For a large variety of consumer products, the private village shops are the main channels in the rural markets; they are also the cheapest and the most convenience channel to align with. As such we shall examine in some detail how the private village are utilized by firms in their rural marketing effort.
The network of village shops of India is considered by several experts as the largest and cheapest distribution channel in the world. There are 3.6 million such shops in rural India. The village shopkeeper actually operated against several odds. He is often forced to deal in a large number of products in order to make his operation viable. It means larger inventory and higher inventory costs. The longer lead time for replenishments from the urban based producer enlarges his inventory holding further. Also, as his sales are not uniform throughout the year, he has to carry the inventory over a longer period of time. All this leads to the blocking up of his capital and increase his costs. The scope for making up the higher costs through higher make up is rather limited. He cannot charge a higher mark up, as the consumer he is catering to cannot afford to pay a higher price. Nor is he able to make the higher costs by increased turnover. The average daily turnover of a rural shop is less than Rs 300. Even this level of turnover is generated only when he extends credit to his customers. And he incurs additional expenses for the frequent trips he has to make to the supply points in the towns/ market centers. It is quite interesting that in spite of all these handicaps, the village shopkeeper conducts his rural retail operation at a profit, though quite nominal, it might be. He achieves this feat largely tough his inborn ability for astute management of money and other inputs. He also puts in hard work. He keeps his shop open for 14 hours a day compared to that 8 hour service provided by the urban shops and he keeps his keeps his shop open on all 365 days in the year, with the support of his wife and children, and ensures that he does not miss a single possible sale. It is mainly this human labor, the cost of which neither gets accounted, nor paid for fully that makes the village shops of India one of the cheapest distribution channels in the world.
It is quite natural, therefore, that firms seeking an effective presence in the rural market, willingly embrace the private village as the major component of their distribution outfit. The shops also function as their effective bridge with the scattered rural consumers.
Organizing its mating channel out of these private shops, however, requires assiduous efforts on the part of the firm. It has to select its outlets from out of existing shopkeepers. In some cases, it has to develop freshers and appoint them as outlets. It has to select from among the available people ending on the product line and other relevant factors and train and develop them into competent dealers for their products.
The name of the game is to motivate the retailer in rural market to stock a product or a brand.
Improving the viability of the outlets:
Improving the viability of the retail outlet is an important part of channel management in the rural context. In the first place, the firm must be willing to view rural marketing as a long term venture. Secondly, the firm must encourage the outlets to deal in a number of product lines. In affect, the firm can collaborate with other firms and make a joint retailing offer, there by promoting the viability of the retail operation.