Innovative Distribution Channels Of Fmcg In India
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1. Innovative Channels are being experimented with by F.M.C.G. Majors? Please discuss their role in future?
In recent years the various innovative channels that are being experimented by FMCG majors in India are:
Partnering with Self Help Groups in Rural India.
Internet based Rural Kiosks/Hubs
Direct Selling
We will discuss in detail each of these channels in terms of their current reach and its future growth potential and the role they play in the future of the FMCG distribution.
Partnering with Self Help Groups in Rural India
As Hindustan Unilever Limited (HUL) sought to reach rural markets, they faced two hurdles. The first was size: rural markets were scattered over large areas, and per capita consumption rates were low. Thus, while the aggregate rural potential was massive, the potential of each of the 638,000 scattered markets was very low. The second was reach: rural markets were not connected to urban centers and road connectivity was poor. Even when feasible, accessing remote markets meant additional costs.
HUL found an innovative solution. Hindustan Lever partnered with micro-credit recipients by offering them opportunities for micro-enterprise. Thus Project Shakti was born. A member of a Self Help Group (SHG) in each of the chosen villages was appointed a Shakti entrepreneur. As Shakti brand endorsers – known as Shakti Ammas – they borrowed money from their respective SHGs and with that capital purchased HUL products to sell in their villages. The Shakti brand endorsers are underprivileged rural women trained to manage businesses, to communicate the benefits of the brands and to effectively engage with consumers. Partnerships with NGOs and support from state governments facilitate these efforts of training.
Now there is a network of 35,000 entrepreneurs reaching 100 million rural consumers in 100,000 villages. This effort makes a lot of business sense: it means a significant increase in penetration and market shares for HUL brands and ongoing direct contact for the company with over 2 million rural homes in a cost-effective manner.
Internet based Rural Kiosks/Hubs
Launched in June 2000, ITC e-Choupal has already become the largest initiative among all Internet-based interventions in rural India. e-Choupal services today reach out to more than 3.5 million farmers growing a range of crops – soya bean, coffee, wheat, rice, pulses, and shrimp – in over 31,000 villages through 5200 kiosks across six states (Madhya Pradesh, Karnataka, Andhra Pradesh, Uttar Pradesh, Maharashtra and Rajasthan)
The same system of physical and information exchange that brings produce from the village was used to transfer goods to the villages. As infrastructure has already been paid for by procurement, it is available at marginal cost for distribution. Through e-Choupals, hubs, and processing centers, they had the ready infrastructure needed to implement an alternative channel for distribution of goods and services to rural India. ITCs previous channels reached areas with populations of 5,000 and above. E-Choupals allowed penetration into areas with populations less than 5,000 where nearly 70% of the countrys population resides.
Products such as herbicides, seeds, fertilizers, and insurance policies, as well as soil testing services are sold through e-Choupal. E-Choupal as a distribution channel begins in agriculture but extends well into consumer goods and services.