widely distributed.
• Communication products offer local language email, chat and bulletin boards.
The Key Objectives : Increasing employability Bridging gaps in information Promoting rural businesses Internet-based services through kiosks such as
e-health care, e-commerce, e-governance and e-entertainment.
Training institutes established at the heart of the target market of TARAhaat, act as a knowledge hub for rural areas, providing basic and advanced courses throughout the year to rural entrepreneurs and the trainers employed by entrepreneurs to teach at their centres.
Performance in 2008-09The performance of TARAhaat has improved in the year 2008-09 when it earned the highest revenue ever.
Network Growthincreased its network size from 128 to 236 running centres in the year of 2009-10 and further expand this network size up to 800 by the year 2012.
New Products and PromotionsLaunched two new courses on ‘Diploma in Computer Application’ and ‘Diploma in Financial Accounting’.
Grameen Sanchar Society (GRASSO) Franchisee of BSNL in West Bengal, Orissa and
Jharkhand. Has a three fold plan to improve the lives of rural
poor (BPL). - a mobile Wireless Local Loop Public Call Office for
communication.- an Internet kiosk for information delivery and facilitation- a rural Light Commercial Vehicle for completing linkage between the market and the villagers, by leveraging IT, telecommunications and services.
• Established one e-seva Kendra for every 10 PCOs covering a population of 10,000 people.
• The e-seva Kendra provides e-goverance, access to weather and agri-related information, access to market prices for agricultural prices, train booking & bill payment.
• Tied up with IBM to deliver computer training in village schools
• Plans to expand and provide value-added services like godowns and cold- storage facilities.
ITC’s e-Choupal
E-Choupal is an initiative of ITC to link directly with rural farmers for procurement of agricultural/aquacultural products.
Launched in June 2000
Presently the service reach out to more than 3 million farmers in 38,000 villages through 6500 kiosks and 9 states.
Investment in each Kiosk is Rs. 2.5 Lakhs.
ITC plans to scale upto 20,000 e-choupals by 2012, covering 100,000 villages and over 15 states, servicing 15000 farmers.
e-Choupal aims to eliminate wasteful intermediation and multiple handling.
Web based information and procurement tools for Indian farmers, supported by ITC.
About 6,500 e-choupals (gathering place) are established which provides a point for information exchange to farmers, as well as an e-commerce hub.
Each e-choupal serves approximately 10 villages within 5 kilometers radius, managed by a sanchalak (coordinator) who is hired locally and becomes the local entrepreneur.
Reduce transaction costs of selling and buying crops for farmers by aggregating certain services together
Designed to address the issues such
as: 1. Fragmented farms
2. Weak institutions
3. Involvement of intermediaries
4. Information Asymmetry
Relevant & Real-time InformationCommodity prices, Local Weather, News
Customized KnowledgeFarm Management, Risk Management
Supply Chain for Farm InputsQuality screening, Demand Aggregation for Competitive Prices & Efficient Logistics
Direct Marketing Channel for Farm ProduceLower Transaction Costs, Better Value through Traceability
E-Choupal Services
Distribution of Products and Services to Rural Markets
Micro marketing
Product/Services Demos
Marketing and Brand Building activities
E-Choupal Services contd…
BENEFITS
Farmers can get real-time information despite their physical distance from the "mandis".
Farmers are reimbursed for transportation cost of goods.
ITC gain access to fair trade pricing and able to control quality and quantity of farm products.
Local farmer can become an entrepreneur by establishing e-Choupal kiosks and selling and trading goods with the markets (coordinator).
Customized and relevant knowledge is offered to the farmers despite heterogeneous cultures, climates and scales of production.
n-logue Communications
n-logue was set up by the Telecommunication and
Computer Networks (TeNet) of IIT Chennai.
It is the business of providing Internet, voice, e-
governance and other rural services through a network
of Local Service Providers and kiosks by establishing and
maintaining corDECT (wireless access) –based
communication systems.
The basic business model has three tiers :
• The village kiosk operator
• The LSP
• N-logue communications.
The Business Model
Kiosk Kiosk Kiosk Kiosk Kiosk
Villagers
Services Revenues
n-Logue
LSP-1 LSP-2 LSP-3
THE KIOSK OWNER/OPERATOR
The kiosk operators are largely young men or
women who invest in and operate a tele-kiosk.
Should have studied up to Class 10/12
The kiosk operator acts as an interface between
technology and village people.
The operator assist customers in sending and retrieving
voice and text messages.
The investment is around Rs 50,000
Each LSP covers a couple of small towns and about 35
villages.
Provide connectivity to govt. offices, primary health
centre, schools and colleges, small business and other
local institutions.
Provide basic communication services, computer
training, word processing, school curriculum based
tutorial classes.
Provides online consultancy through agricultural and
veterinary experts, doctors.
n-Logue presently has about 3000 kiosks in the states of
TN, Karnataka, Maharashtra, Rajasthan, AP and Gujarat.
Kiosk: Bouquet of Services (besides telephony)
– Learning typing– Computer education– Photography– movies on CD– DTP work– Email/voice & video mail– E-Governence– Video conferencing
providing• Tele-medicine• Vet Care• E-learning • E-Agriculture
Project ShaktiSHAKTI - Changing Lives in Rural
India
• Shakti is HUL's rural initiative, which started in 2001, Shakti has
already been extended to about 80,000 villages in 15 states
• Targets small villages with population of less than 2000 people or
less.
• Seeks to empower underprivileged rural women by providing
income-generating opportunities, health and hygiene education
through the Shakti Vani programme, and creating access to
relevant information through the i-Shakti community portal.
• Shakti Vani is a social communication programme.
Women, trained in health and hygiene issues, address
village communities through meetings at schools,
village baithaks, SHG meetings and other social fora.
• i-Shakti, the Internet-based rural information service,
has been launched in Andhra Pradesh, in association
with the Andhra Pradesh Government's Rajiv Internet
Village Programme.
• i-Shakti has been developed to provide information and
services to meet rural needs in medical health and
hygiene, agriculture, animal husbandry, education,
vocational training and employment and women's
empowerment.
OTHER ACTIVITIES :
• To improve the business skills of the SHG women, extensive
training programmes are being held.
• As part of their training programme, all HUL Management Trainees
spend about 4 weeks on Project Shakti in rural areas with NGOs or
SHGs. Assignments include business process consulting for
nascent enterprises engaged in the manufacture of products such
as spices and hosiery item
Emergence of Organized Retailing
Unorganized Retail market in India: Rs. 4,00,000 Crore.
Organized Retail market: Rs. 20,000 Crore.
India’s Retailing space per capita: 2 Sq. ft.US. Retailing space per capita: 16 Sq. ft
Organized retailing has faced major challenges in expanding themselves in rural market.
Haats, Mobile traders and Village shops form the traditional retail network.
New initiatives are taken like SHG by HLL and ITC’s Chaupal Sagar to serve end consumers.
Govt. initiatives: Public Distribution System(PDS) Khadi and Village Industries Commission(KVIC) Indian Farmers Fertilizer Cooperative Limited.
(IFFCO)
Khadi and Village Industries Commission(KVIC)
• Objectives involve skill improvement, providing employment in rural areas and transfer of technology, rural industrialization and promoting self-reliance among people.
• Covers 108 industry groups and 4000 products.
• Operates through 30 State/UT Khadi and Village Industries Boards.
IFFCO• World’s largest fertilizer cooperative based in
India.
• Has 40,000 member cooperatives.
• Responsible for fertilizer distribution in the country.
• During the year 2008-09 IFFCO produced 71.68 lakh tonnes of fertiliser material and sold 112.58 lakh tonne.
Initiatives by private companies
• Chaupal Sagar: First rural mall opened in MP.
• DCM Shriram Consolidated’s Hariyali Kisaan Bazaar: Started by offering farm related inputs but stepped in retail buss. too.
• TATA: TATA Kisan Sansar.
• Godrej Group runs Aadhar stores in Maharashtra and Gujarat.
Traditional Retailing• Low cost structure• Owner operated• Negligible real estate and labor costs• Little or no taxes• Consumer familiarity-generation to
generation
Drivers of the Organized Retail Format
Economies of scale• attraction towards large store• Product variety• proximity
Quality service:• Franchised and company owned stores
Increased brand consciousness• Youth population - well informed about
brands• Brand awareness• Reliability on company outlets
Fighting fakes• Philips uses ITC’s E-Choupal to sell their
lighting tubes in rural India.
EXAMPLES OF ORGANIZED RETAILING IN RURAL INDIA
Mahindra Shubhlabh Services Ltd.(MSSL)
Subsidiary company of Mahindra and Mahindra Ltd. Started in 2000 with equity stake from IFC,
Washington. Revolutionized agri-business by aggregating factors
of production under the brand name Mahindra Krishi Vihar.
Solutions specific to crop, region and market. Provides complete range of products to improve farm
productivity and establishes market linkages to optimize the commodity supply chain.
http://mahindra.com/Farm_Equ_sec/agribusiness.html
Mahindra Shubhlabh Services Ltd.(MSSL) Cont…
• The staff provides support and guidance to farmers in the selection and usage of products.
• They also guide farmers for crop health, environmental and human safety.
• Mahindra Krishi Vihar provides platform for banking institutions to provide loans to farmers with minimum documentation, quick sanctions and attractive interest rates.
http://mahindra.com/Farm_Equ_sec/agribusiness.html
Mahindra Shubhlabh Services Ltd.(MSSL) Cont…
• In-turn the financial institutions develop a lower-risk portfolio and reduce their overhead costs through this channel.
http://mahindra.com/Farm_Equ_sec/agribusiness.html
ITC’s Choupal Sagar Bringing modern retail to Rural India
• First rural mall in India with 7000 sq. ft. of area.• It offers self-service facility.• It stocks everything from toothpaste to TV, hair
oils to motorcycles, mixer-grinders to water pumps.
• Most of the brands that Chopal Sagar sells are national brands such as Marico, LG, Philips, Eveready and shirts from ITC’s apparel business, bikes from TVS and tractors from Eicher.
http://www.itcportal.com/rural-development/choupal-saagar.htm
ITC’s Choupal Sagar Bringing modern retail to Rural India
• The mall is located near the stock points of ITC’s e-choupals, making it an integrated model.
• To offset the huge investments, ITC has partnered with other companies interested in serving the rural market.
• This has helped them with widened product offerings and spreading their overhead costs.
http://www.itcportal.com/rural-development/choupal-saagar.htm
Mahamaza (Bringing E-Commerce to Rural India) Introduced in 2000. Network of virtual dealers scattered around the
country. 275,000 web store dealers in small towns. Extraordinary range of products, from
Motorcycles to cycles and cell phones. They sell 28 brands across 15 industries. Website uses offline network of ‘Web store
owners (WSO)’. Rs.5100 is charged as the registration fees.
Mahamaza Cont…
• WSOs interact with customers face to face and report transactions to nearest offices located in Delhi, Lucknow, Dehradun and Pune.
• Payments are made through pay-orders, DD or Cheques.
• Goods delivery within a week.• Mahamaza avails heavy discount as they
purchase in bulk from the participating companies.
Mahamaza Cont…
• Mahamaza sold Rs. 1.5 crore worth of Nokia Phones in the very 1st month after striking the deal with the co.
ParryIndia Agriline
• An agriculture co. in Tamil Nadu.• Has setup first-of-its kind portal
indiaagriline.com, launched in 2001.• Farmers can access personalized and general
information on agriculture and allied activities.• The portal provided detailed information on 6
crops which included sugar, banana, cashew, tapioca and groundnut.
http://www.eidparry.com/agriland.asp
ParryIndia Agriline It provides detailed info ranging from farm practices
to advisory services to pricing details for different crops in the nearby markets, weather forecasts.
Set-up kiosks in 16 villages near their sugar factory. These kiosks are called Parry’s Corners, business
hubs for their respective villages. A one-stop shop that acted as a storefront for
buying farm inputs, a market for selling goods, and an Internet café for communication and information services.
http://www.eidparry.com/agriland.asp
ParryIndia Agriline
• Personalized info such as payment details of a sugar co. to farmers could also be accessed on the system once a farmer is registered on a kiosk.
• This facilitated market transactions, industry competitiveness, new innovations and positive social transformations.
http://www.eidparry.com/agriland.asp
3A Bazaar
• 3A Bazaar is India’s first mobile retail company which was launched in early 2007.
• The company is owned by the Paramount Trading Corp Pvt Ltd, an exporter of metal handicrafts and primarily operates in the Jyotiba Phule Nagar district of Uttar Pradesh.
• The company is the brainchild of Mr. Asad Shamsi, who was inspired by a few similar retail chains in Europe
http://www.3abazaar.com/
3A Bazaar Cont….
• ‘3A’ represents the first letters of the names of the three Shamsi brothers, all of whose names begin with ‘A’.
• Mr. Shamsi conducted extensive research in rural India and found out that India’s rural population does have disposable income, but not regularly.
• 1st chain of rural retailing in India through mobile vans.
http://www.3abazaar.com/
3A Bazaar Cont…. There are about 7 vans which carry goods worth 2-
2.5 lakhs of rupees everyday from Mr. Shamsi’s storehouse to about 700 villages in JP Nagar district.
Villages are visited weekly or fortnightly or monthly.
It fits with the irregularity of incomes of villagers and the mobility eliminates the drawbacks of a static rural retail shop.
Daily average sales are in the range of 8-10 thousand rupees
http://www.3abazaar.com/
3A Products
• Grocery• Staples• Toys• Personal Care• Health Products• Confectionery• Color and Cosmetics• House Hold items• Stationery
http://www.3abazaar.com/
CONCLUSION Marketers use innovative tools and strategies to
overcome challenges they face in business. Business innovation is broadly divided into
product/service innovation and process innovation. The ICT-driven value chain and organized retail
format have been found to be the best innovations for rural India.
The ‘anytime-anywhere’ advantage of e-marketing leads to efficient price discovery, economy of transaction and a more transparent and competitive setting.
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