Barefoot competition Neha Gupta (10DM-091)

Market Characteristics Changing lifestyles Increase in competition Demand no more confined to purely basic/functional products Increase in Brand Stickiness Low volumes per retail outlet Frequent Purchases

Reasons for demand growth Rising aspirations Increase in penetration of televisions in small towns Exposure to urban life Higher disposable income levels

Challenge? Speed to service the rural distribution chains

Hub and Spoke Distribution Model Company Depot Large Distributor (Hub) Small distributor in adjoining area Full loads suppy twice a week on DD

Super Distributor Method Company Depot Territory Sales Rep Super Distributor + 5 Pilot Sales Reps Distributor Retailer

Coca Cola’s Hub and Spoke Model Coke started out by drawing up a hit list of high potential villages from various districts. To ensure full loads, large distributors (Hubs) were appointed, and they were supplied from the company's depot in large towns and cities. Full load supplies were offered twice weekly against payment by demand draft. On their part, the hubs appointed smaller distributors (Spokes) in adjoining areas. The smaller distributors undertook fixed journey plans on a weekly basis and supplied against cash. The distributors also hired rickshaws (cycle operated vans) that travelled to villages daily. Providing low cost ice boxes Result: Increase in penetration from 13% to 25%

Marico’s Distribution Network Covers almost every Indian town with a population of over 20,000 ;1.6 million retail outlets spread across the country 882 direct distributors, 153 super distributors, catering to 2393 small stockists and 4523 van markets  Dedicated team of Territory Sales Executives and Pilot Sales Representatives 

LG: Charting plans for Rural India Plans for exclusive retail 65 remote area offices under branch offices directly linked to the central billing systems for orders 230 service centres 2,600 mobile authorized service personnel for villages having less than 10,000 residents.

Tailoring Product Portfolios At present, 20% revenue from Rural India Established connection through Sampoorna TVs Introducing washing machines with plastic bodies, geared for supplies to coastal areas to guard against the high corrosive content of salt in the water supply Refrigerators with built-in voltage stabilizers to protect the compressor from fluctuations in electricity supplies Formed a special team, which will undertake an extensive study to introduce "the right products for the rural markets"

HUL: Modifying Rural Distribution In discussion with top telecom firms and banks & financial services companies to create a joint distribution model Operation Stream Line Removed the layer of Star Stores Reduction of the margins of the Rural Distributors by 2% from 6.76% to 4.76

How do RD’s cope with the situation? Start Milk Runs Retain Star Sellers for village clusters faraway from base town Have its seller visiting retail outlets Dropping a few retail outlets Better quality of coverage to rural outlets Increase in business, more absolute margin money Lower Fixed Cost of Distribution Value Unlocked

Conclusion Increase product availability Design products keeping in mind rural preferences and constraints No fixed distribution network serves Rural India Exclusivity comes with price Speed is important

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