Unlocking the Market Potential of Rural India

Here's how companies can identify opportunities and mobilize resources quickly to carve out a sustainable position for themselves in their respective industries
Unlocking the Market Potential of Rural India
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India’s rural market is a critical component of any emerging market strategy. The evidence for this is the observable dash by organizations - both foreign and domestic, to capture this potential. At the same time, the market is far more receptive to modern products & services than it has ever been. What was once considered a largely agrarian subsistence market that valued FMCG at best, is now a vibrant ecosystem in want of modern services such as banking, telecommunications, retail, and others.

According to the Indian Census, rural India accounts for around 70per cent of the country’s total population, and a recent report by McKinsey reveals that despite rising urbanization, it will still account for around 63% of the Indian market in 2025. It is within this context that organizations must develop a rural strategy insofar as they concern themselves with long-term sustainable growth.

Despite significant capabilities and intent, the pursuit of rural strategies routinely leaves enterprises in a disenchanted state. Issues such as lack of infrastructure, low skill development, poor service fulfilment, complex logistics, and a significant cultural divide are intimidating challenges.  These incidentally are also perfectly predictive of why many organizations choose to delay rural strategies, while others decide to forego the potential entirely.

While expansion to rural India may seem daunting, successful marketing and fulfilment may not be as elusive as it is perceived to be. The issues that often deter enterprises from doing so cannot only be overcome but can also be transformed into incredible stores of value, and a competitive edge for those who are able to craft an appropriate rural strategy.

a) Infrastructure and Lack of Accessibility

Last mile delivery has always been an issue for companies in rural regions. Nearly half of all villages in the country do not have all-weather roads. Compounded by the limited expertise of local logistical companies, issues of poor transportation, handling and storage are common concerns. Rural markets lack adequate infrastructure, which renders local distribution a very costly and challenging proposition. Moreover, lower ARPUs deter companies from investing in infrastructure that could help alleviate such concerns.

An ideal solution within this context is an on-ground force - one that is culturally sensitive to the location and can provide last mile logistical connectivity to unserved areas.

b) Cash Collection - Safety and Confidentiality

Despite the government’s best efforts, banking services are largely absent in rural India. Poor internet connectivity and significant cultural fear of electronic payments and banking services leave cash transactions as the dominant means of exchange in most of rural India.

According to the AIOVA (All India Trade Online Vendors Association), the biggest hurdle for an e-commerce platform is cash collection. In the case of rural markets, this collection would have to be delegated to courier services. A large number of intermediaries in the value chains leads to money changing hands multiple times - which causes delays and can lead to significant revenue leakage. This is why many e-commerce companies refuse to offer Cash on Delivery services in rural and semi-urban areas.

Enterprises facing such a challenge can follow a closed loop wallet system, where agents in charge of money collection pay from their own pocket, transferring what is owed beforehand, and recover the same upon collecting from local debtors.

c) Relating to the Customer

It is no secret that successful selling is a function of powerful and appropriate communication. Given the diverse linguistic preferences of rural citizens, it is no surprise that organizations find it challenging to communicate with these markets. The immense amount of work required to localise sales pitches, followed by less than stellar uptick in sales as a result, would reasonably render rural outreach an untenable proposition for any who face such challenges.

Once again, an on-ground local workforce that culturally aligns with the audience and speaks the same language is bound to deliver better results.

A classic example of this is the efforts made by Unilever to not only bring its products to a ready and willing rural Indian market, but also empower locals with employment opportunities. What Unilever accomplished in the FMCG sector is now within the grasp of other industries, largely as a result of pervasive and widely adopted technologies such as the smartphone.

d) Lack of Skilled Manpower

A lack of educational infrastructure, relative isolation from technology and progress, high dropout rates from school, and arduous training requirements can act as further deterrents to rural strategies.

Such realities however neither take away from aspirational goals of rural Indians, nor inhibit their pursuit of upward economic mobility. As natives, they know the region and due to a lower cost of living are willing to work at salaries lower than their urban counterparts. A strategy that can mobilize rural youth and human resources efficiently can help enterprises secure a significant and long-lasting competitive edge over competitors.

e) Time to Market

In a competitive and dynamic market such as India, time to market is everything. It is a true manifestation of the old adage “You snooze, You lose”. A long gestation period can dishearten, and even discourage investors.

While this presents a huge challenge for enterprises, whether they be domestic or foreign, it is also a promising opportunity for those who understand the dynamics of rural markets. Companies that are providing last-mile connectivity have been working with rural populations, getting the youth employment ready and attempting to understand local purchasing sentiments. Those who can identify opportunities and mobilize resources quickly will carve out a sustainable position for themselves in their respective industries.

20 years ago, expansion into rural India may well have been implausible and imprudent. Its constituents and the infrastructure that surrounded them was simply not capable of supporting a rational business case. This market has today come of age, and is ready for those who recognize this.

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