Hariyali Kisaan Bazaar, the rural retail arm of DCM Shriram Consolidated Ltd (DSCL), is restructuring to improve its operations. The chain had shut 30 stores in the past year, hired Tata Consultancy Services to improve inventory management and has appointed AT Kearney to facilitate consolidation.
The company is still bullish about rural retail, though a competitor, Triveni Engineering, had earlier withdrawn entirely from this business, after four years of effort. “In the past one year, we have not added a single store. We shut 30 as part of the consolidation drive. The whole method of running the business has been revisited. We have worked on improving supply chain, inventory management, logistics, promotion, etc,” said Ajay Shriram, chairman and senior managing director of DSCL.
It now has 275 stores across Uttar Pradesh, Uttarakhand, Punjab, Haryana, Rajasthan, Madhya Pradesh, Maharashtra and Andhra Pradesh. “The response of all the measures (taken) is encouraging. The retail business has seen a turnover jump of at least 25-30 per cent over last year. We are in the process of identifying the next set of roll outs, under which 15-20 stores will be added,” said Vikram Shriram, vice-chairman and managing director. Hariyali stores offer products like agri-inputs, cattle feed, plastic furniture, fast-moving consumer goods, automobiles, banking, crop insurance and other agronomical services.
Dhruv Sawhney’s Triveni Engineering & Industries Ltd, had shut its loss-making rural retail business. Its fully-owned retail arm, Triveni Retail Ventures Ltd, incurred losses of Rs 19 crore up to March 2009, since the retail foray in early 2005. Triveni Retail operated 42 stores in rural towns and the semi-urban cities of Uttar Pradesh and Uttarakhand. ITC, which operates 24 large-format rural outlets known as Choupal Saagar, has not expanded since 2007, due to reversals in agri reforms such as restrictions on futures trading, etc.
“The biggest bottleneck towards development in rural markets is the excessive dependence on agriculture and, consequently, on rainfall. There is overall slowdown of GDP growth every time there is poor rainfall,” says a CII-Technopak study on rural retail. To understand and be accepted by the rural consumer requires long and painstaking efforts. Rural marketing involves more intensive personal selling, compared to the urban one. “To effectively tap the rural market, a brand must have associations that the rural consumer can relate to. There are several other infrastructure bottlenecks such as power, water, roads, etc,” says the study.
“Retail is a long-term game. Liquidity is going up in rural India on higher farm incomes. Various means of communication are improving awareness. While profitability is at least a couple of years away, we are well-positioned and our conviction in rural India continues to be strong,” said Ajay Shriram.
