A few years ago, one would not imagine using the words supermarket and rural in one sentence. Largely unorganized and dominated by the friendly neighborhood kiranawaalas and haats, the story of retail in rural India could be summed up using the words frugal, basic necessities , credit and home delivery. At the near end of 2011, the story is vastly different. Increased propensity to spend, media awareness and mobile penetration have ensured that the rural consumer is aware of what he wants and needs to be gratified at a personal level, similar to his urban counterpart. While retail majors like Big Bazaar, Shoppers Stop, Westside, are touching new levels of success in metros and urban markets, organised retail is also emerging as new fancy in rural India. So what is it that attracts the big retail players to the rural markets and how have they managed to tap the psyche of the rural consumer given the diversity of the market and cultural factors that come into play?

Lets take a look at both the questions individually. At the very basic level, all-India sales of fast moving consumer goods, or FMCG, are tipped to touch $100 billion by 2025. This, according to Mr. Prashant Singh, Vice President at consumer research firm The Nielsen Co. is the size of Ukraine’s economy. Demand for more expensive products contributed to 21 per cent of growth in consumer retail in villages and smaller towns in the past year. While the numbers reveal one half of the story, the other more important part is the social and consumption changes that are taking over the rural hinterland. Consumers in the rural areas are far more willing to spend on newer, more contemporary categories of brands that are used by their urban counterparts. They are turning out to be voracious consumers of packaged food, hair dyes, electronics, apparel and fairness creams, among other products.

Big players like ITC, Godrej and DCM Shriram Consolidated Ltd (DSCL) have not only entered the space, but they are building on smart marketing strategy to tap the huge potential of rural market. On a broader level, most of these corporate enter the rural market with a two pronged approach. First, they enter the rural space to help farmers increase their income and then sell branded products to them. For example, Aadhar, an agri service-cum-rural retail venture of Godrej Agrovet, interacts with farmers on a daily basis and educates them on best farm practices. Beside agricultural solutions and products, commodities including food, grocery, apparel, footwear, home appliances, furniture, kitchenware and hardware are sold at each Aadhar outlet. . Each Aadhar outlet services around 20 villages in its radius. Similarly, ITC’s ‘Chaupal Sagar’, offers a diverse product range from FMCG to electronic appliances to automobiles. DSCL too offers retail banking, LPG outlets and even a motorcycle showroom.Some brands that can be seen on the shelves at these stores include a mix of both national and local brands – Lux, Dove, Rin, Coca Cola, Pepsi, Levi’s, RC Cola, and Usha Micro among others.

Future Group, which runs India’s biggest organised retailing business has even gone into towns with populations of 30,000 and below such as Ichalkaranji, Kota, Boondi, Deoghar, Sangli and Tinsukia, among others, across the country. An interesting aspect of Future Group’s strategy is how it treats these towns differently and adapts the products to suit local preferences and tastes.

Some rural retail chains go one step further by introducing consumer benefits or loyalty programs similar to those offered in swanky malls in the urban areas, to increase consumer frequency. A good example of this is Hariyali Kisaan, part of the sugar-to-chemicals DCM Shriram Consolidated which has nearly 300 outlets spread across most of northern India and has now made inroads in Madhya Pradesh, Maharashtra and Andhra Pradesh. Hariyali Kisaan Bazaar has introduced a loyalty programme, ‘Hariyali First’. ‘Hariyali First’ is a point based programme that has differential point systems for different categories. For example, consumers stand to gain two points on buying a product worth ` 100 in FMCG category, while the same amount would fetch one point in some other category. Once the threshold of 100 points is achieved, the points can be redeemed against a product worth ` 50.

However, setting up an organized retail business in India comes with its own set of challenges. Unlike the metros, where purchases happen over the entire month, spending in rural areas depends a lot on factors like, rain and good agri-produces. The other challenge is to make a personal connect with the rural consumer in a market that is highly fragmented. Rural consumers respond better to brands to make take the effort to personalize messages. A lot will depend on how the organized retail chains manage to overcome the unique challenges that come with rural retailing and capitalize on the market opportunity to build a loyal base of rural consumers. One of the main reasons for the success of the kirana stores is the convenience they offer and the trust in the local store which has been built over a period of time. This is a model that the retail chains will need to build on to spread their net wide across Bharat.