By Nitin Kundra and Rohit Razdan
The spectacular economic growth of India’s tier-one cities, like Delhi, Mumbai and Bangalore, has stolen the limelight from the quieter economic transformation going on in the countryside. As recently as 1995, 90% of India’s rural population was considered “deprived,” according to McKinsey Global Institute definitions. By 2005, that fraction had fallen to 65%, and by 2025 it may be less than 30%. Not surprisingly, then, consumption is rising, too, and India is also increasingly digitally connected. Rural customers will account for nearly two-fifths of total consumption in 2025, and more than half in some important categories, such as food, beverages and tobacco. And that may understate matters: Many rural consumers travel to towns and cities to make purchases.
And there are real advantages to doing business in rural India, including for multinationals. There is typically less competition than in urban areas, so rural markets are often dominated by the top two or three brands in a category. As a result, prices tend to be higher, and more stable, than elsewhere.
With all this in mind, we have identified four key principles for companies to succeed in cracking the rural Indian market
1. Shape retail channels to maintain low cost to serve.
2. Become the preferred brand.
3. Develop marketing approaches suited for rural customers.
4. Pick your spots.
To get the explanations of these points, and to see the exhibits, download the full report.