IOC : Rural Retail

Apart from urban retail one can see a lot of activity on the rural front too. A host of companies have started their rural retail/procurement initiatives in the last few years. ITC's echoupal initiative is one which has received a lot of media coverage and recognition. echoupal was initially conceptualized as a procurement model, but with the addition of Choupal Sagars ( Rural Malls) they are also planned to be used as a reverse supply chain to supply back to villages.Retail and Petroleum Companies Apart from various corporate houses which have ventured into the rural retail scenario, some of the oil PSUs have also started their retail ventures in villages. In the urban areas many oil comapnies have started leveraging their real estate advantage to set-up retail outlets. Like Bharat Petroleums In&Out.KSK IOC the fortune 500 oil PSU has started a rural retail venture in 2005. They have started their rural petrol pump cum retail stores in many villages. The idea is to become a one-stop shop for the needs of a villager, and provide him with quality products including fuel. Earlier the consumers in villages had to rely on either the unauthorized petrol diesel dealer in the village or travel for 10-15 Kms to buy fuel for his tractors or the pump sets. With the setting up of pumps in villages you are able to reach the customer at his door-step.Today there are more than 2000 of these rural retail outlets in rural areas across the country and a lot of recognition has also come for the intiative. In September 2007 the initiative was awarded the ‘Most Admired Retailer of the Year’ Award in the category of Rural Retailing, by the India Retail Forum (IRF), and the ‘Retailer of the year- Rural Impact Award’ given by the Asia Retail Congress (ARC).Model The rural retail outlet is a low investment model for IOC, wherein it looks at a investment of 6-9 lakh rupees vs an investment of 1-1.5 crores for a dealership in urban areas, with a quick pay back of 3-4 years. The dealer has to sell not only fuel but non fuel items like, seeds, fertilizers, and FMCG products. This revenue from non-fuel sales is expected to supplement the income of the dealer.The models has been rolled out rapidly across the country, but there are certain bottlenecks which are coming up.
Tie-Ups
The combination of the pump and the retail outlet is what drives this model. IOC has gone ahead and tied-up with many FMCG and farm implements companies for an exclusive access to these rural outlets. One of the first FMCG companies to tie-up with KSK was Dabur, now they have recently tied-up with AIRTEL for mobile. The other tie-ups include National Seed Corporation and Indo Gulf Fertilizers. There many similar tie-ups in the pipeline and the company is working on the modalities of the deal.Ground RealitiesAfter listening about the initiative i decided to visit some of the KSK outlets in UP. The photos below are from one of the KSK outlets which I had visited recently...At the ground level there are many operational difficulties with managing the retail outlet. The fuel sells on its own and the villagers are happy that they are able to buy diesel and petrol at their doorsteps. Earlier they had to travel atleast 10 kms to the nearest petrol pump to buy fuel.... But the dealers feel that they don't have the expertise of dealing with the wide range of products that they are expected to sell, ( from Fertilizer to note books) and because they don't have the whole range which a typical grocery shop would have they find it difficult to attract customers, and with the limited sales they are unwilling to put in a separate person for the retail shop , which is essential. Then there are issues related to credit and the market visits one has to make to keep maintain the stocks.