Unlocking wealth in Rural India

While urban demand for consumer products remains sluggish worldwide, rural markets are growing faster than ever in some of the largest emerging economies, where rural residents report being more optimistic about future wage increases than their urban counterparts.  In some countries, rural side has already begun to outstrip demand in the cities. 

India, the fastest growing economy in the world and with over 1.25 billion consumers of food and beverages is the fifth largest sector in manufacturing. What's more, rural Indians are trading up. Commodities are giving way to branded products, and more expensive goods are replacing entry-level versions, as consumers gain more disposable income. Their increased purchasing power is largely due to the steady migration of manufacturing jobs to the countryside.  

Many corporations are recognizing this enormous opportunity and stepping up efforts to gain a strong foothold in India's rural markets. But they are meeting with mixed results. An undeveloped transportation infrastructure, unreliable telecommunications and electricity services, inadequate distribution networks and widely dispersed consumers make it costly to establish a profitable presence at scale.  As also, finding partners to help identify, sell to and service rural customers  is no simple matter either. 

What sets these organizations apart is their superior understanding of how to forge viable distribution paths into the countryside, identify profitable new customer segments, earn the loyalty of channel partners, and create durable ties with customers to build a strong first- mover advantage. Smart companies have found that they need to focus on distribution even before making the seemingly commonsense moves of identifying and and approaching target customers. 

Many sparsely populated areas (5000 to 10000 people) with good roads are served by vans that bypass distributors and supply products to retailers directly. Retailers use mobile technology to order appropriate stock for their local customers, and the vans make regular visits of three times a week. Still smaller and less accessible micro markets (with population below 5000 with no paved roads) by two or three wheelers Goods are delivered once, twice or three times a week in small sizes and lower prices. Some companies have adopted the village entrepreneur model partnering with ( and sometimes helping establish) independent businesses. 

Once a distribution path has been forged into a region, companies focus on expansion by targeting clusters of villages within the region. A few large clusters in four or five big states could have the same market potential as a larges number of villages scattered across the country, while being far more cost- effective to serve. Companies are investing resources to identify promising clusters with enough demand to generate profits quickly.  

To a large degree, rural residents base their purchase decisions on personal bonds and mutual trust, In this manner, rural markets are different from more transactional urban ones, and they demand strategies that integrate companies and their offerings into the social fabric. Smart companies determine which stakeholders are likely to the most influential and then find ways to earn their loyalty. In rural India, word of mouth plays a strong role in building brands, far more so in urban areas. 

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