India’s over 600,000 villages and a rural population of over 700 million present a very unique and challenge opportunity for various organizations. The fact that this population has completely different needs, wants and desires compared to the urban populace makes the situation even tougher to play in.
India’s rural sector has always been an enigma for organizations across the board. They have tried various ways and means of reaching the rural population. Some have been successful while others haven’t.
India’s retail sector has for quite a few years been one of the sunshine sectors of our industry. Future Group, Reliance, Aditya Birla Group, Goenka, a number of big players have established themselves in this field in formats as varied as supermarkets and cash and carry stores. But problems ranging from poor supply chain, high infrastructure costs, lack of positioning and loyalty have proved as obstacles in their growth path.
Now, many of them are turning their glances to the rural areas for expansions.
- Shoppers Stop is planning to open over 12 stores in smaller cities by the year end at an investment of about 120 crore
- Future Group is planning to enter 10 – 12 towns every year
- Metro Cash and Carry and Easy Day are looking to expand their cash and curry business first to smaller towns
- Wills Lifestyle and Spice Hotspot are targeting these smaller cities and towns as a very important part of their strategy
Wondering how come this change? I analysed a number of factors / reasons responsible for this.
One of the most important factors is the changing demographic dividend - Increasing disposable incomes, better standards of living and reduction of gender and race divides is proving to be increasingly beneficial.
With increasing influx of TV, new technologies, media and Internet, the rural population is getting all kinds of information in the nick of time. This has been instrumental in helping them open their eyes to the outside world and in knowing what’s good and what’s bad.
This has also helped the rural populace to better realise their agricultural produce and get the right price for it. Eg: Reliance Fresh is sourcing the vegetables directly from the farmers for its stores thereby removing the need of middlemen. Low land availability and rising prices has also made many retailers look to smaller towns for their operations.
Increasing customization and decreasing the stock of luxury products is the strategy which retailers are using for rural areas.
In Rakesh Biyani, CEO, Retail, Future Group’s words –
“Sales per sq ft may be lower than the cities, but then the costs are lower too”
Do you think our retailers can succeed in the smaller towns and rural areas?