INNOVATION 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?

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
Š Ease of access Š Up-to-date content Š Layout, design, consistent theme Š Easy navigation Š Higher interactivity Š Access through multiple media Š Higher use of non-textual information Š Multiple languages Š 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.

Š Each soochanalyas has a computer, modem, printer, UPS,furniture and stationary. Š The kiosk have dial-up connectivity through the local exchanges, running on optical fibre or UHF links. Š Server hub is a Remote Access Server housed in district panchayat centre. Š Cost of establishing one kiosk-Rs.75000 Š Financed by panchayat and community , no contribution from the government. Š Managed by local entrepreneurs referred as managers, who charge users fees for the services offered by the kiosks.

Š The first 20 kiosks was handed over to respective managers after one year of operations. Š Village panchayat maintains the building and the fixtures. Š Managers are responsible for all operational expenses and revenue collection. Š Manager does not receive any salary. Š He pays 10% of the income as a commission to the district council for maintaining the Net. Š 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 :
Š Increasing employability Š Bridging gaps in information Š Promoting rural businesses Š Internet-based services through kiosks such as e-health care, e-commerce, e-governance and eentertainment. Š 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.

Š Performance in 2008-09 The performance of TARAhaat has improved in the year 2008-09 when it earned the highest revenue ever. Š Network Growth increased 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. Š New Products and Promotions Launched two new courses on Diploma in Computer Application and Diploma in Financial Accounting .

Grameen Sanchar Society (GRASSO)
Š Franchisee of BSNL in West Bengal, Orissa and Jharkhand. Š 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.

ITCs 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. e-choupal serves approximately 10 villages within 5 kilometers radius, managed by a sanchalak (coordinator) who is hired locally and becomes the local entrepreneur. 

Each 

Reduce

transaction costs of selling and buying crops for farmers by aggregating certain services together

Designed to address the issues such as:
1. 2. 3. 4. Fragmented farms Weak institutions Involvement of intermediaries Information Asymmetry

E-Choupal Services
Relevant & Real-time Information
Commodity prices, Local Weather, News

Customized Knowledge
Farm Management, Risk Management

Supply Chain for Farm Inputs
Quality screening, Demand Aggregation for Competitive Prices & Efficient Logistics

Direct Marketing Channel for Farm Produce
Lower Transaction Costs, Better Value through Traceability

E-Choupal Services contdW
Distribution of Products and Services to Rural Markets Micro marketing
Product/Services Demos Marketing and Brand Building activities

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 eChoupal 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. T e basic business model as t ree tiers : ‡ The village kiosk operator ‡ The LSP ‡ N-logue communications.

The Business Model
n-Logue

Services

LSP-1

LSP-2

LSP-3

Revenues

Kiosk

Kiosk

Kiosk

Kiosk

Kiosk

Villagers

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
± Learning typing

(besides telephony)

± ± ± ± ± ± ±

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 Shakti
SHAKTI - 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 incomegenerating 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)
Š Subsidiary company of Mahindra and Mahindra Ltd. Š Started in 2000 with equity stake from IFC, Washington. Š Revolutionized agri-business by aggregating factors of production under the brand name Mahindra Krishi Vihar. Š Solutions specific to crop, region and market. Š 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/choupalsaagar.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/choupalsaagar.htm

Mahamaza (Bringing E-Commerce to Rural India)
Š Introduced in 2000. Š Network of virtual dealers scattered around the country. Š 275,000 web store dealers in small towns. Š Extraordinary range of products, from Motorcycles to cycles and cell phones. Š They sell 28 brands across 15 industries. Š Website uses offline network of Web store owners (WSO) . Š 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
Š It provides detailed info ranging from farm practices to advisory services to pricing details for different crops in the nearby markets, weather forecasts. Š Set-up kiosks in 16 villages near their sugar factory. Š These kiosks are called Parry s Corners, business hubs for their respective villages. Š 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 http://www.eidparry.com/agriland.asp information services.

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.co m/

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.co m/

3A Bazaar Cont .
Š 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. Š Villages are visited weekly or fortnightly or monthly. Š It fits with the irregularity of incomes of villagers and the mobility eliminates the drawbacks of a static rural retail shop. Š Daily average sales are in the range of 8-10 thousand rupees http://www.3abazaar.co
m/

3A Products
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Grocery Staples Toys Personal Care Health Products Confectionery Color and Cosmetics House Hold items Stationery

http://www.3abazaar.co m/

http://www.3abazaar.co m/

CONCLUSION
Š Marketers use innovative tools and strategies to overcome challenges they face in business. Š Business innovation is broadly divided into product/service innovation and process innovation. Š The ICT-driven value chain and organized retail format have been found to be the best innovations for rural India. Š 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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