Problems in Taping Rural Markets – Managing Physical Distribution

The main problems in physical distribution in the rural context relate to:

a. Transportation:

  • Inadequate railways
  • Bad or no roads
  • Immediate carriers or cargo operators

b. Warehousing Problems

  • No electricity (only 35% of India have electricity)
  • Unavailability of godowns
  • Marketing purposes

c. Communication Problems

  • Only 3% of India is connected by phones
  • Unreliable post and telegraph facility

Transportation problems

Transportation infrastructure is quite poor in rural India. Though India has the 4th largest railway system in the world, many parts of the rural India remain outside the rail network. As regards road transport, nearly 50% of the 576000 villages in the country are not connected by roads at all. Many parts in rural India have only kacha roads and many parts of the rural interiors are totally unconnected by roads with any mandi level town. As regards carriers, the most common mode is the animal drawn cart. Because of these problems in accessibility, delivery of products and services continues to be difficult in rural areas.

Warehousing problems

In warehousing too, there are special problems in the rural context. Business firms find it quite difficult to get suitable godowns in many parts of rural India. And there is no public warehousing agency in the interiors of rural India. The central warehousing corporation (CWC) and the state warehousing corporation (SWC’s) which constitute the top tier in public warehousing in India, do not extend their network of warehouses to the rural parts. They go only upto the nodal points or major market centers. The warehouses at the mundi level which constitute the second tier in the warehousing chain are mostly owned by cooperatives. And the same is the case with rural godwons, which form the third tier. None of these tiers function as public warehousing agencies ; they provide the warehousing service only to their members. As such, a business firm has to manage with the CWC/SWC network which stops with the nodal points, or it has to establish its own depots or stock points run by its stockists / distributors. Of course, in such cases, the commercial advantages of operating through a public warehousing agency like CWC/SWC are lost to the firm.

Communication problems      

Communication infrastructure, consisting of posts and telegraph and telephones, is quite inadequate in rural areas. Since communication is the first requirement of efficient marketing, lack of proper communication infrastructure poses difficulties, especially in physical distribution.

Cost-Service Dilemma Gets More Acute

The effect of these problems on the physical distribution front is certainly felt by any business firm venturing into the rural market.  They adversely affect the service aspect as well as the cost aspect. Maintaining the required service level in the delivery of the products at the retail level becomes very difficult. At the same time, physical distribution costs get escalated with 80 per cent Of the total rural consumers living in the ‘less than 1,000 people’ category of villages. The scattered nature of the market and its distance from the urban based production points, compound the difficulty arising from the constraints in transportation, warehousing and communication.  Larger pipeline stocks and bigger inventories in warehouses are the natural outcomes of these constraints.  It means higher costs of transportation, higher inventory carrying costs and transit and storage losses. And as we will see in detail in the next section, costs of distribution channels too are much higher in the rural context.  Consequently, the total distribution cost per unit is higher by as much as 50 per cent on an average in the rural market, as compared to the urban market. In fact, the experiences of some companies operating in the rural market show that the cost of distribution in rural areas is two and a half times that of urban areas.

Solving of Physical Distribution Problem

The marketers have to find solutions to the distribution problems. While deriving solutions, the marketers have to keep in mind cost and the service to the consumers. Some of the solutions are as follows:

Shared Physical Distribution Responsibility with Stockists or C&F Agents

With a view to keeping the costs low, some firms try out remote control marketing. But experience shows that firms with major aspirations in rural marketing cannot depend on such remote control operations; they cannot take the route of ‘simply consigning the goods’ and retiring the bills through banks.’ For them, effective presence in the market is a must. While it may not be necessary to have a netw6rk of own stock points throughout the marketing territory, the firm should have a network of stockists or clearing cum forwarding agents(C&F agents) at strategic locations for facilitating physical distribution can be shared by the firm and the stockists.

Combining different modes of transportation

As regards transportation, the system of rail-cum-trucks for long distance movement, trucks for medium/ short distance movement and delivery vans and bullock carts for local haulage should effectively serve the purpose. Water transport too, has a role in specific areas. Bullock cart has a special role in rural distribution. Business firms operating in the rural market of the country have to appreciate that the bullock carts play a major role in secondary transport. They are available in plenty and they are ideal for the rural roads.

Company delivery van

Companies like Hindustan Lever, TOMCO, Brooke bond – Lipton and ITC who are the pioneers in rural marketing in India, have successfully experimented with company delivery vans, for resolving the distribution problems in the rural market. The delivery van takes the products to the retail shops in every nook and corner of the rural market. Besides resolving the problem of product delivery, the van also serves certain vital secondary purposes – it enables the firm to establish direct sales contact with thousands of rural consumers; it also helps the firm in sales promotion. But the cost of operating such vans is quite high. And the proposition can work only if the market/ area assures business potential enough to cover such costs. In the case of HLL, ITC, etc… they knew that such a level of business would accrue only out of a sustained and long term marketing effort and market presence. These firms had the resources, as well as the will to stay in the market. Through the system of operating the vans, they were not just solving a transportation problem, they were developing the market. And they were viewing the costs as a long term investment.

Syndicated distribution

While the company delivery vans are very useful in rural distribution, the idea cannot be easily implemented by firms with relatively less resources. Syndicated distribution may be of help in such cases, the firms can come together and encourage an independent agency to operate such delivery vans with a view to hiring its services. The delivery van here becomes a syndicated service.

Assistance form stockiest

The Company can also get assistance from stockiest. The stockiest can own or hire vans or trucks and accordingly distribute the goods to the retailers and the dealers. The company should help finance such kind of plant and projects.

Central Warehousing Facility

The Central Warehousing Corporations (CWC) and The State Warehousing Corporations (SWC) should also pay attention in providing suitable warehousing in rural areas. At present the CWC and the SWC concentrate their warehousing activities only at major markets. The smaller markets are handled by cash starved gram panchayat’s or Satellite municipalities. There is an urgent need to have good warehousing facilities at local market to. These have to be provided either by the government or the companies operating in particular areas. A system can be devised where in a group of companies can come together and have common warehousing facilities. Here the cooperative rule can also help provide good warehousing facilities in rural areas.

Sorting out communication problems

The communication problems in the villages can be sorted out (mostly) by the government alone. The marketer must make the government must make the government realize the importance of rural markets and the corresponding network of post, telegraph and telephones. Locally there are examples of private telephone exchanges that have worked wonders for specific areas. However small exchanges have limited scope. Recently the government has alone sent corporate partnership in printing and disembursing postal and telegraphic material. However the experiment doesn’t seem to have caught on.

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