Selling in the hinterland

And now another company charts a roadmap for organised rural retail, and tastes initial success.

Umraj village in Nanded district lies in the sugarcane belt in Maharashtra. Last year some of the farmers here saw a huge increase in the yields of their crop to around 25-30 tonnes per acre, compared with barely 10-15 tonnes earlier.

And that's because Godrej Agrovet helped these farmers with better farm inputs and some professional advice. Agrovet is helping farmers across the country earn more because they want them to be able to spend more. And that's the strategy behind it's rural retail initiative "Aadhaar".

"By improving productivity, we are giving them more purchasing power," says C K Vaidya, managing director. What's more, having built up a network, albeit a small one, Agrovet is now beginning to leverage it: already corporates are willing to buy space in its stores.

In just over two years, Agrovet has rolled out 28 retail outlets, designed to be one-stop shops for rural consumers, in states like Maharashtra, Punjab and Tamil Nadu, many of these in the more affluent pockets of rural India.

The target is not too ambitious: 1,000 outlets in about 5-6 years, with around 70 Aadhaars slated to come up this year itself.

Agrovet is willing to spend around Rs 1,500 crore on this initiative having already invested Rs 15-20 crore. It will need that kind of money because Agrovet owns many of these stores and actually constructs the brick and mortar structures.

Agrovet has opted for the familiar hub and spoke model: typically, the hubs would be larger stores with an area of 8,000-10,000 sq ft while the smaller spoke stores would occupy around 3,000-4,000 sq ft. One big store is surrounded by six smaller shops, the distance between them varying between 10-30 km.

"We look for a base population of 25,000-75,000 for the smaller shops which would give us a catchment population of about one lakh," explains Anirban Banerjee, general manager, marketing.

For the hubs the base population would be about one lakh resulting in a catchment of about 2 lakh people. A store would cost anywhere between Rs 20-50 lakh, depending on whether it has to be built from scratch or only the interiors need refurbishing.

Initially the shops stocked goods that a farmer would use like fertiliser and seeds but now they cater for the entire rural household selling kitchenware, apparel, footwear and even durables.

"We're beginning to see money," says Vaidya, who's looking at a turnover of around Rs 3-5 crore from the larger stores with the smaller shops bringing in about Rs 1.5- 3 crore.

While acknowledging that this cannot be a high margin business "" the idea is to do big volumes "" Vaidya says that once the 1,000 store network is in place, revenues should touch Rs 3,500 -4,000 crore with operating margins of 8-10 per cent.

Since the Aadhaars sell at the MRP (maximum retail price), sourcing products at the right prices and quantities, so as to get big discounts, is critical to the success of the venture.

Meanwhile, Agrovet is entertaining corporates who want to retail their products or services in its stores. Already Monsanto hawks seeds while Nagarjuna sells fertilisers.

Apollo Pharma has started selling medicines at two of the outlets. And Agrovet is talking to a couple of banks and insurers. Besides, it is exploring the franchisee model to set up e-kiosks.

Also, in a move that will help improve the lot of the farmers, Agrovet has started buying their produce, picking up fairly large quantities of maize, and is also scouting for buyers for other crops.

These initiatives are similar to those begun much earlier by ITC's agri-business division "" e-choupals (kiosks) and Choupal Sagars (rural hyper markets). And with the much-talked about Reliance's rural (and urban) retail initiatives under way, times are a changing for the humble Indian village.