Rural retail market has no benchmarks to follow, so we have to keep innovating

Written by Alokananda Chakraborty | Updated: Nov 1 2009, 03:28am hrs
Organised retail has been in a tailspin over the last one year in the wake of the economic slowdown. However, rural operators say the business is now thriving, thanks to government measures like the farm loan waiver and the NREGA. Thus, it is of little wonder that the Rs 3,534-crore DCM Shriram Consolidated Ltds Hariyali Kisaan Bazaar (HKB), a chain of centres is looking to scale up and expand its network. Hariyali Kisaan Bazaar, which aims to provide end-to-end ground level support to the Indian farmer, also functions as retail outlets for the catchment area. In an interview with FEs Alokananda Chakraborty, Rajesh Gupta, president, Hariyali Kisaan Bazaar, talks about the opportunities in rural retail. Excerpts:

How have rural aspirations changed over the years Has rural retailing been able to adapt itself to the changing aspirations

The overall monthly per capita consumption expenditure in rural areas has risen by 122% in the last 12 years, and aspirations are continuously evolving with the penetration of mobile telephony and the increase in television viewing. The improvement in education in rural India has also acted as a strong catalyst in the development of the rural economy.

Organised retail has given a strong boost to rural India by lifting farm incomes and enhancing the linkages between urban and rural India. Rural regions provide a highly unexplored market for the expansion of retail activity. With the growth in awareness across product categories such as agri-inputs, food & grocery and lifestyle, there is also a growing requirement for specialised products.

How has the overall economic downturn affected your business A recent study by the Rural Marketing Association of India said that rural economy has not been impacted by the global economic slowdown. Do you agree with the contention

It would not be right to say that the global downturn has not impacted the rural economy. Though the impact is not very significant, it cannot be ignored. If you look at rural income, 50% of it is related to the farm sector and the other 50% is non-farm. The farm sector had remained insulated from the global economic slowdown. There are, however, several external factors in which an indirect cause-effect relationship in the non-farm income, for example, remittances have gone down.

What does the announcement of high support prices for key crops like wheat and paddy mean for retail chains like Hariyali Kisaan Bazaar

Higher minimum support prices are definitely positive for farmers and help in improving agricultural incomes. This is a positive development for retail chains in the rural markets, as it opens up multiple purchase points. This is because more income results in more spending by farmers.

Do you think that rural income has been boosted by government measures like the farm loan waiver/NREGA

The rural economy has definitely seen a boost with government measures like the farm loan waiver and the NREGA scheme that have served as change agents for the rural economy and provided rural India with a growth stimulus. The liquidity in the rural market has gone up and we have seen growth in certain product categories like agri-inputs and fuel. We are now focusing on the non-agri needs of rural customers and on increasing our product mix.

What kind of backend infrastructure do you need to run a retail chain like Hariyali Kisaan Bazaar Please elaborate on the logistics support that you have developed, given the wide variety of products and services that HKB offers.

Logistics and infrastructure in rural areas are weak; therefore creating an efficient backend infrastructure is critical for a retail chain. Hariyali Kisaan Bazaar has invested in a strong infrastructure with a distribution centre in each state, which helps meet logistics requirement, stocking, dispatches etc. The physical infrastructure is supported by a strong IT backbone. Today, Hariyali Kisaan Bazaar has over 300 outlets across eight states, namely, Uttar Pradesh, Haryana, Uttarakhand, Rajasthan, Punjab, Madhya Pradesh, Maharashtra and Andhra Pradesh.

Where do DCM Shriram Consolidated Ltds plans of hiving off HKB stand now

We are waiting for an opportune time to hive off Hariyali Kisaan Bazaar. As of now, we are focusing on the growth and strengthening of our business.

You have also launched a range of products under the HKB store brand/private label. Which are the categories in which store brands work better and how much do you see in-house products contributing to your sales volume and revenues this year

The sales contribution of our private label stood at around 10% in FY 2009. We were present primarily in the food and agri-input categories last year. In FY 2010, we have introduced our private label in many more categoriesfoods, agri products, apparels for men, women and kids, footwear, home linen and utility products like luggage and small appliances. We are now looking at a 15-20% contribution across categories.

Looking ahead, what will be the growth driver for HKB-newer products or innovative services like credit extension

Hariyali Kisaan Bazaar has been able to create a niche for itself due to the innovative services that it offers. When we started Hariyali Kisaan Bazaar, we only had agri-input products and our agronomy services were what made us the primary choice for farmers. The rural market has no benchmarks to follow; so we try to keep innovating in order to meet the various needs of rural customers. We have added services in the area of rural banking insurance.