Rural Marketing Project

Logistics Firm for Rural Market

Submitted to: Submitted by:

Ms Kavita Shukla Geetika Kasturi
Vivek Malik
Priyanka Giri
Rashi Pandit
Executive Summary:

The report below is detail study of 3 villages that we visited

Bhondsi

Khelda Dhani

Dum Duma lake Gaon

We observed that there is a huge logistics problem in these 3 villages as no

company directly supplies to any of the retailer and there is no distributor of any
company except Pepsi.

The following report talks about how the retailers are managing their supplies till
now by buying from Sadar Bazaar or Sohna Road. Also products are sold above
MRP in these villages as transportation cost is added to their price.

We have proposed to set up a logistics firm to buy goods from directly the
company and then supply these to the retailers also stock the supplies for a week
initially which will extend to 14 days after we have sufficient working capital to
operate with.
 Introduction

On account of green revolution and expansion of urban limits the rural areas are
consuming a large quantity of industrial and urban manufactured products. Earlier
FMCG products were restricted to only urban areas but now considering the fact
that urban market is saturated to a point that it is difficult to penetrate anymore, so
the focus has now shifted to Rural Markets. The rural market holds a lot of
potential for consumer durables as well.

Rural Market is very lucrative because there is a lot of untapped rural market
potential. Also there has been an increase in the incomes levels of people. Recently
it was revealed that the number of high income people in India exceeds the number
of low income people.

The social and cultural drift has also opened up the minds of the rigid rural people
to a world of products to choose from. Also there is very little penetration and
offers lot of scope for further penetration.

A rural market is:

(a) As per the latest census, as a place where the population is not more than 5000,
and the density of   population is not more than   400 per   square km and at least
75% of male working population is engaged in agriculture.
(b) A simple definition from marketers view would be “any   market that   exits in
the area with less than 100000 population, low density of population and without
significant infrastructure facilities in

70% of India's population lives in 627000 villages in rural areas. 90% of the rural
population is concentrated in villages with a population of less than 2000, with
agriculture being the main business. 

Rural consumers are more of a homogenous group, their needs and requirements
from a product are very similar. A rural consumer would prefer simpler goods,
those goods which require technological expertise or those in which too many
variants are available would not fare very well in rural markets as they would
rather confuse the customer.

 About 285 million reside in urban India as compared to 742 million in rural
India.

 The number of middle income and high-income household in rural India has
grown from 80 million to 111 million while urban India has grown from 46
million to 59 million.

 53 per cent of all FMCGs and 59 per cent of all consumer durables are sold
in rural India.

 Rural marketing involves addressing around 700 million potential

consumers, over 40 per cent of the Indian middle-class, and about half the
country's disposable income.

 The Indian rural market is almost twice as large as the entire market of USA
or Russia.

 The rural market for FMCG is Rs. 65,000 crore, for durables Rs. 5,000
crore, for tractors and agri-inputs Rs. 45,000 crore and two- and four-
wheelers, Rs. 8,000 crore. In total, a whopping Rs. 1,23,000 crore.

The villages we plan to cover:

 Bhondsi

 Khedla Dhani

 Dum Duma lake gaon

 Demographics:-

 Population of three villages were:-

Khedla Dhani:- 2500(approx)

Dum Duma lake gaon:- 2000(approx)

Bhondsi:- 3000(approx)

Major source of income:-

 Working in villages nearby

 Milk production

 Irrigation.

Other relevant information:

 Age of sample people17- 35

 Educated.

 Price sensitive.

 Smart buyer

Consumer Behavior:

 Consumers usually buy the products which have become generic for
respective categories.

 Brand aware

 Not very brand loyal

 Their favorite cloth washing bar is 5 Bhai, but mostly retailers keep
duplicate 5 Star.

 Willing to compromise a bit on price if quality exists

 While purchasing consumer durables, they take decisions very wisely, they
consult a lot of people (peers, family members, the person who is already
using that product).

Retailer Profile:

 Retailers are very competitive in nature.

 Closely placed

 The size of the shops is small.

 They keep only those goods which are used daily like tea, sugar, cold drink,
soap etc. and vegetables also

 They visit Sadar Bazaar or Sohna to buy their stocks.

Brands that sell:

 Soaps:- Lifebuoy, Lux

 Cloth washing bar:- 5 Bhai, 5 star.

 Toothpaste:- Colgate and Pepsodent

 Tea:- Today, Tata(sachet only)

 Shampoo:- Clinic All clear, Sunsilk, chik,

Pantene.

 Cold drink:- Coke and Pepsi and other brands of them.

 Beedi:- Shiv, 502, Damru.

 Cigarettes:- Small Gold flake, Capstan,

Cavanders, Four square,

 Skin cream:- Fair and Lovely

 Battery cell:- Nippo and Jeep only.

 Biscuits:- Parle-G, tiger.

 Potato Chips:- Lays, diamond

 Namkeen: -Kurkure, kurkuri, taka tak, o yes,crukure

 H air oil:- Hair and Care, Dabur amla kesh tail, navratan

Opportunity:

 The major problem faced:-

a) High prices of goods due to addition of transport expenses.

b) Less availability of goods.

c)No place to store goods.

  The reason behind these is :-

a)Less efficient supply chain

b)No distribution of goods from companies side.

So, the opportunity lies in distribution cycle in the villages.

.Problems in Distribution:

 Problem in distribution channel are:-

Retailers in villages are buying goods from retailers in Sadar Bazaar or

Sohna.

 Margin is very less

 Transportation cost is high

 Our stock has to be procured at wholesale prices.

 Increased one channel partner.

 The retailers have established a repo with Wholesalers of Sadar Bazaar and
could thus be unwilling to shift from the existing regime as it is deep rooted
in their minds that Sadar Bazaar is the source of cheapest supplies.

Findings:

 The opportunity which we found in the villages:-

àThe population of all the three villages is near about 8000 and these
villages are in the radius of 3 km.
  The number of retailers in these villages were:-27

à Khedla Dhani: - 9

Bhondsi:- 12

Dam Dama lake gaon:- 6.

 The estimated average sale of a retailer is in the range of Rs. 4000-6000.

Our Proposal:

 We seek a proposal to introduce modern trade format retail for these 3

villages.

 The logistics supply is very bad in these three villages, so we plan to be not
just the supplier but the stockist for these 3 villages.

 Within a year we plan to penetrate to7 smaller villages in the surrounding

areas and establish sub stockist there.

 Provide goods to retailers at low cost.

Every Retailer has to go to Sadar Bazaar every third day to get his stock. This
trip costs him around Rs 50/- per visit and if he has some minor shortages, he
gets them refilled from Sohna, a trip to which costs him Rs20/-. There are a
minimum of 27 retailers in these 3 villages. We can capitalize on the
opportunity that there is dire need of cheaper and timely supply of goods. We
can act as stockist and a wholesaler for non perishable goods. We can procure
vegetables daily from Sohna market and hence help the retailer save on the
transportation. Our earnings would be that we would initially sell on the same
price as Sohna which is slightly more expensive than Sadar Bazaar but
everything would be readily available, so the retailer would prefer buying from
us than going all the way to Sadar Bazaar

Strategy:

 Strive to reach at least 7-10 villages.

 Set up a giant distributorship within the belt and extract maximum benefit by
providing a wide product range.
  Trade off the distribution cost with incremental market penetration.

 Offer products that suit the need of the rural markets

 Easy to understand.

 Quality assured products

Competition:

Our main competition is an established logistic supplier catering to the same

retailers but in a very unorganized manner. He supplies only such goods which
are available with him which might not satiate the demand of the retailer. Also
the supply is not at regular intervals hence a retailer cannot depend on this
supplier and prefers going to Sadar Bazaar.

The suppliers of Sadar Bazaar are not directly giving competition but we might
have a problem in convincing retailers of the village to shift from the
wholesalers of Sadar Bazaar to us.

Retailer cum wholesalers of Sohna would be a source of competition

considering their proximity to the place, hence we would have to keep the
prices very competitive.

USP:

The USP of our firm would be that we would provide more variety of products
under one roof at lower prices. We would be the Big Bazaar of the village, not
just supplying to the retailers but also directly to consumers as well. There is no
shop for sweets and clothes. We would incorporate that as well.
 FINANCE

MATERIAL QUANTITY CONSUME

TOTAL

1.Tea 10packs/200gm/month/family
15000 packets

2.Sugar 5kg/month/family 7500kg

3. Bathing soap 1/week/family I,e; 4/month/family 6000 piece

4. Washing soap 3/month/family 4500 piece

5. Chips 2 packet/month/family 3000 packets

6. Soft drinks 2/month/family 3000bottles

7. Loose snacks Rs 20/month/family Rs 30000

8. Tobacco (bidi and gutka) Rs 10/day/family Rs 45000

9. Cooking oil 2lit/month/family 3000 lites

10. Recharge Coupons Rs 50/month Rs 25000

The above table is the total consumption of 7500 people in the village.
Calculation in Rupees

MATERIAL RUPEES QUANTITY

TOTAL(Rs)

1.Tea 10 * 15000 = 1,50,000

2.Sugar 30 * 7 = 75,000

3. Bathing soap 50(for 4) * 1500 = 75,000

4. Washing soap 15(for3) * 1500 = 22,500

5. Chips 5 * 3000 = 15,000

6. Soft drinks 5 * 3000 = 15,000

7. Loose snacks 20 * 1500 = 30,000

8. Tobacco (bidi and gutka) 10 *30 *1500 = 4,50,000

9. Cooking oil 35 * 3000 = 1,05,000

10. Recharge Coupens Rs 50 * 500 = Rs25000

TOTAL RUPEES Rs11,12,500

According to the calculation we can see that the total consumption of 1500 families in a month
for our 10 products is Rs 11,12,500.

As we see that our budget is Rs 3 Lakh ,so we need to go 4 times to the market to buy the
products for our ware house.

Now assuming we will get around 10% - 15% discount on all the products we buy and
calculation on over all 12% discount on the total purchase.
Our strategy is that we will get 12% discount on MRP, now we will provide the products to the
retailers on the discount of 5% on MRP and ask them to sell the products on MRP and will also
organize a contest in which the highest selling retailer will get a cash price of Rs 5,000 this will
motivate retailers to take the product from us and also sell them on MRP.

With this strategy the villagers will get all the product on MRP and will save more than 5% of
there total expenditure on the 10 selected products.

OUR PROFIT AND EXPENSES

12% on total buy that makes Rs

1,33,500

5% discount to retailers - Rs
55,625

Transport and loading unloading (Rs 600 + Rs 300= Rs 900) * 4 round - Rs

3,600

Rent on warehouse in village ( Rs 4,500/ month) - Rs

4,500

2 guards on Ware house (3000 each/ month) - Rs

6,000

Contest Money -
Rs 5,000

Total saving
Rs 58,775

This would be the savings we would aim initially, considering the risks of a
new project. Later as we cover 10 villages the costs and profits will go up.