Rural Marketing Model

Rural Marketing Model

When e-commerce has started in many countries and gradually became successful people started thinking that now they have found a rural marketing model. Many startups and traditional business houses have started coping with that model and tried to replicate in rural areas but up to now, they have not become successful. This is a very old debate in our country that what is the right model for rural areas? Many FMCG companies have understood the difference in the behavior of rural and urban people and they have launched small packing for rural areas. There are some fundamental differences in demographics, income sources, and distances that create quinic characteristics in the rural consumer. According to a different type of hierarchy in goods and services which rural consumers are purchasing, different hierarchies market places gradually developed in the rural areas we called them weakly market, regular market, wholesale market, seasonal fairs, and religious fairs and festivals, etc. without understanding these differences many companies have tried many models in rural areas. They have made some common mistakes during developing their marketing strategies. They have created a big infrastructure like malls, keeping the same inventory in all shops, fixed the same price for all shops, and hired very high qualified people in very high salaries. This model very successful in the urban market but failed in the rural market. If you see the population per square kilometer in the rural area it is very low in comparison to urban cities and rural consumer purchase for weakly bases and for agriculture input seasonal bases their volume is very low so they made a minimum effort for purchasing and do not travel beyond 20 km to 25 km or more. For selling their goods also they have adopted the same model because their volume of produce is also very low. Due to this behavior, daily footfall is very low and that’s why big shops or malls are feasible in rural areas. Due to differences in cropping patterns, soil types, religion, and food habits identical products are not in demand in rural areas. Many companies are producing products using the same formula or process but their brand names are different and one brand name is popular in one area and another brand name is popular in another area that’s why selling the same brand name product is not possible. Every manufacturer has a different pricing policy and booking and margin for their product this will create a price war on the ground among different suppliers, so fixing the same price for all areas is not working in rural areas. After GST taxes are applied on bill amount, not on MRP that’s why all they agri-input available below MRP so margin are very low and it is not possible to support high salaries staff for rural marketing. In rural areas trust is more important on price because consumers rely very heavily on local person advice before deciding the purchase. 

Now, most e-commerce companies are trying to enter rural areas adopting the same model which is creating huge losses for them and they are not able to move fast. Every day we are reading that up to now they reached tier two or tier three cities. Many agriculture startups also trying to emulate these models and struggling for growth. Those companies are developing the entire supply-chain building their own fulfillment centers and delivery chain. It has a huge cost and economically not viable. If we see historically what type of gradual evolution came in rural marketing then we see initially weakly markets have developed and religious fairs have come later on after that regular market has developed and mainly money lender became the regional distributors, wholesalers, retail shopkeepers. They have started giving loans in the case and later on in the kind. They are the people who supply FMGS, Agri-input, and purchase Agri-produce. This ecosystem is still working in the profit and all the manufacturing companies have developed their distribution channel through these people only. They have created a monopoly and many entry barriers for newcomers. Even most of the government laws supported this system only. There is not much happening under ease of doing business policy either. There is a very strong lobby are present if any government want to change anything in rural area protest and demonstrations have started and created fear for loosing of election political parties supported the old middlemen system. 

Now realizing these ground realities many big FMCG companies, e-commerce companies, and some startups developed franchisee or affiliate model under which they are using the old infrastructure and supply and distribution chain and introducing the power of new technology, the internet of things, and mobile connectivity and removing inefficiencies in them and creating an inclusive light assets model which is cost-effective and viable for rural areas. The rural consumer doesn’t have much purchasing power so if these new startups understand their need, demand, and aspirations and using available infrastructure start working profitably. A gradually modern supply chain can be created and modern infrastructure can be developed easily because aggregating demand and supply will create sufficient values for recovering the cost of transactions. An inclusive model will create working opportunities for local peoples, those can be trained easily according to business need. This workforce doesn’t have displacement costs and understands local requirements can gain consumer trust easily and quickly. The root cause of the rural economy is the law of inheritance, under this law there is a provision when the father will die land will divide among legal hairs and fathers are dying every day and land are dividing. Due to this provision, small and marginal farmers are growing. When someone has a small piece of land their input requirement is very low and the farmer will purchase their input from the last person in the supply chain and when he produces some crop again their produce is a very small quantity, they will sell the last person of the supply chain. This is the point that creat a vicious circle in the rural economy. Through using the same package of practice and an inclusive model, this can be converted into a virtuous circle. Now, most of the big companies and many startups are changing their business model for rural areas.