01 Dec 09 The great big Indian rural market

To me, some recent reports in the press attributing the healthy performance of manufacturing in India in Q2 FY10 to rural markets, brought the puzzle of rural markets in India into focus again. Every one who has anything to sell in India is trying to get to the “bottom of the pyramid”, because that is where the future growth and volumes lie. But no one has really found the key to unlock the full potential of rural India.

In many industries (FMCG, telecom, consumer durables, etc), companies have seen higher growth in rural markets than in urban areas in recent years. Their strategy so far has been to sell the same products to the rural customers that they sell in urban markets but in smaller-size packs – sachets, to get the rural folk hooked on. And reports suggest that the rural consumers do seem to have shifted from local non-branded products to branded soaps, detergents, biscuits and so on.

But no one really understands what is driving this growth – most of what they know is conjecture. Good monsoons (hence agricultural performance) from 2004-2008 was considered to be the key driver of rural growth – till 2009.  Rural markets have grown in the first two quarters of 2009 despite poor performance of agriculture. We now attribute this to non-agricultural income – various rural employment and rural income generation schemes. The fact is, no one has any hard data on the rural markets.

According to Rama Bijapurkar, an authority on consumer trends in India, “The truth is that we don’t yet have an answer to this through direct field surveys that actually ask people who their customers or their employers are. Sadly, Indian companies’ willingness to pay for hard data is low and in the absence of this, India is now at a pace where conjecture, no matter how widely believed, can be a dangerous basis for business planning.” (Rural consumption myth I)

This is also the reason why there have really been no attempts to design new products for the rural markets. And there are some very good reasons why rural markets should really be studied is distinct from urban ones. Rama Bijapurkar has described some of them in another article on the same theme – Rural consumption myth II

As a research company, we see many research requests that focus on understanding the bottom of the pyramid in India – but always focussed on the “urban conglomerations”. I guess understanding urban markets is hard enough given the (poor) availability of data – you need the very brave to take on the rural markets. But unless someone does this, sellers to the rural markets will continue to flounder in the dark.

Varsha Chitale
Varsha Chitale

Varsha led the competitive intelligence practice at ValueNotes. As part of her drive to educate India Inc. on the merits of competitive intelligence, she often conducted webinars and seminars on CI for senior executives of Indian companies.

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