Distribution in Rural Markets

DISTRIBUTION IN RURAL MARKETS
There are about 6 million outlets, both in urban and rural markets, in India. Out of these,
3 million outlets are located in urban India in 4000 towns and cities whereas the balance
3 million outlets are scattered in about 6 lakhs villages. Even if a company has a product
that meets the requirements of rural consumers, it will succeed only if it is made as and
when required by the consumer. Some of the obstacles to reach the rural customers are,
1. The distribution chain requires a large number of intermediaries and this increases the
cost of distribution. 2. Non availability of dealers.3. Poor viability of retail outlets due to
low business volume. 4. Inadequate banking facilities. 5. Only about 70 % of the markets
are connected by roads. 6. Interiors villages get flooded during monsoon and 7. Transport
and communication facilities are poor in villages.
Distribution system has two Sub-Divisions

1. Physical Distribution 2. Channel Distribution.
1. Physical Distribution activities include order processing, handling of goods,
packaging warehousing, transportation, inventory control, banking and customer services.
2. Marketing channel is the route taken by the title to the product as it moves from the
producer to the ultimate consumer. Every marketing channel starts with the producer and
ends with the consumer. The channel member consists of wholesalers and retailers who
are middlemen in distribution and they perform all marketing functions. There are many
channels used for the distribution of goods in rural areas as follows 1. Manufacturer-
Consumer (Direct Sale): In this case, the stocks are directly supplied to the ultimate
consumer avoiding middlemen and their commission. This benefits the consumer and the
seller.2. Manufacturer-Retailer-Consumer: Here the stocks are sold to the consumers
through a network of retailers.3. Manufacturer-Wholesaler-Retailer-consumer: The
manufacturer appoints the wholesaler in key rural markets and these wholesalers cater to
the needs of retailers in villages. This is popular channel used by the manufacturers.
4. Manufacturer-consumer-Depot / C & F Agent-Retailer-Consumer: In this case,
the manufacturer moves the stocks to company depot operated by a C and F agent and
from these depots; stocks are supplied directly to the retailers.5. Manufacturer –
Company depot / C and F Agent- Wholesaler-Retailer-Consumer: This is a lengthy
marketing channel and the manufacturer opens his own depots or appoints C and F agents
in state capital or in key cities in each state. Goods are supplied to wholesalers working at
district headquarter or in commercial centers. Wholesalers in turn service the network of
retailers.
ROLE OF WHOLESALERS AND RETAILERS: (a) Wholesalers are individuals or

business firms who sell products to be used primarily for resale or for industrial use. The
wholesaler is a bulk purchaser with the objective of resale to retailers or other traders
after breaking down the bulk into smaller quantities. Wholesaler offers special services
such as maintenance of sales force, storage of stocks, delivery to retailers, sales
promotion work, product servicing, market information and risk bearing. (b) The village
shopkeeper (Retailer): He knows practically all the rural consumers. He deals in a variety
of consumer goods. He is connecting link between the consumer and the organization and
plays an important role in promoting products in rural areas.
Considering the constraints in physical distribution of stocks in rural areas, many

companies have come out with innovative solutions.
1. Company owned delivery Vans: The van may be owned by the company or by
wholesaler. The delivery van takes the product to the retail shops in the villages.2. Hired
Vans: In this case the wholesaler uses the hired van to cover the retailers in the village,
and the cost of operation of the hired vehicle is shared by the company and the
wholesaler. 3. Syndicate distribution: There are cases wherein companies do not have
resources for running exclusive vans for delivery of goods to the rural market. In this
case, the firms / distributors selling non-competitive consumer goods come together and
operate delivery van to service the rural retailers. 4. Satellite distribution: In this system
the company appoints stockists in important towns. These stockists are responsible for
placing orders with the company, receiving the stocks, storing of stocks and supplying
the goods in small lots to the retailers and merchants situated in rural areas.5. Haats:
Traditionally on certain days of the week, both the sellers and buyers meet in the village
to buy and sell goods and services, these are the haats. By participating in the haats and
melas, the company not only promotes the products but also understand the shared
values, beliefs and perceptions of the rural customers that influence the buying behaviour.
6. The Melas: Melas are of different types i.e. commodity fairs, cattle fairs and religious
fairs and may be held only for a day or may extend over a week. 7. Project Shakti: In
many states, women self – help groups have been formed through initiative of
Development of Woman and Children in Rural Areas (DWCRA) .The group’s financial
resources consist of savings, government assistance and bank loans. HLL has come out
with a new distribution model with main objective to develop income- creating
capabilities of underprivileged rural woman. Typically a woman from the SHG is
selected as a Shakti entrepreneur and receives the stocks from HLL rural distributors. She
sells directly to consumers and small merchants in the village. The most powerful aspect
of this model is that it creates a win-win partnership between HLL and the women
entrepreneur.

Distribution in Rural Markets

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DISTRIBUTION IN RURAL MARKETS

Distribution system has two Sub-Divisions

ROLE OF WHOLESALERS AND RETAILERS: (a) Wholesalers are individuals or

Considering the constraints in physical distribution of stocks in rural areas, many

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