1

Retail management
TERM PAPER
ON

Rural retailing opportunities and challenges

Term paper submitted
By
Sana Pooja rani
Rohela Haimath khan
Sai chaitanya
Vangaveeti Aswani
Venkatesh Kanumilli
Shirisha

CONTENTS

PAGE NO.

1. Objective of the study.03

2. Introduction.04

3. Problems in Rural Marketing....05

4. Rural Retailing............................05

5. Opportunities in Rural Retailing.....................................................................06

6. Rural Retailing and its challenges...............08

7. Rural Retail Stores..........10

8.

Recommendations and conclusion......24

9.

References..25

1) Objectives of the study:

To understand the importance of rural retailing.
To understand the challenges in rural retailing and rural markets.
To understand the opportunities in rural retailing.
To visit few organized rural retail stores and understand their practices.
To suggest some recommendations if any.

2) Introduction
Rural India is prospering, so must its population which depends on agriculture for many years,
our rural people have not been getting their due share of the country's growth because much of
the gains that are rightfully theirs have been taken away by brokers and middlemen. Certainly
market-driven technology-based agriculture will make India an economic superpower. The
retail revolution is going to act as a catalyst. So the new concept that is hitting the market today
is the "Rural Retailing". To start with, rural India accounts for over 50 per cent of Indias GDP.
There is tremendous potential in rural India as the rate of disposable income is increasing,
growing middle class, advent of IT infrastructure and enormous grouped population.
Though sales are expected to be much lower in early stage, but the break even is reached in fourfive months of being set up, as against eight-nine months earlier. This is because of the
advantages they enjoy of low rentals, lower operational costs with air-cooled smaller-sized store
and good logistics of being close to the supply chain.
But there are lot of potent associated threats and challenges as well, for making any retail or
marketing operations successful and sustainable. The retailers find the rural physical and
geographical expanse daunting. It is really a nightmare for any marketer to address the needs of
600,000 plus villages spread over a geographical area of over 3.2 million square kilometers, and
that too hardly connected by all weather roads.
Moreover lack of infrastructure and logistics together with multiple tax rates, restrictions on
goods movement, among others increase inventories and, therefore, costs. Due to lack of scale
and diversity in buying behavior, marketers are also forced to not only create multilayered
distribution networks but also develop new packaging and price points.
However increasing penetration of TV, rebirth of radio, through FM, availability of broadband
internet, fast spread of mobile phones, and rural road development programmes could in a short
span of time may apart from improving infrastructure, bridge gaps in behavioral patterns across
the country.

3) Problems in the Booming Rural Marketing

Although the rural market does offer a vast untapped potential, it should also be recognized that
it is not that easy to operate in rural market because of several problems. Rural marketing is thus
a time consuming affair and requires considerable investments in terms of evolving appropriate
strategies with a view to tackle the problems.
The major problems faced are:

Underdeveloped People and Underdeveloped Markets:

The number of people below poverty line has not decreased in any appreciable manner.
Thus underdeveloped people and consequently underdeveloped market by and large
characterize the rural markets. Vast majorities of the rural people are tradition bound,
fatalistic and believe in old customs, traditions, habits, taboos and practices.
Lack of Proper Physical Communication Facilities:

Nearly fifty percent of the villages in the country do not have all weather roads. Physical
communication of these villages is highly expensive. Even today most villages in the
eastern parts of the country are inaccessible during the monsoon.
Media for Rural Communication:

Among the mass media at some point of time in the late 50's and 60's radio was
considered to be a potential medium for communication to the rural people. Another mass
media is television and cinemas. Statistics indicate that the rural areas account for hardly
2000 to 3500 mobile theatres, which is far less when compared to the number of villages.

4) Rural Retailing:
Retailing is the final phase of the distribution channel and it is clear by now that it is availability
and distribution that drives growth in rural Indian markets. Hence retailing will be significant
and will undergo greater organization and maturity as is being witnessed in the urban markets,
even in the rural markets. Innovative retail models which take into account the nuances of rural
markets are the way forward.
Study on buying behavior of rural consumer indicates that the rural retailers influences 35% of
purchase decisions. Therefore sheer product availability can affect decision of brand choice,

volumes and market share. India offers a huge, sustainable and growing rural market which can
be tapped effectively through innovative distribution channels with retailing being the most
critical element of this strategy as it is the final touch point and the actual touch point with the
customer which can be the most critical influence in the buying process.
For time being all what retailers need is the requirement for stores in these towns for getting the
right merchandise mix in tune with the local community's requirements.

5) Opportunities in Rural Retailing:

The Indian rural market with its vast size and demand base offers great opportunities to
marketers. Two-thirds of countries consumers live in rural areas and almost half of the national
income is generated here. It is only natural that rural markets form an important part of the total
market of India. Our nation is classified in around 450 districts, and approximately 630000
villages, which can be sorted in different parameters such as literacy levels, accessibility, income
levels, penetration, distances from nearest towns, etc. 70 % of India's population lives in 627000
villages in rural areas. According to the NCAER study, there are almost twice as many 'lower
middle income' households in rural areas as in the urban areas.

At the highest income level there are 2.3 million urban households as against 1.6 million
households in rural areas.
Middle and high-income households in rural India are expected to grow from 80 million
to 111 million by 2007.
In urban India, the same is expected to grow from 46 million to 59 million. Thus, the
absolute size of rural India is expected to be double that of urban India.
As organized retail in rural India awaits the arrival of Reliance Retail, current majors like
ITC, Godrej and DSCL are expanding their retail operations by setting up more stores,
entering new states and offering newer product categories. A shift from selling agriinputs will help these stores target the non-farming segments. It is a little known fact that,
while 25% of the rural population is not engaged in agriculture, it earns 50% of the rural
income.
When organized retail first made its presence felt in rural India, it wasnt a pure retailing
operation targeting the rural masses. Companies like DSCL and Godrej who had
significant agri-business interests, set them up to meet the needs of farmers in a stores
catchments area. A typical agri-input store would have a catchment area of around 100
villages spread over 20-25 kms. Says Ashik Hamid, associate director, Technopak,
These stores are one-stop shops meant to meet the occupational needs of farmers by
providing agri-inputs and fertilizers. These stores, like DSCLs Hariyali Kisan Bazaar,
ITCs Choupal Saagar etc. tend to be located in small towns that function as procurement
hubs where the farmers come to sell their produce. Their earnings are tapped then and

there, by getting them to combine their visit with shopping. These stores tend to target
farmers with all sizes of holdings, We build our offerings for everyone, from the farmer
owning 20 acres to the one owning 200, says Rajesh Gupta, business head, Hariyali
Kisan Bazaar, It wouldnt be done any other way as there is a similarity on the
application side, everyone needs the same inputs.

While organized retail centered on these stores, unorganized retail revolves around the
local village shop and the haat. Shops are usually present in villages with a population of
more than 500 people. They stock more product categories than what similar urban shops
would, but there isnt much variety offered within a category. Haats are weekly mobile
supermarkets that are spread over 2-3 acres of land, with more than 300 stalls, selling
anything from animal feed to local medicines.

"Rising rural incomes, healthy agriculture growth, boost in demand, rising consumerism across
India, better penetration of FMCG products in the rural market are contributing to high growth
and rapid expansion of the FMCG industry in rural India,"
Traditionally, for the auto industry, the rural market has been largely restricted to tractors and
two-wheelers, though the penetration of scooters and motorcycles in villages is only 10 percent,
as compared to 25 percent in urban areas.
Any marketer worth his salt knows that in the wild blue yonder of rural India lies a huge market
for many products and brands. He will know that it accounts for over 50 per cent of the goods
consumed in the country. For two-wheelers, colour TVs and fridges rural areas account for 30
per cent or more of the market.
However, thats at a broad, macro level; an acknowledgement of a vast markets existence. But
how does one plan to service this market; what do marketers base their planning on. There
are many questions: how many rural retail outlets are there? What are the kinds of
products they sell? How do these vary across the states? What is their size in terms of space
and turnover? Are the numbers of rural outlets growing rapidly? At what rate are they
growing?
And, to add to that: What proportion of rural households patronise these shops for their different
requirements? How does this vary across different product categories? Why do the rural folk
prefer to shop at outlets in the village or in the towns or cities for different products (retail
habits)? How do the number of outlets in the village vary depending on the size of the village, its
distance from the closest city, its distance from the highway? How do the retailing habits of
those in villages of different kinds and those from different states vary?

6) Rural Retailing and its Challenges:

Some of the challenges faced by marketers and retailers in rural India are low per capita income,
dependence on the monsoons for purchases, difficulties in communication and high distribution
costs. Marketers are addressing these issues through the 4A's of Availability, Affordability,
Acceptability, Awareness and coming up with innovative campaigns to address the rural
segment. Understanding of rural customers and their needs is what will make the rural foray of
retailers successful. The main difficulties faced by the retailers in rural markets are

Large and scattered market.

Major income from agriculture.
Low standard of living.
Traditional outlook.
Diverse socio economic backwardness.
Lack of proper physical communication and infrastructure facilities.
Many languages and dialects.
Dispersed Markets.
Low per capita Income.
Low levels of Literacy.
Prevalence of spurious brands and seasonal demand.

Most of the modern retail opportunities are in the urban areas and the rural retail potential has
remained untapped. While there is a large potential in rural areas, fragmentation and cost of
market access are real deterrents. No doubt that rural retailing is gradually gaining grounds with
the explorations by the corporates like ITCs Choupal Sagar (rural hypermarket), HLLs Shakthi
and Mahamaza. However, the pace at which the retail sector has been expanding in rural areas
should have been much more faster. The higher purchasing power in rural and semi-urban areas
has significantly modified peoples lifestyle; for e.g. the sachet phenomenon is a thought to reach
to the bottom of the pyramid. Lot of people in rural India are just not willing to buy a whole
bottle of shampoo, but that doesnt mean they wont buy it. Thus, the key is in slicing the
relevant customer segments and developing appropriate formats. If the specific needs of
consumers are recognized, there would be a considerable market expansion, which would divert
a part of retail business to rural areas and help in reducing rural-urban imbalance.
In addition to these problems the number people below poverty line has not decreased in any
manner. Vast numbers of rural people tend to be highly superstitious, are tradition bound, believe
in old customs, traditions, habits, taboos and practices. Initial costs to penetrate into these
markets will be very high. Increasing costs of land in the rural areas also add to retailers
problems. Pace of expansion by competitors, High operating costs, supply chain problems, low

margin on agri inputs and low purchasing power of the customers will further add to the
challenges faced by the retailers.
A huge and distinct rural market has emerged in the country. One needed to distinguish between
a developed rural market and a developing rural market and adopt new strategies with an
aspiring middle class in the scene. Inadequate data and poor infrastructure are still impediments
on the way. The rural diversity, in terms of language and culture, among the States add to the
challenges. The rural population has become very conscious of the value of money and cannot be
taken for granted any more. Everything sold in metros cannot be sold in rural markets anymore.
The biggest challenge in rural retailing is to ensure products are available across the 638,000
villages, which are spread out over three million sq km in India. The problem is further
compounded by the geographical immensity of reaching the 12 million-strong kirana
(neighborhood mom-and-pop) stores in the country. Most of these stores are small, and
consumer goods companies have to reach out to them in villages only through a channel of
distributors and wholesalers, adding to the costs of distribution. At the same time, these small
retailers cannot be ignored about 90 percent of them are in towns that have no more than a
million people and some are in areas that have less than 100,000 people.
Companies are left with no choice but to start building a strong distribution system and adapting
to innovative means of transportation to combat bad roads and poor connectivity. This challenge
affects the pace of replenishments of sold goods as the supply system is too fragmented and
increases inventory holding costs for retailers. Some companies had set up area offices which in
turn manage smaller rural offices. Due to lack of reliable infrastructure for logistics and since the
supply chain is just developing in the country, fast moving consumer goods companies have to
plan their products in advance. So the supply pipeline becomes long and loaded.
More often companies have to redesign their products and rework on their pricing strategy to
succeed in the rural markets smaller pack sizes, product variants and perception of affordability
are key to target rural markets. Examples include shampoo in sachets and dry food in smaller
packaging. Using the media, which has deeper penetration in rural areas, goes a long way in
building awareness and driving acceptance for products. The channels include the state-run
broadcaster Doordarshan, radio channels, local language advertising, cinema, outdoor media
such as posters, banners and wall writing and tapping all forms of local entertainment. The
availability of more economical technology applications specific to rural markets will also help
organize the fragmented retail formats.

7) Rural Retail Stores:

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7.1) Rural Malls: Chaupal Sagar

Chaupal Sagar is one of the first organised retail forays into the hinterland. It was soft-launched
on 15 August. It is actually a warehouse for storing the farm produce that ITC buys through its echaupals. The mall has come up in one part of this warehouse.It has been set up by the
international business division of tobacco major ITC. It has been initiated as rural shopping-cuminformation centres in Madhya Pradesh. The first rural mall has come up 40-odd kilometres
journey from Bhopal towards Sehore.
ITC Spent 3 years and Rs.80 crores on research and development of this concept including
investments in E-choupal.
Objective
ITC describes the establishment as a set to create a high-quality, low-cost fulfilment channel for
rural India. However, any organisation is driven by the profit motive which are served through
this initiative:
reated
Creating an entry barrier for other prospective players ITC has very effectively integrated its
profit and social motives.
Concept
KSA Technopak - "It is definitely a pioneering venture because no other Indian company has yet
entered rural retailing with the all-under-one-roof concept."Malls stocking wide variety of
products with floor space of 7000 sq.ft plus a trading zone and information centre. It is a Hub
cum Supermarket, which has been set up in a section of the ITC rural warehouses.
Format
Chaupal Sagar cannot be shoehorned into any of the existing retailing categories. At 7,000
square feet, it is too small to be a mall. It has opted for self-service, stocking its merchandise on
shelves lining the neat aisles, it stocks a breadth of products no supermarket can. It offers almost
everything - from toothpastes to televisions, hair oils to motorcycles, mixer-grinders to water
pumps, shirts to fertilisers... It defies pigeonholing. It is just a very sharply thought-out rural
store.Most of the brands it sells are national such as Marico, LG, Philips, torches from Eveready,
shirts from ITC's apparel business, bikes from TVS, and tractors from Eicher.

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Facilities
Spread over 5 acres of land at Sehore in Madhya Pradesh:

Rural shopping malls will be open from 6 am to 9 pm.

Features and facilities at these ITC malls can overshadow those in the metros. The ITC
store sells everything that a rural consumer may ask for - sarees to kurta-pyjamas to shirts
(in the range of Rs 99-500), footwear, groceries, electronic durable from TVs to
microwaves, cosmetics and other accessories, farm consumption products like seeds,
fertilisers, pumps, generators and even tractors, motorcycles and scooters.
Banking and automated teller machines will be standard at the malls.
Insurance products for farmers.
Entertainment facilities, restaurants, public facilities and parking space will also be
available.
There is even a fuel pump in tie-up with BPCL and a cafeteria.
Parking lot for 160 tractors.
There will be a primary healthcare facility to be serviced by a private healthcare service
provider.
Information centres: The company will create the facility for providing online
information on commodity rates and weather.
Shopping malls will have a training facility on modern farm techniques.
Farmers can come and log on to the Internet and check the pricing and sell their
commodities.
There will also be godowns for storing the wheat and soybean and also for stocking
products retailed at the mall.

Business Model
The business model of Chaupal Sagar is linked closely with the E-chaupal initiative of ITC.
Role of ITC is to create infrastructure such as space, computers, and building. ITC will charge a
fee for the services and items sold at the mall.
E-CHAUPAL: E-Chaupal is the backbone of these rural malls. While the first layer (EChaupal) provides the farmers necessary information about weather and prices, this hypermarket
initiative will provide them another platform to sell their produce and purchase necessary farm

12

and

household

goods

under

the

same

roof.

The e-Choupal model required that ITC to make significant investments to create and
maintain its own IT network in rural India and to identify and train a local farmer to
manage each e-Choupal.
E-Choupal combines a Web portal in the local language and PCs with Internet access
placed in the villages to create a two-way channel between ITC and the villagers. The
project started with a pilot in June 2000 in Madhya Pradesh with Soybean farmers.
Currently, it covers six states, and multiple commodities like prawns, cotton and coffee
with 4000 Choupals.
Plans are to reach 15 states by 2010, covering 100,000 villages with 20,000 Choupals.
Each e-Choupal (equipped with a PC with Internet connectivity, printer and UPS)
typically housed in the farmer's house, is linked to the Internet via phone lines or,
increasingly, by a VSAT connection, and serves an average of 600 farmers in 10
surrounding villages within about a five kilometer radius. Using the system costs farmers
nothing, but the host farmer, called a sanchalak, incurs some operating costs (The IT part
of each e-Choupal costs about Rs 1.3 lakh, each e-Choupal is estimated to pay back for
itself in 4.5 years) and is obligated by a public oath to serve the entire community; the
sanchalak benefits from increased prestige and a commission paid him for all e-Choupal
transactions. The farmers can use the computer to access daily closing prices on local
mandis, as well as to track global price trends or find information about new farming
techniques-either directly or, because many farmers are illiterate, via the sanchalak. They
also use the e-Choupal to order seed, fertilizer, and other products such as consumer
goods from ITC or its partners, at prices lower than those available from village traders;

13

the sanchalak typically aggregates the village demand for these products and transmits
the order to an ITC representative. At harvest time, ITC offers to buy the crop directly
from any farmer at the previous day's closing price; the farmer then transports his crop to
an ITC processing center, where the crop is weighed electronically and assessed for
quality. The farmer is then paid for the crop and a transport fee. "Bonus points," which
are exchangeable for products that ITC sells, are given for crops with quality above the
norm. In this way, the e-Choupal system bypasses the government-mandated trading
mandis.
Farmers benefit from more accurate weighing, faster processing time, and prompt
payment, and from access to a wide range of information, including accurate market price
knowledge, and market trends, which help them decide when, where, and at what price to
sell. Farmers selling directly to ITC through an e-Choupal typically receive a higher price
for their crops than they would receive through the mandi system, on average about 2.5%
higher (about US$6 per ton). The total benefit to farmers includes lower prices for inputs
and other goods, higher yields, and a sense of empowerment. At the same time, ITC
benefits from net procurement costs that are about 2.5% lower (it saves the commission
fee and part of the transport costs it would otherwise pay to traders who serve as its
buying agents at the mandi) and it has more direct control over the quality of what it
buys.
By building a network of warehouses near the production centres and by providing inputs
to the farmers and test output at the individual farm level, ITC is able to preserve the
source and quality information of produce purchased. By helping the farmer identify and
control his inputs and farming practices and by paying better for better quality, ITC is
able to improve the quality of produce that it purchases. In the commodities market, these
two combine to help ITC create the differentiator that it set out to establish in the
beginning.

ITC gains additional benefits from using this network as a distribution channel for its products
(and those of its partners) and a source of innovation for new products. It is also being used to
provide services like rural market research to those interested.
Strategy for Success

Use of ITC warehouses : This will help in cost control as well as better utilisation of
space in these warehouses. It will also provide convenience and familiarity with the target
customer.
Targeted at Farmers selling to ITC warehouse through E-chaupal : With its network of echaupals, ITC communicates its latest commodity prices to the farmers via the Internet or
VSAT lines. If they find these attractive, they sell their produce to ITC. The sanchalak
(the person who operates an e-chaupal; most of them are farmers) of villages near these
malls reckons that half the farmers in his village deal only with ITC. Now, by setting up

14

the mall next to the warehouse, ITC is trying to monetise the footfalls from farmers; that
is every time sanchalaks- and farmers visit ITC's soybean factories in MP to sell their
produce, they also have the opportunity to spend their freshly earned cash.
ITC realised that the farmers had just got money, that they would spend it anyway, and
that they had an empty vehicle with which they could lug the stuff back.
ITC intends to capture the rural folks' out-of-village shopping:
The warehouse is one bulwark of its strategy, obviously. But the farmers will come here
only after every harvest. To ensure that they keep coming to Chaupal Sagar even at other
times, the company is offering a slew of other goodies. Another building is coming up
next to the main warehouse. When completed, it will house a bank, a cafeteria, apart from
an insurance office and a learning centre. ITC has tied up with agri-institutes to offer
farmer training programmes. Then, plots of land have been earmarked to display large
agricultural machinery like threshers. Other parcels of land have been earmarked for
pesticide and fertiliser companies for demonstrating their products. A petrol pump is
coming up as well.
To attract footfalls during the lean season, ITC plans to organise various activities and
events including melas,training programs, demonstrations.
The hubs are strategically located to attract suburban crowds as well.
Retail channel for its own brands as well as for other brands :
Working through the sanchalaks, ITC first pushed its own products, like salt, into the
hinterland, and then invited others like Parachute and Philips to ride on this distribution
chain. Today, it plans to similarly create revenue streams around its warehouses.

Financing Scheme

ITC is investing initially Rs 3 crore (Rs 30 million) in each such shopping mall. However
it is working out a strategy to make it cost-effective for them.
To keep its own investment to the minimum, ITC is encouraging the samyojak - a local
broker or middleman co-opted by ITC - to pick up equity and manage these shops as part
owners.
Assisted by four ITC salesmen, the samyojaks will assess demand, ensure just-in-time
delivery, manage customer service and keep accounts.
Uniqueness Of the Model: lies in the fact that it works equally well for ITC as the buyer
of farm produce and ITC as the seller of desirables.
Charge fees from the brands being showcased at the mall as well as for the services being
provided at the Mall.

Results & Expectations

During the peak season, a hub sees traffic of about 200 tractors per day on an average, as
farmers come to sell their crops at the hubs.

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Initial response: On the first day the store notched up a business of about Rs 70,00080,000. Footfall of about 700-800 people on weekdays and soaring to 1,000 on weekends
with conversion levels of 35%.

Future Plans

ITC chairman Yogi Deveshwar has promised his shareholders that the company would
open 1,000 rural malls in India. This is the first one to have come up.
Encouraged by its image as a fair and reliable buyer of farm produce, ITC decided to
invest in 5-acre malls, costing between Rs 3-5 crore each, across 15 states. The first five four in Madhya Pradesh and one in UP - will be inaugurated by March 2004.
The first shopping mall is being set up near Sehore, and the second one will come up in
June near Itarsi in Oshangabad distric

7.2) Coramondal Internatioal: Mana Gromor

Coramondal international is a part of Murugappa groups and are in diversified business like
reailing, fertilizers, cements, infrastructure. Their retail stores are known as Mana Gromor .The
setting up of over 400 MGCs, a low-cost hub-and-spoke model, across Andhra Pradesh, has
helped the company sell its products directly to farmers. Total revenues from these centres stood
at Rs 204 crore (excluding turnover from the sale of the company's own products) in 2008-09.
Coromondel have about 400-plus Mana Gromor Centres (MGCs), rural retail stores, in Andhra
Pradesh and are focusing on consolidating these operations during this year. They are going to
expand the stores initiative to other states such as Tamil Nadu, Karnataka and Maharashtra.
During the financial year, CFL, part of the $3 billon Murugappa Group, plans to introduce new
agri and lifestyle products for sale through theses MGCs. At present, around 150 stores are
selling lifestyle products and the company plans to increase this to 300 during the year. The
range of products sold through MGCs include apparel, consumer durables, footwear and mobile
re-charge coupons, among others, besides fertilisers, pesticides and specialty nutrients. CFL also
plans to add toys and stationery items to the list of products sold by these stores.
The name change to Coromandel International reflects a global corporate image because the
company is expanding globally. They are no longer a fertiliser company; They are into fertilisers,
pesticides, specialty nutrient products and are also looking at other growth areas. Their focus
both geographically and in terms activity is much wider .

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Visit to Mana Gromor:

We visited Mana Gromor center in jammikunta (Karimnagar Dist).We asked some structural
questions on supply chain, market selection, advertising, promotion strategies, and store design,
merchandise pricing to store manager . we interviewed some of the customers who purchased in
the store about store services, Their satisfaction levels, Purchase patterns, Decision making
process. We observed the consumer behaviors, store layout and design and also we observed
number of walk in customers ,real customers.

Observations and findings from Mana Gromor:

Supply chain management: They import their life style products from regional distribution
Centers (Warangal).15 MGPs import their life style products from this RDC. Andhra Pradesh
has 9 RDCs. Lead time for getting the products is one week. Transportation and unloading is
taken care by the RDC.
Store manager is responsible for Storing and sorting of merchandise.
Lead Time= 1 week
Inventory carrying cost= 5000 Rs per month
Safty stock=20 % more than the demand
Other costs= 1000 Rs
Lead time fluctuations= Twice or thrice in the year.
Demand fluctuations = Most probably in festival seasons.
Total cost for supply chain for the store is =6000 Rs
Factors which are affecting the store sales:
a) Behavior of consumers:
Most of the customers who come to the MGC are farmers. They come for buying the pesticides
then the sales persons offer them to have a look at the life style product store which is also
attached to their pesticide store. But most the people have perception that the products which are
in the modern retail stores are more expensive and there would be no credit policies. So it is
difficult task to the store manager to change the perceptions about prices of lifestyle merchandise
in the stores.

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b) Behavior of competitors:
Most of the kirana stores and mom & pop stores spread negative roomers about the MGP and
some times competitors have given offers to attract their customers.
c) Socio Economic Environment:
Most of the people in rural are middle class people so their purchasing power is low so they
dont go for branded products. And they are also more price conscious about their products.
Location selection:
This MGP is 1 km far from the center of the town in out skirts. So it is disadvantage to them
because farmers they spent 10 Rs. for auto to reach the store. So according to the store manager
they are losing 20% of the customers due to wrong selection of the place.
Advertising and promotions:
To attract the customer and pull the customers they implemented different strategies like
Wallposters, Pamphlets, banners. Their promotion mantra is word of mouth and their Field
assistants also promote their products when they visit their fields. And also they displayed some
posters at POS .
Coming to the advertising part they advertise about their store in local TV channels and slide
shows in film theatres.
Store layout and design:
MGC is in the area of 170 feet* 200 feet and this is divided in to two parts one is for Pesticides
store and second half is for the life style products store. Customer who enter in to the pesticide
store can also enter in to the life style products store through the door which is between these two
stores. They have enough shelfs to accommodate the products and they have the space for every
product. They have enough parking place for the vehicles. They fixed CFL bulbs and tubes for
lighting and they painted the walls in the mixture of orange, green and white colours, which is
Mana Gromor Theme. This is the layout form of KOHLs Layout.

Observations about Customers:

No of walk-in in the Pesticides store is: 74 people in 3 hours(12.00 p.m-3.00 p.m)
No of customers who purchased in pesticide store: 68 people
No of people who visited the LSP store through pesticide store: 31 people

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No of people who purchase from the 31 people (impulse purchase): 3 people

Pesticide store graph:
80
70
60
50
40
30
20
10
0

Series1

No of walk
insthepesticide store

Purchasers

no of customers visited Impulse purchase in LSP

LSP throuh Pestisides
stores

No of people who directly come to the LSP store in three hours: 12

Real purchasers in the LSP store: 8
No of people visited pesticide store trough LSP store: 1
Purchasers in Pesticide store ( impulse purchase) : 0
14
12
10
8
6
4
2
0

Series1

No of customer enter in
to the lsp store

real customers

no of customers visited
Pestisides stores throuh
lsp store

Impulse purchase in
pesticides

19

Coromondel Mana Gromor store pictures:

Picture 1: Visual merchandicing and aisle space in coramondel store

Picture 2: Store design,wall paintings,lighting, store room in the picture.

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7.3) Haryali Kisan Bazaar

Haryali Bazaars Bring Organised Retailing to Farmers

Having successfully pioneered a new concept of Haryali Kissan Bazaars in 2002 in

Hardoi, agri-inputs focused DCM Sriram Consolidated Ltd. (DSCL) opened eight more
(Ladwa in Haryana, Ferozepur in Punjab, Kota in Rajasthan and four locations in UP).
The store complex is spread over 2-3 acres and caters to all the farmers requirements
(both DCM Sriram products & other sources): farm inputs (fertilizers, seeds, pesticides,
animal feed), farm implements, spare parts, irrigation equipment, spraying equipment.
Further, the uniformed salesman, an agricultural graduate, gives free agricultural related
advice in personal interactions or through mobile phones (averaging 20 calls a day).
Twenty such stores, each catering to 100 villages, are planned.

Hariyali Kisaan Bazaar - a rural business centre, is a pioneering micro level effort, which is
creating a far-reaching positive impact in bringing a qualitative change and revolutionizing the
farming sector in India. It is also an example of how well meaning corporates can contribute to
development of agriculture by building sustainable business models.
The "Hariyali Kisaan Bazaar" chain, seeks to empower the farmer by setting up centres, which
provide all encompassing solutions to the farmers under one roof. Each "Hariyali Kisaan Bazaar"
centre operates in a catchment of about 20 kms. A typical centre caters to agricultural land of
about 50000-70000 acres and impacts the life of approx. 15000 farmers. Each centre is engaged
in:

Bridging the last mile: Provides handholding to improve the quality of agriculture in the
area. Provides 24X7 support through a team of qualified agronomists based at the centre.
Quality Agri-Inputs: Provides a complete range of good quality, multi-brand agri inputs
like fertilizers, seeds, pesticides, farm implements & tools, veterinary products, animal
feed, irrigation items and other key inputs like diesel, petrol at fair prices.
Financial Services: Provides access to modern retail banking & farm credit through
simplified and transparent processes as also other financial services like insurance etc.
Farm Output Services: Farm produce buyback opportunities, access to new markets &
output related services.
Other Products and Services:Fuels, FMCG, Consumer Goods and Durables,Apparels etc.

These centers provide the much needed respect/dignity and freedom to the Indian farmer. In the
near future, Hariyali Kisaan Bazaars plan to move beyond agri to meet the other needs of farmers
as customers.

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Visit to Haryali Kissan Bazar:

We visited Haryali kissan Bazar in Jammikunta (Karimnagar Dist).We asked some structural
questions on supply chain, market selection, advertising, promotion strategies, and store design,
merchandise pricing to store manager . We interviewed some of the customers who purchased in
the store about store services, Their satisfaction levels, Purchase patterns, Decision making
process. We observed the consumer behaviors, store layout and design and also we observed
number of walk in customers ,real customers.
Observations and findings from Haryali Bazar:
Supply chain management: They import their life style products,agri products,apparels,tyres,
tubes from zonal ware houses. Lead time for getting the products is 5 days.Transportation and
unloading is taken care by the ZWS.
Store manager is responsible for Storing and sorting.
Lead Time= 5 days
Inventory carrying cost= 10000Rs per month
Safty stock=30 % more than the demand
Other costs= 2500Rs
Lead time fluctuations= Twice or thrice in the year
Demand fluctuations = Most probably in festival seasons,craft seasons, fertilizing seson.
Total cost for supply chain for the store is =12500 Rs
Factors which are affecting their store sales:
a) Behavior of consumers:
Most of the customers who come to the Haryali are formers they feel discomfort to come to this
store because this store is 3km far from the town so customers would spend 10-15 rs to come
here. And they bargain in the store because they sell all products which are useful to the
farmers.
b) Behavior of competitors:
Coramondel is the biggest competitor for Haryali .Coramondel is in the town so most of them
prefer to go coromondel. And coromondel promotion strategy and personnel relationship with
customers are good.

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c) Socio Econpmic Environment:

Most of the people in rural are middle class people so their purchasing power also low so they
dont go for branded items most of the times and also they are more price conscious about their
products.
Place selection:
This Haryali is 3 km far from the center of the town and it is at the out of the town and it is
between two towns so it is disadvantage to them because farmers spend 15 rs for auto to reach
the store. So according to the store manager they are missing 50% of the customers due to wrong
selection of the place.
Advertising and promotions:
To attract the customer and pull the customers they implemented strategies like Wall posters,
Hordings , Pamphlets, banners, slide shows in film theatres

Store layout and design:

MGC is in the area of 250 feets* 300feets and this is divided in two 4 categories
Store,
ware house,
Petrol pump,
Tractor spare parts,
cultivating plows.
The store house is the design of spiral design they have circle, rectangular type of fixtures
they have and any body can go to every department very easily. They have huge aisle space
and the width of the shelf also very wide
Observations about customers:
No of walk-in in the store is: 14 people in 2 hours(10:00 a.m-11:45 a.m)
No of people who visited the petrol pump : 16 people
No of people who purchase from the 14 people: 13 people

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Pictures of Haryali Kisan Bazaar

Picture 3: Haryali kisan bazaar store in Jammikunta

Picture 4: spiral store design of Haryali Kisan Bazaar in Jammikunta

24

8) Recommendations and Conclusion

The business model for rural retail can be successful only when integration between the
profit and social motive is apparent. The social angle needs to be met for it to be
acceptable.
Selection of location of the store is very important. Selecting a store in the locality will
pay off than having it at the out skirts of the village.
Empowerment in terms of economic power, purchasing power, knowledge and
information dissemination is crucial for rural retail ventures to succeed. The model
should empower the rural consumer and at the same time take advantage of this
empowerment through creation of demand for its own products and that of its partners.
The level of penetration except for certain products, has been negligible so far. However,
so far as the rural share in consumer expendables like cooking oil, tea, electric bulbs, hair
oil, shampoo, toilet soap, toothpaste, washing cakes and washing powder is concerned,
their share on an average, is much higher than consumer durables. Though the ruralurban differentials are not so pronounced in the case of durables, the rural market
penetration is low with respect to urban areas. However, in case of health beverages and
cosmetics like shampoos, nail polish and lipsticks, large gaps exist. Hence these products
provide substantial opportunity to enter the rural markets.

Definitely there is lot of money in rural India. But there are hindrances at the same time. The
greatest hindrance is that the rural market is still evolving and there is no set format to
understand consumer behaviour. Lot of study is still to be conducted in order to understand the
rural consumer.

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9) References
Websites:
1.
2.
3.
4.

www.echoupal.com
www.dscl.com
http://www.murugappa.com/companies/coromandel/subsidiaries.htm
www.indiaretailing.com

Books:
5. Bhupesh Bhandari:The reign of rural retail
6. Berman Barry and Evans Joel.R., Retail Management- A Strategic
Approach-Ninth Edition, PHI
7. Cox, Roger and Brittain, Paul., Retailing-An Introduction- Fifth Edition,
Pearson Education.