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Fueling The Farmer's Income And Demand By Empowering Retailers

Factors such as increasing awareness of health needs, better availability, right packaging, consistent quality, adequate product labelling will ensure healthy growth year after year for the foreseeable future.

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Sustained growth in the rise of internet penetration, availability of affordable smartphone, low mobile data tariffs, improved digital literacy, maturing of digital payment & related infrastructure, continued support and stimulus provided by the Government through programs (StartUp India, StandUp India, Make in India) are factors fuelling the digital economy. With 430+ million internet users, India is the second largest online market, next only to China. As per industry reports Internet users in India are expected to increase to 635.8 million by 2021. While the growth is increasingly broad based, technology led disruptions across sectors like Financial Services, Retail, Healthcare etc are acting as catalysts, encouraging entrepreneurship, creating jobs and fostering an environment for more inclusive growth.

With companies witnessing intense competition in cities, it is natural that focus shifts to tier 2/3 cities and beyond which are relatively less tapped and ripe with potential. The next wave of growth e-commerce and consumer internet companies hence will be driven by these cities and rural India. The semi-urban and rural e-commerce is likely to be US$10-$12 billion opportunity in the next 4-5 years. Many companies are tackling the challenges of rural markets, such as logistics, content, etc by bringing down hurdles for expansion of services and products like staples, spices, dry fruits, flours, pulses, rice respectively. However, most of the current operating models which are discounting led and thus dependent on sustained infusion of capital only leads to increased cash burn and stress on the current supply chain. 

Kirana stores are at the centre of this raging battle in the semi-urban and rural retail market as they still account for 90% of India's US$700 billion retail market. These mom and pop stores play a significant role in contributing towards our Indian economy and they are the only source of getting new products for majority of rural areas. In the rural FMCG market, high costs of acquisition and low rural incomes have put high-tech solutions out of the reach of intended beneficiaries. There is just one traditional agricultural market yard in a vast area where most transactions are done by local influences, who usually keep farmers and rural traders in the dark about how any commodity is evaluated and priced.

Engaging with the end producers and unorganised marketing infrastructure make the products exceedingly expensive for the end consumers to buy. The FMCG sector in rural and semi- urban India is estimated to cross US$ 100 billion by 2025. Rural FMCG market accounts for 40% of the overall FMCG market in India, in revenue terms & consists of about 650,000 villages.

To expand and conquer rural retail, any succeeding model needs to have multiple elements in place. Digitization that provides rural traders and primary processors a more competitive market, efficient modern marketing mechanisms, reliable and quality logistics support, together will help rural consumers get the best rates while ensuring transparency. In broader sense, 90% of the domestic consumption of all the farm produce in the industry happens at a kirana Store. But the demand from the Kirana stores is heavily fragmented and hence the entire system brings in a lot of middleman and inefficiency with quality risk embedded in the supply chain.

Enabled by easy access to platforms like Shopkirana, hitherto small and easily perishable kirana stores, now have a significant deterrent in the fact that they can place directly place multiple product orders with single billing along with parallel digital access to brands.  Digitization has reduced the risk and uncertainty among kirana stores. The farmers now have the convenience of myriad services and digital connectivity empowering them to become smart retailers themselves though it is a bit far away from achieving critical mass.

Factors such as increasing awareness of health needs, better availability, right packaging, consistent quality, adequate product labelling will ensure healthy growth year after year for the foreseeable future.

One needs to tread with caution though as several players who vowed to improve the farm-to-plate supply chain have only met with partial success. This is because there are several regulations along the supply chain that constrain its expansion and functioning as a demand driven supply chain or seed-to-feed chain. The success of the back-ended models depends on their ability to reach closer to the farmer, build systems for quality control and partner with a front end for demand aggregation. This cannot scale without the participation of village-level entrepreneurs and Farm Produce Organisations (FPO). The models have the potential not only to generate employment in rural areas but also enhance farmer incomes. Both of which are the need of the hour today not just for retail but the nation as well.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Deepak Dhanotiya

The author is Co-founder of Shopkirana

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