Rural Market Dynamics – Changing with the times

With two-fifths of the villages accounting for nearly four-fifths of the population, there is little doubt that the rural population is large and relatively untapped. Besides, the urban-rural divide has typically been huge, though that gap has been reducing over the years. In 2001, there were 742 million people in the rural areas compared to 285 million in the urban areas. In 2020, the rural population is expected to continue to be over 700 million while the urban population will touch 499 million.

The emerging rural markets are heterogeneous both in size and affluence. For instance, in states like Tamil Nadu, Karnataka, Gujarat and Kerala, the size of the rural population is 18 to 40 million and the rural market is over Rs 600 million.On the other hand, there are some markets that are big but not as affluent. These include states like Uttar Pradesh, West Bengal, Andhra Pradesh and Rajasthan, which have a population of over 40 million but a market size of about Rs 600 million.

The rural areas are heterogeneous in terms of social development too. Some markets are big and developed but not as affluent, for instance Tamil Nadu, while some are affluent but not as large or socially developed like Haryana, and others that are large but neither developed nor affluent like Uttar Pradesh, Andhra Pradesh and Karnataka.

Over the years, the rural household income has been on the rise and so has the education level. For instance, in 2007, nearly 6 per cent of the rural population was in the high-income bracket, earning over Rs 140,000 per annum (at 1999 prices); 46 per cent was in the lower-middle-income bracket, earning Rs 35,000 to Rs 70,000 per annum; and 24 per cent was in the low-income bracket earning about Rs 35,000 per annum This is a far cry from 1993 when 65 per cent was in the lowincome category, earning less than Rs 35,000 a month. Likewise in education, 2001 statistics show that at least 3 per cent of rural households have one graduate and 16 per cent at least one member who has passed Class 10 and Class 12 as against 1993, when less than 10 per cent passed the senior school examinations.

Media coverage in the rural areas has been growing rapidly. In 2008, the press had reached 29.9 per cent of the rural population, TV 43.9 per cent, satellite 21 per cent, radio 20.1 per cent and cinema 6.7 per cent.

There has been an aggressive effort by marketers to win rural customers. From 2004 to 2006, LG India for example tripled its retail and distributor outlets in the rural areas to 2,700 and 1,300 respectively. Similarly, Hindustan Unilever’s Shakti Programme reached about 42,000 women entrepreneurs in 123,000 villages and Lifebuoy Swasthya Chetna reached 140 million people in 40,000 villages during the same period.

The result of these efforts has been that the routine expenditure of an average rural household has increased rapidly with the percentage spend almost converging with urban spends. In the areas of health, transport, clothing and durables, while the rural spend is 4.7 per cent, 10 per cent, 7.1 per cent and 4.9 per cent respectively, urban expenditure is 4.6 per cent, 11.1 per cent, 6.8 per cent and 5 per cent respectively.

The other positive fallout has been the growing share of rural markets in company strategies and revenues. Today, Hindustan Unilever, LG and Colgate have dominant positions in the rural market.

Rural families are witnessing three key trends in rural earning: a parallel income (since farming is not a very reliable option); women contributing to the family income in parallel work, the farm, etc.; and a third income from the teenage son or daughter.