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INTRODUCTION
Availability determines volume and market share Challenge : Reaching 6 lakh villages and feeding a retail network of over 35 lakh village shops 68% of rural markets still lies untapped due to inaccessibility. Some successful regional brands : Ghari detergent, Anchor toothpaste, Gemini Oil
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Poor storage systems Highly credit-driven market, low investment capacity of retailers Poor visibility and display of product Poor communication of offers and schemes poor reach of media
Channels of Distribution
Five layers of distribution channels for movement of products from company depot to interior village markets: Layer Channel Partner Layer 1 Company depot/ C&FA Location National/State level
Layer 2 Distributor/ van operator/ District level super stockist/ rural distributor Layer 3 Sub-distributor/ Retail stockist/ Tehsil HQ, towns Sub-stockist/ Star seller/ and large villages Shakti dealer Layer 4 Wholesaler Layer 5 Retailer
Prof. Raghavendran Venugopal
Wholesaling
70% of rural market beyond reach of direct marketing 50% rural consumption through wholesalers Speculative rather than distributive - insufficient product availability - urban areas most concentration on retailers - wholesale distribution less -companies neglected rural markets
Rural premises: - infrastructural constraints * lack of sufficient space * inadequate power supply * lack of proper storage system - financial constraints * inadequate funds * unwillingness of banks to extend loans - low retail space per capita <100 sq.ft area - travel and transport costs
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Vans
Salesman loads van with stocks from nearest stockist or company stock point Works around surrounding markets Then moves to next stock point journey cycle Used for both sales & promotions Eg.: Everyday , J.K. Diary Effective but expensive
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Mobile Traders
Direct to home, unorganised distribution Daily need products mostly local brands detergent, cosmetics, personal care, garments, footwear Carry products on bicycles, mopeds, handcarts Deep reach Good rapport with clients Mostly sell fakes and local brands
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Haats/ Shandies
Oldest marketing channel in India Profile of haat visitors and purchase behaviour
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BEHAVIOUR OF CHANNEL
Credit facilities to customers Pricing by channel Reason for stocking a product / brand Seasonal pattern of stocking Information source and influence on retailer Purchase source for the retailer Purchasing cycle Channel promotion
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VAN/SUBSTOCKI ST
RURAL MARKET
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C&FA
DISTRIBUTOR (RURAL)
DISTRIBUTOR (URBAN)
SUBDISTRIBUTOR
WHOLESALER
WHOLESALER
RETAILER (RURAL)
RETAILER (LOCAL)
RETAILER (URBAN)
RETAILER (URBAN)
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CHARATERISTICS
Rural distribution separated from urban distribution Company appoint a sub distributor(SD)under rural distributor(RD) Owing to poor road networks & low volume per outlet, RD covers a large area DM1 model focuses more on RDs & SDs rather than the wholesale channel and has large no. of points appointed in the rural areas as locations are scattered. This ensures that companies products reach maximum no. of areas Advantages include better monitoring, price discipline and control over the sale and distribution of products Companies prepare PJPs (Permanent Journey Plan) six working days. Outlets are covered only fortnightly No. of outlets covered in a day is 30 40 of which 15 20 are productive Eg. HLL
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WHOLESALER
RETAILER (LOCAL)
RETAILER
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CHARATERISTICS
There is no separate channel for rural distribution Minimises distribution costs, allowing companies to offer better margins to distributors and other channel partners (fewer) Companies with limited no. of SKUs and high sales volume adopt this model It is also preferred by new entrants who lack infrastructure required to have wide distribution network Example: Priyagold biscuit, Nirma (Shakti detergent, Nirma soaps, Camay & other toiletries) Issues: Coverage, No SD to cover interior parts
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At Tehsil level
WHOLESALER
RETAILER
WHOLESALER
RETAILER
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EXCLUSIVE DEALERS
MULTIPLE DEALERS
CONSUMER
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DEPOT
DISTRIBUTOR (URBAN)
STOCKIST (RURAL)
RETAILER (URBAN)
RETAILER (RURAL)
CONSUMER
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Retail outlets are not able to sell more durables because: They lack variety Transport costs increase the prices (The net landed cost of a 21inch Color TV is Rs. 1000 more compared to the price offered by a dealer in the city) Rural buyers prefer to buy from city stores because: More choices are available It is possible to get competitive prices through bargaining Rural buyer can see many options, visit several shops and check different prices Problem: To generate volumes, companies give huge discounts to the big city dealers, which results in price differences and put the rural retailer at disadvantage
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HAAT RETAILER
VILLAGE RETAILER
MOBILE TRADER
CUSTOMER
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Channels of distribution: Channel 1: Manufacturers to wholesaler/retailer in big city or small town, or directly to customer Channel 2: Wholesaler in big city to wholesaler in small town/kasba
Channel 3: Wholesaler in small town /kasba to village retailer/mobile trader/haat Fakes reach consumers through the following channels: Small kirana shops located within the village Big shops generally located on the main road Door-to-door visits by salesmen who pose as company representatives Salesmen in local trains and buses Mobile traders Haats
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SYNDICATED DISTRIBUTION
Distribution is posing a major problem for a new company to penetrate to Rural market. Two or more companies come together to form a syndicated trading organization to jointly distribute a collective group of household products by sharing costs. Small company should not deal in the same products that the big company deals
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JK Diary Case
JK diary launched a WHITENER DIARY TOP in 50 gm. sachets priced at 6.50 Rs targeting at Rural customers. To cover the interiors a van was hired(125 Km *25 Days) @6Rs Per Km. Since JK diary has only a single product they shared the travelling expense with three other companies targeting at rural customers.
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OTHER CHANNELS.
HERO HONDA Company reported emergence of Unofficial channel of distribution. (Village Mechanics, Real Estate Agents & Shopkeepers). Take the Bikes in 2s or 3s from company Dealers. Display them outside dealers Premises and will close the sale. Paper work left to the Dealer to complete.
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Rural Markets are GOLD Mines which forced marketers to come up with innovative ideas to ensure the reach of their Products in these areas
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THANK YOU
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