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Report on rural formats of modern retail in

India.
Rural Retail: Retail is undergoing major changes in todays
changing business environment. Industrial sectors are in the phase
of transition from conventional business models to innovative,
market driven and consumer centric models. In India retail is not a
new word, however the emerging formats of retailing are changing
the entire scenario and posing tough challenges in front of Indian
retailers.
They are now designing customized retail products and services and
targeting the untapped segment of the market. Presently, nearly
60% of the population resides in rural India and their retail
requirements are partially met by the unorganized retail stores. This
study is an attempt to explore the potential of rural retail market of
India, accessing their needs for products and brands. The study also
aims at developing a business model for the rural retail market in
India.
More than 70% of the Indian population lives in more than 600000
villages of varied sizes, infrastructure, education levels and
economic conditions. According to India Retail report 2009, the
urban rural split in consumer spending stands at 9:11, with rural
India accounting for 55 percent of private retail consumption. With
organized retailing getting into maturity in Tier-I and Tier-II cities,
the next level of retail growth would be seen in rural markets.
There are a number of formats in modern retail that emerged over
the last century or so and have now become the standard the world
over. They today rule the roost and have captured the bulk of the
market share around the globe. Let us discuss these briefly.
The Indian retail sector is going through a transformation and this
emerging market is witnessing a significant change in its growth and
investment pattern. Both existing and new players are
experimenting with new retail formats. Currently two popular
formats hypermarkets and supermarkets are growing at a rapid
pace. Apart from the brick mortar formats; brick -click and clickclick formats are also increasingly functional on the Indian retail
landscape. Consumer dynamics in India is also changing and the
retailers need to take note of this and formulate their strategies and
tactics to deliver the exact expected value to the customer.
Development of mega malls in India is adding new dimensions to
the booming retail sector. There is significant development in retail
landscape not only in the metros but also in the smaller cities and
towns.

Rural formats in Modern Retail:


It is difficult to fit a successful international format directly and
expect a similar performance in India. Considering the diversity in
terms of taste and preferences prevailing in India, the retailers may
go for experimentation to identify the winning format suited to
different geographies and segments. For example, the taste in south
is different from that in north and this brings challenges to the
retailers. Therefore, most of grocery retailers are region centric at
this point in time. The available research findings on retail indicate
the following trends in Modern Retail formats:
Trial & Error: Now a number of retailers are in a mode of
experimentation and trying several formats which are essentially
the representation of retailing concepts to fit into the consumer
mind space. Apart from geography even rural and urban divide
poses different kind of challenge to the retailer. Pantaloon Retail
India is experimenting with several retail formats to cater to a wide
segment of consumers in the market.
Emergence of Wholesale Clubs: Since retailers are trying to
segment the market with the help of formats, they developed
another new format in the form of Wholesale Club to sell a segment
of consumers, who purchase on bulk and look out for substantial
discounts and offers. The new format is going to be a kind of
wholesale club which is likely to be located close to Food Bazaar.
Consumers who are interested to purchase on bulk can take benefit
from this format.
Increasing Acceptance in Small & Medium Markets: Mallmania is phenomenal in India and is spreading fast and entering
even the second tier cities in India. Real estate developers are
jumping very fast to take this further from Metro cities to smaller
cities and corporate houses like ITC and Sriram group are making
steady progress to make this phenomena feasible in rural markets
as well. There is no denying that the top notch cities like Mumbai,
Delhi, Bangalore, Hyderabad, Kolkata, Chennai and Pune are leading
the way but the second tier cities like Visakhapatnam, Vijayawada,
Coimbatore, Madurai and Surat are also catching the eye of all
retailers. Retail developers are in such a mood that they may over
ride the requirement in a specific city.
Increasing Importance of Supermarkets & Discount Stores:
Such a format provides the greatest selection of any general
merchandize and very often serves as the anchor store in shopping
mall or shopping centre. In India, the number of department stores
is less as compared to other retail formats such as supermarkets
and discount stores. Shoppers' Stop is the first one to open a

department store in the early 1990s and currently operates 19


stores in 10 different cities in India .The store strongly focuses on
lifestyle retailing and mainly divides into five departments such as
apparel, accessories, home decor, gift ideas and other services.
Shoppers Stop is getting stronger and stronger year after year
Customers still rely on traditional concepts: A super market
normally sells grocery, fresh, cut vegetables, fruits, frozen foods,
toiletries, cosmetics, small utensils, cutlery, stationery and Gift
items. In India Food World, Food Bazaar, Nilgiri (30 plus stores) and
Spencer Hyper are the leading super market operators.
Emergence of Private-Label Brands: The private labels are
offering flexibility to both the retailer and the consumer on price
front. The objective of the store is to offer variety at affordable price
in each category. Food Bazaar has made the transition from just a
grocery retailer to developing emotional bonding with shoppers by
providing some value added services to the shoppers. Some of
these initiatives include: (Jo Dikhta Hai WO hi Bikta Hai) Live chakki:
which allows customers to buy fresh wheat and have it grinded
there at the store Fresh Juice counter: This provides customer to
have fresh juices. Live dairy: This provides customers with fresh milk
and milk products. Live kitchen: Customers have the option of
buying vegetables, getting them chopped, cooked fully or partly.
Soups, salads and sandwiches are also available at live kitchen.
Recent Developments in Rural Retailing: Therefore, in recent
times rural retailing is witnessing explorations by both corporate
houses and entrepreneurs ITC's Choupal Sagar, HLL's project
Shakthi and Mahamaza are some of the models being tried out. At
this juncture there is no conclusive evidence of winning rural retail
formats available. However, corporate forays into rural retail are
expected to bring more experimentation and innovation in term of
retail format. The Godrej Adhaar, the rural retail initiative of Godrej
Agrovet Ltd operates a chain of 18 stores providing a host of
services to farmers and their families and is planning to set up at
least 1,000 stores19 across rural India in the next five years. Apart
from Godrej Adhaar and Choupal Sagar other formats operating
successfully in the rural area are, M & M Shubh Labh stores, Escorts
rural stores, Tata Kisan Sansar, and Warnabazaar.
e-Retailing: The importance of internet retailing is growing all over
the world. Some internet retailers such as e Bay and rediff.com are
providing a platform to vendors to sell their products online and
they do not take the responsibility of delivering the product to
buyer. They provide virtual shopping space to the vendors. On the
other hand online retailers like amazon.com and walmart.com have
to maintain their warehouse to stock products and take the
responsibility of Delivering products to the buyer. Many companies

are expanding their services to Tier 2 and Tier 3 cities. With growing
internet penetration, Rural India has greater capacity and demands.
Few formats which can be incorporated in Rural India:
Supermarkets:
A supermarket is a large food store of at least 4,000 sq.ft. in size
where the bulk of the sale is under the self-service system. In Rural
India, majorly all the villages buy bulk products in a near buy town.
Super Markets will be a more useful means of providing service to
the customers at one go.
Convenience Stores:
A convenience store is a scaled-down version of a supermarket.
Convenience stores can be set up in villages where the population
lies in the middle and higher income levels. This not only increases
penetration but also taps the untapped market very easily. And
hence brand recognition all over.
Discount Stores: Most of the population in India prefers products
at low cost, discount stores provide an opportunity to enter to the
Rural India.

Few existing models in Rural India:


HARIYALI KISAAN BAZAAR MODEL:
DSCL backed by years of experience in the agribusiness, has
implemented a one of a kind rural retailing initiative, the Hariyali
Kisaan Bazaar rural departmental stores, to provide single-point
solution to the diverse needs of the contemporary Indian farmer.
AADHAAR MODEL:
Godrej Aadhaar is the agri services cum retail initiative of Godrej
Agrovet Ltd. It is a complete solution provider for the Indian farmers
and provides professional guidance with an objective to improve
productivity, higher returns and improved cost benefit ratio.
PROJECT SHAKTI MODEL:
HUL launched Project Shakti in the year 2001, in keeping with the
purpose of integrating business interests with national interests The
model was piloted in Nalgonda district of Andhra Pradesh in 50
villages in the year 2000. The Government of Andhra Pradesh took
the pioneering step of supporting the initiative by enabling linkages
with the network of DWACRA Groups of rural women set up for their
development and self-employment.
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.

E-CHAUPAL: E-Chaupal is the backbone of these rural malls. While


the first layer (E-Chaupal) 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 and household goods under the same roof.
HLL-SHG BUSINESS MODEL:
Hindustan Lever Ltd (HLL) India's largest consumer goods company
has a large distribution network comprising 5,000 re-distribution
stockists and 40 C&FAs (Clearing and Forwarding Agent). Yet this
network covers only 75,000 villages directly out of the uretotal
6,00,000 villages in India. A tie up with SHGs can take HLL products
to many more villages directly.
Conclusion:
Indian customers have become more sensitive to quality, customer
service and status. He/She is ready to pay, sometimes, astronomical
sums provided their needs are satisfied. They are basically looking
for an experience which is more of cognitive than physical. Indian
consumers are still family-driven entities. Shopping, entertainment
and eating out are family events. Since these decisions are normally
group decisions, hence a marketer has to address family sensibilities
more rigorously to woo Indian customers. Finally, it is not the format
that gives business sustainability rather it is one of the vehicles to
deliver the value to the customer.