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Comparative Study Of Retailers Satisfaction Of

Distribution Services In Urban And Rural Areas Of FMCG Sector





Researcher HEMANT KUMAR AGRAWAL M.B.A. II YEAR Roll. No. -1025170064

Supervisor Mr. UTKAL KHANDELWAL Dept. of Management GLA Institute of Business Management, Mathura

The rural market is growing much faster than the urban counterpart. The market share of FMCG products in rural markets is 53 % and a durable product is 59 %. Due to improvement in transport network, rural people have better access to towns and cities. The urban retailers in tier-2 cities are tapping the rural customers living in surrounding area. The conventional wisdom of urban glossy advertising and fantasy mix through television are not going to work in the rural markets. The rural advertising in India needs innovative and alternative media to woo the customers. The case of adopting a railway station by Titan during Kumbhamela helped them to generate a high brand recall as for each arrival of the train- the announcement was made Welcome to Sonata-Naini. Fast moving consumer goods (FMCG) worth $3.5 billion are expected to be sold in rural India by the end of 2007. The FMCG segment, in value terms, is expected to be over $18 billion as on December 31, 2007, of which the rural sector would comprise of a little more than one-fifth. Retail, in general, means selling in small quantities. In a laymens parlance retailing is a term which can encompass sale of goods and merchandise for personal or household consumption either from a fixed place like market, shops or more recently, departmental stores, supermarket, shopping malls etc. It all started through small shops selling goods but lately came the huge stores ushering in retail revolution in India. There are three major types of retailing, first is Market where buyer and seller are in contact. This involves selling on the sidewalks, streets etc. The second form involves shop or shop trading where goods are out of buyers reach and kept at a distance which the seller supply them on demand. The third type is virtual selling where products are offered online and then selling is done involving email, online shopping. In 1920s, the first supermarket opened in U S A, which heralded the concept of self service. The scenario remained and conceptualise to the whole world. This has not only opened the vistas for global retail but also provided a next big revolution called Retailing. Retailing both reflects and determines culture as consumer goods are the focus of our labor, our economy, and our collective lifestyle. Because of consumer goods, the retailing industry demands equal opportunity employers. Retailing is the most unifying and common force for the youth of our society. Retailers now are on a spree to make their global presence felt by entering into the untapped markets which

have immense consumer base,especially India and China. Wal-Mart; Carrefour etc are eying these markets through acquisitions or through mergers.


In recent years, rural markets of India have acquired significance, as the overall growth of the Indian economy has resulted into substantial increase in the purchasing power of the rural communities. On account of green revolution, the rural areas are consuming a large quantity of industrial and urban manufactured products. In this context, a special marketing strategy, namely, rural marketing has emerged. Rural India with its traditional perception has grown over the years, not only in terms of income, but also in terms of thinking. The rural markets are growing at above two times faster pace than urban markets; not surprisingly, rural India accounts for 60% of the total national demand. Today, rural market occupies a larger part of our economy and it is expected to grow at least four times the existing size. Another contributing factor for rural push was growing saturation in urban markets. To be precise, rural marketing in Indian economy covers two broad sections: 1. Selling of FMCG in the urban areas 2. Selling of manufactured products in the rural regions In present situation, our huge population is helping marketers to think new marketing strategies. 630 Billion rural populations are greater than total consuming markets of many countries like Canada, South Korea, etc.s Tapping the rural market is one of the most important marketing strategies followed by various MNCs and Indian companies now-a-days. A number of companies in FMCG, consumer durables as well as telecom sector have adapted strategies to expand their base in rural market. Among those who have already taken remarkable initiative in rural market are HLL, Colgate, LG Electronics, Philips, BSNL, LIC, CavinKare, Britannia and Hero Honda. Rural Marketing in simple word is planning and implementation of

marketing function for rural areas. Rural marketing has been defined as the process of developing, pricing, promoting, distributing rural specific products and services leading to exchange between urban and rural markets which satisfies consumer demands and also achieves organizational objective. Rural India buys:* Products more often (mostly weekly). * Buys small packs, low unit price more important than economy. * In rural India, brands rarely fight with each other. They just have to be present at the right place. * Many brands are building strong rural base without much advertising support, like Shampoos, detergent etc. * Fewer brand choices in rural areas; number of FMCG brands in rural areas is half that of urban. * Buys value for money, not cheap products


Urban retailers is spreading and making its presence felt in different parts of the country. The trend in grocery retailing, however, has been slightly different with a growth concentration in the South. Though there were traditional family owned retail chains in South India such as Nilgiris as early as 1905, the retail revolution happened with the RPG group starting the FMCG world chain of FMCG retail outlets in South India with focus on Chennai, Hyderabad and Bangalore markets, preliminarily. The experiment has reaped rich dividends and the group is now foraying into other territories as well. Owing to the success of FMCG world model of RPG group, several new models such as Trinethra, Subhiksha, Margin Free and others have made their foray into this sector albeit at regional levels.

To be successful in fmcg retailing in India essentially means to draw away shoppers from, the roadside hawkers and kirana stores to supermarkets. This transition can be achieved to some extent through pricing, so the success of a FMCG retailer depends on how best he understands and squeezes his distribution chain. The other major factor is that of convenience shopping

which the supermarket has the edge over the traditional kirana stores. On an average a supermarket stocks upto 5000 SKUs against few hundreds stocked at an average kirana stores.

Though with excellent potential, India poses a complex situation for a retailer, as this is a Country where each State is a mini-Country by itself. The demographys of a region vary quite distinctly from others. In order to appeal to all classes of the society, retail stores would have to identify with different lifestyles. Hence we may find more of regional players and it would take enormously long time before nation wide successful retail chains emerge. This is the main reason as to why the successful retail chains in the country today operate at regional segments only and are not aiming at nation wide presence, atleast for the time being.

In the urban retailer industry, the gestation periods are long, institutional funding is difficult, and there is none or little Government support. But the belief among top retailer chains in the country is that the industry will see large investments coming once the current ban on foreign direct investment is lifted. But that could be two-three years away. FMCG and grocery retailing is a tough business in India with margins being very low, and consumers not dissatisfied with existing shops where they buy.

Supplier Retailer Relationships

Traditionally the supplier-retailer relation in India comprised several layers such as the national distributor, the regional wholesaler and the end retailer. However this scenario is fast changing with the organized retail increasing its presence in the country where the relationship is directly with the manufacturer. However this new model has been affecting the relationships that the manufacturer enjoys with the traditional system which is still the most dominant in the entire retail sector. The issue of differential pricing is being taken up at several forums and the growing dissatisfaction among the traditional retailers is being addressed by the manufacturers. However we see that in the long term, the role of a national distributor would slowly fade away or get restricted to the rural/ upcountry regions. The supplier-retailer relationship would come under severe pressure as each party would try to squeeze maximum margins out of the other.


Distribution chain management must address the following problems:

Distribution Network Configuration: Number and location of suppliers, production facilities, distribution centers, warehouses and customers.

Distribution Strategy: Centralized versus decentralized, direct shipment, Cross docking, pull or push strategies, third party logistics.

Information: Integration of systems and processes through the distribution chain to share valuable information, including demand signals, forecasts, inventory and transportation etc.

Inventory Management: Quantity and location of inventory including raw materials, work-in-process and finished goods.

Cash Flow: Arranging the payment terms and the methodologies for exchanging funds across entities within the distribution chain.

Logistic Instability: It deals with problems relating to planning implementation and controlling the physical flow of materials and final goods from points of origin to points of use.


An article written by Jyothi Data (2003) points out that FMCG majors are increasingly moving away from pumping money into advertising and are looking instead at innovative promotional strategies that are more effective in terms of translating into sales. Industry analysis undertaken by information and credit rating agency ICRA points out that the initiatives taken by FMCG companies focused primarily on effective supply chain management and not on advertisement expenditure. It is possible that such initiatives resulted in increasing market awareness of their products, which in turn helped the companies push up sales. (Jyothi, 2003)3 According to Kumar (2002), 8000 annual melas are held in rural India every year. Besides these melas, rural markets have the practice of fixing specific days in a week as Market Days when exchange of goods and services are carried out. Every region consisting of several villages is generally served by one satellite town where people refer to go to buy their durable commodities. If marketing managers use these feeder towns they will easily be able to cover a large section of the rural population. Only 16% of the rural population has access to a vernacular newspaper. Although television is undoubtedly a powerful medium, the audiovisuals must be planned to convey a right message to the rural folk. A radical change in attitudes of marketers towards the vibrant and burgeoning rural markets is needed to impress the 230 million rural consumers spread over approximately six hundred thousand villages in rural India. Marketers have to adopt a strategy that appeals individually to the rural audience and formulate separate annual plans and sales targets for the rural segment. Changes must be made in the marketing mix elements such as price, place, product and promotion. Corporate marketers should refrain from designing goods for the urban markets and subsequently pushing them in the rural areas. The unique consumption patterns, tastes, and needs of the rural consumers should be analyzed at the product planning stage so that they match the needs of the rural people.(Kumar,2002)4


To study the future prospects of rural and urban retailers and their scope for the FMCG companies, in India. To study the challenges faced by rural and urban retailer in India. To assess various aspects of distribution services provided by the disributor to retailer and wholesaler. To determine and compare the extent of retailers satisfaction with quality of distribution services on the basis of different factors. To understand the preferences of retailers about distribution services. To understand the purchase criteria of retailers for selecting distribution services.

This passage describes the methodology used after getting the feel of market place in KOSI KALAN city & describes the way in which the research has been carried out. For the purpose of knowing about the Distribution Service level KOSI KALAN city, I designed a questionnaire to be answered by the retailers & the wholesalers. After making the questionnaire, the area for which the research work has been carried out and collection of information has been described here. At the end, conclusion of the study has been discussed. Place of Research The entire research work has been done in different residential areas & market places of KOSI KALAN like: Kosi, Ajijpur, Faalen, Kharot, Barsana, Nagariya, Nandgaon, Shergarh, Chhata, Akbarpur, Kotwan etc. Total Population Sample Size --------------------500 50 Descriptive Simple Random Sampling

Research Design Sampling Design Research Time

The research was conducted for the time period of 6-7 weeks.

Tools & Instruments

Survey method is used for collection of data regarding Distribution Service in KOSI
KALAN city.

Personal Interviewing Technique is taken into consideration for having the information. Structured Questions were asked for this purpose.