Possible Approaches for Effective Channel Management in the Rural Context:



The Existing Market Structure: Indian rural market is composed of 22,000 primary rural markets and 20 lakh retail sales outlets of which nearly 1 lakh are fair price shops of Public Distribution Systems (PDS) as estimated. One retail shop services 60 to 70 families in rural areas. The structure also involves stock points belonging to the manufacturer or area distributor to service these retail outlets at village levels in feeder towns.


Available Channel Choices: The channel types that is available in the rural market are-


  1. The Private Shops
  2. The Co-operative Societies
  3. Fair Price Shops of PDS
  4. The Village Shandy or Weekly Market


From the above, the co-operative societies are mainly concerned with the distribution of agricultural inputs. Fair price shops are concerned with the distribution of essential commodities consumed by the common man. The ‘Village Shandy’ is a widely used channel of rural market. But its role in marketing branded products is limited.


The Private Village Shops: Private shops are the main channels in the rural market for a large variety of products. They are also the cheapest and the most convenient channel to align with.


The village shopkeeper is forced to deal in a large number of products in order to make his operations viable, which means a large inventory. The larger lead-time for replenishments from urban based production point enlarges the inventory holding further. And as his sales are not uniform throughout the year, he has to carry inventory over a longer period of time, leading to the blocking up of his capital.


Organizing one’s channel out of these private shops, however, requires assiduous efforts on the part of the firm. The choices are usually confined to-


  1. Existing traditional private shops.
  2. Moneylenders willing to branch off to trade.
  3. Land owners willing to branch off to trade.
  4. Educated unemployed persons.


The firm has to select personnel from the above group depending on the product line and other relevant factors and then train and develop them into competent dealers.


Satellite Distribution: A concept known as ‘Satellite Distribution’ can be tried in developing a distribution channel in the rural market. Under this system, the firm appoints stockist in feeder towns, who take care of financing, warehousing the goods and sub-distribution of goods. The firm also appoints a number of retailers in and around the feeder towns and attaches them to the stockist. The goods are supplied to the stockist either in cash or credit or on consignment basis.


The sales volume of the retailers will vary depending on the potential of the area covered and the capacity on the dealer concerned. Over a period of time, some retailers grow in terms of business turnover. If such retail points also happen to be transportation centers within the feeder town area, the firm elevates them as a stockist. The area of operation of the original stockist shrinks in this process, but care has to be taken to see that his volume of business does not shrink. This is achieved, in practice, on account of growth in demand and deeper market penetration.


If twenty retailers operate in the network of an original stockist, five or six of them get elevated over a period of time as stockist. Out of the retailers some remain attached to the original stockist and other relevant factors. The process continues as long as the market keeps expanding. And at any point of time, enough retail points in variably hover around or particular stockist, hence the name ‘Satellite Distribution’.


The main advantage of this system is that it facilitates market penetration in the interiors of market. However, the firm must ensure is that it facilitates market penetration in the interiors of the market. The firm must ensure that in the process, the motivation of the earlier generation stockist is not destroyed due to overzealous and premature elevation of the retailers into stockist.

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