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CHAPTER 5 – SUMMARY AND CONCLUSION

This chapter is discussed under the following headings:

5.1 Overview of rural FMCG distribution system

Overview of rural consumer behaviour

5.2 General information about the companies and rural districts studied

5.2.1 Distribution channel companies studied

5.2.2 General Information about the two rural districts selected

5.2.3 Total number of channels and rural customers studied

5.3 Conventional approaches to reach the two rural districts in Maharashtra

5.4 General information about distributors, wholesalers and retailers

5.5 Attributes for satisfaction of distributors, wholesalers and retailers studied

5.6 Problems perceived by channel members in distribution of FMCG studied

5.7 Rural consumer behaviour

5.8 Brand awareness and preferences

5.9 Rural consumers’ Response on Brand Change in Different Categories

5.10 Levels of consumer satisfaction with channel members

5.11 Consumerism

5.12 Suggestions offered by rural consumers

5.13 Hypotheses validation

5.14 Constructing a scale to measure effectiveness of FMCG distribution channels

5.15 Conclusion

5.16 Recommendations for further research

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5.1 Overview of rural FMCG distribution system

While the rural market certainly offers a big attraction to marketers, it would be naïve to

think that any company can enter the market without facing any problems and walk away

with a sizable share. Distribution is the most important variable in the marketing plans of

most consumer goods manufacturers, because managing such a massive sales and

distribution network is in itself a huge task.

Distribution channels play a pivotal role in marketing by performing a number of vital

distribution functions. Firms rely mostly on their marketing channels to generate

customer satisfaction and to achieve differentiation over competition. The major area of

concern for companies is to make their products available in the remotest corners of the 6

lakh villages in the country. This goal is not easy to achieve and the major companies are

incurring huge costs to make their products available in the 3.5 million rural outlets. It is

a challenge for any company to design a distribution model that is cost effective and that

meets the growing demand from the rural market. There are a whole lot of channels

involved in the distribution network. FMCG distribution has the maximum channel

partners in the Indian rural market.

The wholesaler is the most important source of information for the retailer. The

wholesaler is also the most important influence on the retailer. This means that the

marketer would do well to motivate the wholesaler to get the retailer in the rural market

to stock his company’s products, particularly the newer products. Retailers in interior

areas are not visited by agents of distributors. They go to the nearby town / large feeder

village once or twice a month to buy their stock.

Understanding channel behavior has a critical bearing on channel decisions. The ability

to influence the retailer to stock and promote products requires identifying the manner in

which the retailer performs his business. The extending of credit by retailers to customers

is a function of location and product. Raut98

observed that extending credit to consumers

is practically non-existent in towns but is common in interior villages.

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Overview of rural consumer behaviour

Earlier rural consumers purchased most of their requirements from nearby towns. But in

recent times, a shift has been seen towards purchasing locally. This change in consumer

purchase behaviour has important implications for the rural marketer. There is a need to

access retailers in towns and larger villages and promote products there, so that the

products that are purchased locally can reach smaller retail outlets in villages. Consumer

loyalty can be to the brand or to the retailer. It follows that the type of consumer loyalty

exhibited by the target group has implications for the marketer. The influence of the

retailer is perceived to be high in the rural market. Kim58

suggested that promotion by the

retailer supplements the efforts at creating brand knowledge in rural markets. A

promotion announcing the benefits of a product or brand along with distribution efforts is

observed in rural markets in the FMCG category. Rural retailers can capitalize on

consumer satisfaction and provide outstanding value and service to keep local customers

in local markets. Although, few companies have zeroed in on customer experience, many

have been trying to measure customer satisfaction and have plenty of data as a result17

.

Customer satisfaction is essentially the culmination of a series of customer experiences

or, one could say, the net result of the good ones minus the bad ones.

The aims and objectives of the research study were:

1. To identify conventional approaches to reach Rural Maharashtra.

2. To find the problems perceived by channel members in distribution of Fast

Moving Consumer Goods to Rural Market in Maharashtra.

3. To assess the level of satisfaction of rural consumers with regard to Fast Moving

Consumer Goods distribution system.

4. To construct a scale to measure the effectiveness of rural FMCG distribution

channels.

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5.2 General information about the companies and rural districts selected

5.2.1 Distribution channel companies studied

The two companies whose distribution channels were studied were: Hindustan Unilever

Limited (HUL) and Godrej Consumer Products. These companies have the highest

combined market share in rural markets Sangli and Kolhapur districts and have a strong

presence of their products in almost all villages. They have all types of channels members

to reach rural markets.

5.2.2 General Information about the two rural districts selected

There is a greater degree of rural base elite who goes in for greater consumption of

FMCG products with reference to Kolhapur and Sangli districts. It is interesting to note

that there is a greater degree of rural population more oriented towards urban patterns of

living and life style and their preferences for FMCG are on a larger scale. There is a

predominant concentration of well-to-do rural population who have recently migrated and

settled in urban areas of these districts, therefore their consumption pattern would sway

between the rural taste and the elite urban style of preference. Some impressive facts

about Sangli and Kolhapur districts are as follows: Sangli and Kolhapur districts have the

highest literacy rate in India, i.e. 77.23 and 77.19% respectively. Per capita district

domestic product82

is Rs 20,411/- and Rs 20,019/- of Kolhapur and Sangli districts

respectively which is one of the highest in the country. The prosperity and the resulting

spending prowess of Kolhapur and Sangli people38

was famously reported in a list of

districts with the highest number of Mercedes Cars in the state of Maharashtra, where

Kolhapur came second only to Mumbai. Sangli and Kolhapur districts literacy

improvement in the last decade got 13th

and 14th

ranks respectively all over India67

.

Number of families below poverty line is 14.16% and 17.16% for Sangli and Kolhapur

districts respectively67

which is comparatively the least. So it is pertinent to focus on

these two important districts and hence it was considered an appropriate choice by the

researcher.

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5.2.3 Total number of channels and rural customers studied

The distribution levels identified were – Distributors, Super-stockist, Wholesalers,

Stockists, and retailers. Total 11 distributors / super-stockist / stockists, 40 wholesalers,

60 retailers and 100 rural customers were selected for the research analysis since the

remaining were incomplete in many respects and hence were discarded from the final

research. The non-probability purposive/judgmental sampling technique was used. The

researcher chose the sample based on common trait of interest that would be appropriate

for the study. The research study was conducted with a purpose in mind, the sample was

selected to include people who evinced interest and excluded those who did not suit the

purpose.

5.3 Conventional approaches to reach the two rural districts in Maharashtra

From the study, it was revealed that the conventional approaches to reach rural customers

of Kolhapur and Sangli districts in Maharashtra have different models –

General model: There is a distinction between urban and rural distribution to create

special focus on their individual market. The company appoints wholesalers under the

rural distributor. The rural distributor covers large market where road connectivity is

available. Deep market is covered by the wholesaler and it becomes important because of

the assortment he keeps and the customers he generates from the satellite markets.

HUL Model 1: In this model, the wholesaler plays a very crucial role because the

distributor can not reach the places where there is no road connectivity. The wholesaler

keeps large assortments which induce the rural retailers and subsequently, the rural

customers get attracted because the rural traders play a key role in the buying decision of

rural customers.

HUL Model 2: In this model, the rural distributor covers the retailers which are located

in the same Taluqua and the retailers which are well connected by roads and

telecommunication. Here retailers get better margin as one channel member (wholesaler)

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is reduced and lead time is also less; Shakti dealer gets chance to meet the distributor who

has very large assortments.

GODREJ Model 1: In this model, the super-stockist is only one for the district and

stockists are as good as rural distributors of HUL and he can not cover the retailers

directly unlike HUL distribution model. The turn over of rural stockists is considerably

lesser than the rural distributors of HUL in spite of the profile. The number of stockists is

more than double of the distributors. The GODREJ distribution does not have the self

help group like SHAKTI dealer.

GODREJ Model 2: In this model, the stockist covers the local retailers and the rural

retailers which are located in nearby areas in the range of 1 – 3 kilometers. The stockists

have lesser number of delivery vehicles as compared to the rural distributors of HUL.

The researcher would like to point out that though the nomenclature differs in two

companies, their role remains the same. Distributors of HUL are equivalent to stockists of

GODREJ and super-stockist is as good as the distributors of HUL except “the super-

stockist does not cover retailers directly but the distributor does”.

5.4 General information about distributors, wholesalers and retailers

It was found out that there are no distributors and wholesalers in the villages whose

population is less than 2500. However, retailers exist in all villages regardless of the

population. Majority of the distributors (45.45%) and wholesalers (48%) started their

businesses during the years 2001 – 2003, whereas majority of retailers started their

businesses during the years 2004 - 2006. There was no distributor appointed after 2007.

Not a single wholesaler was appointed by HUL / Godrej before the year 2000. However,

retailers existed before the year 2000 also. most of the distributors studied (63.63%), had

immovable products between the range of 11 – 15 annually because they have to keep

wide varieties due to higher sales so more demand is more inventory and more

immovable products also. Likewise, most wholesalers (50%) had them between the

ranges of 6 – 10, but retailers had very few immovable products, i.e. in the range of 0 – 5

and 6 - 10. The main reason for immovable products is damage in transit or on the shelf.

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Hence they do not sell and are dead stock with them. Distributors spent more annually on

immovable products due to their large turnover as they are the suppliers to the

wholesalers. Wholesalers spent lesser as compared to distributors due to fewer turnovers

and retailers spent the least on immovable products. Marketers have introduced the

system of taking immovable products back from distributors recently not because it’s

damaged but unsold and compensated with another products. This process takes much

time so the money remains blocked.

5.5 Attributes for satisfaction of distributors, wholesalers and retailers studied

The researcher studied various attributes such as mode of delivery, coverage pattern,

mode of payment, costs, number of assortments, lead time, execution of promo-offer,

display of products, understanding of channels’ requirements, communication, issues

handled, actions taken against channels’ request, responsiveness during implementation,

meetings with territory in-charge, time taken for query resolution, actions taken against

channels’ complaints, quality of sales-kit, domain knowledge with territory in-charge,

attitude of territory in-charge, and credit period for satisfaction of distributors,

wholesalers and retailers and their responses were found quite significant. Most of the

channel members were satisfied with the present system of FMCG distribution in the

rural market of Sangli and Kolhapur districts in Maharashtra.

5.6 Problems perceived by channel members in distribution of FMCG studied

Immovable products: All channel members spent considerable amount on immovable

products and the main reason was the damage of products in transit. Many times such

immovable products are sold at discount prices or returned to the manufacturers.

These results are partly in agreement with those of Thakur115

who found that the

commodities which have fixed life, pose special problems to retailers and distributors as

these have to be sold before their shelf-life. Retailers offer discounts on perishable

products nearing their shelf-lives to encourage consumers to buy and studied how many

units of the commodity they should stock on the shelf to maximize their expected profit.

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Dumping of goods: There was a scheduled dumping of the goods by the Carrying and

Forwarding Agencies who were appointed by the marketers irrespective of the

requirements in a particular month at distributors’ level. This created huge inventories

which blocked the money. The frequency of coverage was less for the channels that were

located far away from the feeder village, taking cost factor into consideration.

These results are not totally in agreement with those of Sangameshwaran102

observed that

to remove the conflict between the manufacturer and its distributors, the consumer goods

giant Hindustan Unilever (HUL) has tied up with a third-party logistics service provider

to manage the entire back-end distribution chain to streamline distribution.

Payment terms: It was quite disturbing that some of the distributors had problems of

mode of payment. The reason behind this was that advanced cheques were issued to the

manufacturers; very same day of delivery it was to be cleared; distributors had to give 8-

10 days credit period to their wholesalers and retailers, obviously had to have overdraft

facility with banks which was very costly so they felt it needed to be addressed.

These results are not in agreement with those of Banerjee et al9 who observed that

working capital crunch or expansion plans of channel members going haywire has

become the cause of payment issue.

Excessive costs: Shrinkage cost was the biggest threat distributors were facing in Sangli

and Kolhapur rural market; one distributor lost approximately Rs 22 – 24 lakhs in

previous years and it was learnt that one of the distributors bid goodbye due to excessive

shrinkage cost. Manufacturers’ requirement - number of employees, number of vehicles

and floor space the distributors should have, had become onus on them. The wholesalers

had a problem of reaching retailers due to lack of good roads and distance so fuel

consumption and cost of recovery of credit was more. The rural distributors could not run

their businesses without credit to the down line channel members and also many retailers

who were on-cash-buyers go to the places like BIG BAZAAR at district places who sold

them at wholesale price and demand discounts from rural distributors.

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These results are in agreement with those of Nottingham78

who reported that the Indian

retail industry suffered a total loss of staggering Rs 9,691 cr due to shoplifting and waste

in 2007. The study found that the average shrinkage rate (stock loss from crime or waste

expressed as a percentage of retail sales) for India is 2.90 per cent of sales.

Excessive lead time: Some channels faced from over dumping of products and not

because of long lead time. Whereas few of the retailers had grievance over excessive lead

time due to lack of pucca road and hence inadequate transport facilities, therefore, their

waiting period was longer especially those who located far away from the distributors /

wholesalers.

These results are in agreement with those of Kashyap et al45

who reported that poor road

connectivity - lack of all-weather roads and inadequate transport facilities are responsible

for long lead time.

Dearth of promotional schemes: FMCG companies categorized wholesalers in 2 to 3

types depending on their monthly billing so extra commission was given if they achieved

the levels as prescribed by the manufacturers. Hardly any distributors got benefits and the

promo-offer was given directly to wholesalers and retailers.

Lack of cooperation and cohesiveness: Existing rural distributors were capable of

handling multi-distributorship of the same company in other areas of rural market to

cover the remotest places and smoothen the distribution system which could help in

reducing lead time and proper coordination and also might help in long association with

the same company. Some wholesalers and retailers also expected to have syndicate

distribution and found not being resolved getting mingled.

These results are in agreement with those of Rajiv et al89

who found that co-operation

among distribution channel members could be fostered through the use of participative

and supportive activities which helped in improving performances of the channels and

fostered the relationship between co-operation and channel member performance.

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Unresolved issues: Rural wholesalers were supposed to buy goods from rural

distributors but to increase sales urban distributors tried to jump their territory and

approached the rural wholesalers giving some 3 to 4% discount which was not being

given by their rural counterpart so there was a horizontal channel conflict and remained

unresolved.

These results are partly in agreement with those of Ramachandran et al91

who at ‘All

India Distributors' Association Stirr’ reported that the distributors raised a strong protest

with leading fast moving consumer goods (FMCG) companies for bypassing them and

selling their products directly to large retail stores because making direct supplies would

have a negative impact on the turnover of distributors.

Lack of action: Few wholesalers had complaint against distributors about ill treatment

due to long distance, consequently more lead time which adversely affected their sales;

after lodging complaints against such distributors no action was taken and subsequently

they could not deliver in time to their retailers.

Discrimination: Distributors didn’t get credit from companies but they had to give some

credit period to wholesalers and retailers and because of that they had to have overdraft

facility with bank. They expected to be given some credit period by the manufacturers.

These results are in agreement with those of Banerjee et al9. Their study revealed that

almost all organized retailers are seeking longer credit. Small format retailers, who don’t

have an extensive network and therefore the bandwidth to negotiate with companies, are

feeling the squeeze more than the big retail players.

Menace of Fake Products: Many distributors, wholesalers lost profit margins due to

prevalence of spurious goods with the same brand name and packing colours and many

rural consumers were becoming victims of such menace.

Kaul56

also studied counterfeiting and how FMCG companies were facing problems due

to the spurious goods entered in the distribution channels. He added that other than

pulling down the profits of the FMCG companies, a counterfeit product of lesser quality

gave a "bad name" to the brand.

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5.7 Rural consumer behaviour

Personal profile of rural consumers

It was observed that most of the respondents (75%) were family heads and they were

male. It was heartening to see that youngsters between the age group of 18 to 30 years

and that too the married ones had emerged as decision makers in the family who could

communicate well. It was unfortunate to see that graduates were very less (19%) who

were brand conscious and were aware of various brands available in the market. Most of

the respondents had education below Std. X. They did not buy branded products and

became victims of duplicate products. Very few (6%) of them had done their professional

training like Industrial Training (ITI) which helped them in getting small jobs outside

their villages. Most of the respondents (53%) who did their graduation were working in

Zilla Parishad schools, i.e. Government schools as teachers. The main profession of

villagers was agriculture; very few (2%) were into family who run business like retailing,

and a handful of them (10%) were into private jobs. The researcher felt elated to note that

the majority of the families (57%) had between 4 to 5 members which indicated that they

were greatly influenced by the government-run-family-planning program. All the

consumers studied were Marathi speaking.

Rural Consumer Details

Many respondents (58%) had incomes between Rs 30,001 to 40,000/- per annum. These

consumers were mainly dependent on the monsoon as agriculture was rain fed and that

was the reason why only few of them (15%) had good savings. Most of the consumers,

whose savings were above Rs 2,000/ per month were government employees and had

fixed monthly salaries. It was very sad to note that majority of the respondents (65%) had

no investment at all. Only 17% had invested in insurance and an even lesser percentage

(12%) had bank deposits. None had investment in securities / real estate.

Consumption pattern of rural consumers

Most of the respondents (64%) had food commodity consumption up to Rs 1000/- and

many of them (69%) spent up to Rs 1000/- on non-food commodity such as clothing,

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medicines, education and fuel and light etc. in proportion to their income. Many of the

respondents (52%) spent between Rs 301 – 500/- and were choosy of selecting packaged

food such as biscuits, tea & coffee etc. Many major brands of FMCG were available in

rural area, so all of them went for packaged toiletries and cosmetics irrespective of the

true quality of the products. 50% spent between Rs 301 – 400/- per month on these.

Rural Consumer shopping behaviour

Many of the rural customers (64%) bought their products from one shop only and the

main reasons were - shop is nearer to their home (64%), credit facility (64%) is available,

reasonable prices (50%), and the most important was the good behaviour and courtesy of

the retailers (50%) and had great influence on rural customers.

Rural consumers’ Habits with Regard to the Purchase of Commodities

There was awareness among rural customers that they (100%) bought products from

permanent stores only. Because of the monthly bulk purchase, food items they (69%)

were bought from main bazaar without credit and toiletries and cosmetics (83% & 64%)

were bought from the local shopping centre under the pretext that they were same

everywhere and that was the reason why they bought them on credit. Mostly, old people

preferred to buy from local shops. All the respondents (100%) bought food items monthly

and few of them (33%) bought toiletries weekly. Due to less consumption, cosmetics

were bought monthly (86%) and sometimes annually (14%) too. Consumption of

toiletries and cosmetics were less so they were choosy and wanted only a particular

brand, e.g. Fair and Lovely face cream. If required brand was not available they

postponed buying. FMCG shopping is still dominated by male (husband).

Rural Consumer Shopping Behaviour

Majority of the rural customers (81%) traveled a distance of 6 to 15 kms outside the

village to purchase goods. The reasons to buy outside the village were the variety

(100%). The high quality goods (86%) of their choice which they did not find in their

villages and reasonable prices (69%) and there was not a single customer who traveled

for better product services. The main conditions for purchasing on credit were mainly no

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choice / no bargaining (67%); any substitute available (19%) to be bought and bargaining

was restricted and must buy from the same shop in future (19%). Rural customers could

buy their products on credit offered up to certain amount fixed by the retailers (64%) and

there was a time limit also (33%). It was observed that the customers were charged higher

prices (86%) and low quality goods (86%) if they bought on credit. All the respondents

(100%) did bargaining; most of them did it casually (50%) and also it depended on the

type of shop (36%). The main reason for bargaining was bulk purchasing (64%), so they

required discounts and the customers (14%) were under impression that traders charged

higher prices in the beginning. It was clearly observed that the advice of traders (64%)

attracted customers to buy a particular product / brand and television (36%) also had

moderate impact purchase.

5.8 Brand awareness and preferences

Food items had the biggest patronage between 3 to 5 years. Toiletries (washing soap and

powders) had mediocre patronage between 2 to 3 years. Shampoo in cosmetics had the

least support of the loyal patrons, kept changing.

5.9 Rural consumers’ response to brand change in different categories

Majority of the respondents (more than 80%) did not change the brands of food items,

whereas toiletries and cosmetics brands (approx 100%) were changed in the recent past.

100% respondents said that the reason for changing the existing brands was that new

brand was of better quality and quantity. Many rural consumers wanted to test the new

brand. In cosmetics category, some respondents shifted to new brands because of window

display and ads. There was not a single respondent who changed the brand because of the

reason that the new brand was cheaper. Traders had incredible influence on purchase by

rural customers. In all purchase he had small or greater role and respondents’ family

members were also asked for their preferences. The purchase decision was not limited to

one person from family but it is a collective decision. Peer group had almost no role in

their purchase decision. Neighbors and friends did not have predominant role in purchase

decision.

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5.10 Levels of consumer satisfaction with channel members

Product related attributes

Most of the rural consumers were dissatisfied with the quality of food items (69%),

toiletries (80%) and cosmetics (60%). There were lots of spurious goods in these

categories and were flooded by regional brands.

Prahalad86

studied that a lot of poor consumers are willing to pay for quality. Therefore,

companies have to learn that quality is a critical component of the brand promise. That is

a big shift in India for the last 7-8 years.

Consumers were highly satisfied with the size of the products (54% food items, 51%

toiletries) and 67% were satisfied with cosmetics available in Sangli and Kolhapur rural

market; small packs of food items, cosmetics and toiletries were preferred by them are

available.

These observations are in agreement with those of Panda79

who studied that small pack

sizes get acceptance in markets, by rural buyers who can pay only a small price because

of the nature of income receipts. He buys his provisions daily and does not have a big

amount to spend.

Though the MRP of all the products available in rural market were similar to the same

in urban market but taking quality into consideration rural consumers were paying more

so most of them were dissatisfied (68% food items, 58% toiletries and 52% cosmetics).

Generally defective packing was observed in rural market e.g. open edible oil pack,

broken biscuits inside the pack. Dimmed look to the pack gave the glimpse of adulterated

products so many consumers (46% food items and 67% cosmetics) were dissatisfied and

51% were satisfied with toiletries.

These observations are in agreement with those of Panda79

who revealed that in as many

as 18 products categories in rural market, consumption of branded items account for 80%

of sales. This indicates the potential for national brands if they can find a way to package

their offering to compete effectively with regional brands.

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General Factors

Rural consumers were highly satisfied with the availability of food items (54%), and

satisfied with toiletries (70%) and cosmetics (67%) though the specific products / brands

not available. At least one product was available under all categories which just solved

their purpose without specific brand and they were least bothered about good / bad

quality products.

These observations are in agreement with those of Sarangpani et al104

who studied that

there are two distinct segments consumers in rural market. One set of rural consumers

who can not read, write and understand with ease. They do not buy branded products.

They have their own method of identification of products and communication with the

retailers. For instance, they ask for Erra Sabbu (for Lifebuoy), Pacha Sabbu (for Nirma),

Neeli Sabbu (for Rin), etc. Rarely do they purchase branded packaged goods and values

associated with them.

There was extremely high dissatisfaction (69% food items, 80% toiletries, and 60%

cosmetics) among the rural consumers regarding range of products because product

length was too short that only 2-4 products were available under each category;

customers had no choice but to buy the available ones.

These observations are in agreement with those of Saran103

who emphasised that the rural

FMCG market with its promise of millions of rural consumers is not yet touched by the

cornucopia of brands and products.

Once the frequently-purchased products were out of shelf it took a lot of time to reach

the shelf back, say min 5 days and max might be more than 10 days also. Therefore

customers were dissatisfied (69% food items, 80% toiletries, and 66% cosmetics) with

regularity of supply of products.

These observations are in agreement with those of Kucuk60

who provided clear insights

into the influence of product availability, and thus distribution on double jeopardy (DJ)

patterns, for frequently-purchased products (FPP). The distribution created behavioural

187

brand loyalty when Frequently-purchased Products are widely available (excessive

availability) in the market.

If required products were not available at local shop then they had to look for other

shops, i.e. bigger villages or town which was far away from their villages so they

couldn’t go regularly. Therefore many customers were dissatisfied (69% food items, 80%

toiletries, and 66% cosmetics) with the proximity of retail shops.

These observations are in agreement with those of Kashyap et al46

who observed that

there are 3.5 million outlets spread over 6 lakh villages whereas there are 1.68 million

outlets spread over 5000 towns and cities, i.e. there are only 6 shops per village and 340

shops per town / city. There are hardly any shops in 2.3 lakh villages.

5.11 Consumerism

It was unfortunate that very few respondents (83%) had awareness about different

consumer protection acts and also whoever knew it was difficult to recall (13%) which

had become again a serious concern for the marketers.

Major Complaints / Problems With Regard to Purchase of Products

It was again an eye opening for the marketers that there was a strong presence of

duplicate brands (58%) in rural areas which was perhaps difficult for the customers to

identify and less awareness. Prices were almost same and they were charged as per MRP.

Customers Complaints & Measures

It was good that customer lodged complaint with retailers but most of them had taken

very strong measure by switching over to other shop (71%) and some of them returned

the goods and took money back (29%) in case of complaints against the goods. No legal

case filed and no replacement with the new goods.

5.12 Suggestions offered by rural consumers

Retailers to provide information on new products; retailers to give good products;

retailers to provide discount at par with their urban counterparts; producers to have check

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on retailers; producers to catch retailers who not doing malpractices and prosecuted and

producers to ensure implementation of any scheme (promo-offer) in villages.

5.13 Hypotheses validation

Hypothesis I: Existing FMCG Channels of Distribution in Rural Maharashtra Serve

the customers well.

The intent of the researcher was to find out whether there was any relation between the

distance traveled by the rural consumers and the availability of products, range of

products, regularity of supply of goods, and proximity of retailers, and the measures

initiated by the rural consumers if they find poor quality or duplicate brands in rural

market of Sangli and Kolhapur districts hence the hypothesis was formulated.

Spearman’s rank correlation coefficient was negative in many variables such as range of

products, regularity of supply, and proximity of retailers and positive in few variables

especially in availability of products.

Range of products at local retailers vs distance traveled by the rural customers

A negative correlation and significance level was two tailed and p value = 0.01 and 0.05

between Distance traveled by the rural consumers to buy products with Satisfaction of

rural customers with range of products at local retailers.

Inference: The rural customers were dissatisfied with the range of food items, toiletries,

and cosmetics available at the local retailers, i.e. there was a lack of product width and

depth. Only a limited range had been observed in food items, toiletries, and cosmetics.

Therefore, it implies that the rural customers have to travel away from their villages to

towns / cities to buy their desired products. These observations are in agreement with

those of Seung-Eun et al109

who found that most strategies performed by small-town

independent retailers did not meet their local consumers' expectations. Specially,

merchandise assortment and their availability, such as offering a unique and large

selection of products, showed the largest discrepancy between respondents' expectations

and retailers' performance, indicating that independent retailers are not meeting their

consumers' needs in these areas.

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Regularity of supply of products vs distance traveled by the rural customers

A negative correlation and significance level was two tailed and p value = 0.01 and 0.05

between Distance traveled by the rural consumers to buy products with Satisfaction of

rural customers with regularity of supply of products in case of out of stock at local

retailers.

Inferences: There were limited stocks of products at village retailers, i.e. 1 to 3 products

in one category. If the products were out of stock, rural customers had to wait for 5 days /

10 days / even more. So, it compelled them to travel outside their villages to meet their

demands. Therefore, the rural consumers had to travel distance away from their villages

to taluquas or cities or towns to buy the products and hence they were not satisfied with

the regularity of supply of products at local retailers. These observations are in agreement

with those of Kucuk60

who provided clear insights into the influence of product

availability, and thus distribution on double jeopardy (DJ) patterns, for frequently-

purchased products (FPP). The distribution created behavioural brand loyalty when

Frequently-purchased Products are widely available (excessive availability) in the

market.

Proximity of retailers vs distance traveled by the rural customers

A negative correlation and significance level was two tailed and p value = 0.01 and 0.05

between Distance traveled by the rural consumers to buy products with Satisfaction of

rural customers with proximity of retailers.

Inferences: If there was no range of products available at local retailers and poor

regularity of supply of products, the rural customers had to approach other good shops

wherein the desired products were available, which were far away from their places.

They had to travel to Taluquas or towns or cities which were far away and could not be

approached regularly. Therefore the rural consumers were not satisfied with the

proximity of retailers for buying their daily needs. These observations are in agreement

with those of Kashyap et al46

who found that there are 3.5 million outlets spread over 6

lakh villages whereas there are 1.68 million outlets spread over 5000 towns and cities, i.e.

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there are only 6 shops per village and 340 shops per town / city. There are hardly any

shops in 2.3 lakh villages.

Availability of products vs distance traveled by the rural customers

A positive correlation and significance level of two tailed p value = 0.01 and p value =

0.05 was seen between Distance traveled by the rural consumers to buy products with

Satisfaction of rural customers with availability of products.

Inferences: Availability means the presence of at least one product in one category of

FMCG, i.e. 1-2 products in bathing soap category, one product in washing soap category,

one product in edible oil category etc. irrespective of the brand and variants. The rural

customers are satisfied when the presence of the products at local retailers solves their

temporary purpose. At least one product was available under all categories which solved

their purpose without specific brand as they are not bothered about good/bad quality

products. These observations are in agreement with those of Sarangpani et al104

who

studied that there are two distinct segments consumers in rural market. One set of rural

consumers who can not read, write and understand with ease. They do not buy branded

products. They have their own method of identification of products and communication

with the retailers. For instance, they ask for Erra Sabbu (for Lifebuoy), Pacha Sabbu (for

Nirma), Neeli Sabbu (for Rin), etc. Rarely do they purchase branded packaged goods and

values associated with them.

Poor quality of products vs measures initiated by the rural customers

A positive correlation and significance level was two tailed and p value = 0.01 between

Measures initiated by rural consumers – returned goods and took money back with Poor

quality with regard to purchase of products.

Duplicate brands vs measures initiated by the rural customers

A positive correlation and significance level was two tailed and p value = 0.01 between

Measures initiated by rural consumers – switched over to other brands with Higher

prevalence of duplicate brands with regard to purchase of products.

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Inferences: Whenever there is poor quality in FMCG bought by rural customers they

return the goods and take money back from the rural retailers. Most of the rural

customers can now differentiate between original and duplicate brands so they switch

over to other brands if duplicate ones are found. It implied that there was either poor

quality or prevalence of duplicate brands in rural market. Therefore, rural customers were

not getting good quality and authentic brands in rural market of Sangli and Kolhapur

districts. These observations are in agreement with those of Commuri20

who observed

that when premium brands are counterfeited, consumers adopt one of the strategies when

faced with the prospect of their favorite brands being counterfeited: flight, i.e.

abandoning the brand.

Hence the Hypothesis I: ‘Existing FMCG Channels of Distribution in Rural

Maharashtra serve the customers well’ is not validated.

Hypothesis II: Channel members are satisfied with the distribution of FMCG in

rural market

The intent of the researcher was to find out whether there was any relation between the

FMCG channels’ satisfaction i.e. satisfaction of distributors / super-stockists / stockists,

wholesalers and retailers, and the attributes – mode of delivery, coverage pattern, mode

of payment, costs, number of assortments, lead time, execution of promo-offer, display of

products, understanding of channels’ requirements, communication, issues handled,

actions taken against channels’ request, responsiveness during implementation, meetings

with territory in-charge, domain knowledge of territory in-charge, attitude of in-charge,

time taken for query resolution, actions taken against channels’ complaints, quality of

sales-kit and credit period. Hence the hypothesis was formulated.

To test this hypothesis, Chi-square test was thought to be the most appropriate test which

was designed for use with nominal or categorical data, and it can be used with continuous

variables if the data are first converted into frequency ranges. The Chi-square test is used

to see whether two discrete variables have a relationship or are independent. The

variables were discreet categorical measured on an ordinal scale.

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Observations: There was a dependency and the two discrete variables had a strong

relationship. As the Chi-square statistic increased, the likelihood that a relationship

existed between two variables, i.e. the type of FMCG channels and attributes increased.

The researcher interpreted the results by looking at the difference between the observed

and expected counts. In this case, the level of significance is 0.001.

The above inference based on Chi-square Test points out satisfaction, though not total

satisfaction.

Result: X2 (2) = 28.369, p < 0.001

Hence Hypothesis II: ‘Channel members are satisfied with the distribution of

FMCG in rural market’ is validated.

5.14 Constructing a scale to measure effectiveness of FMCG distribution channels

The effectiveness of FMCG distribution channels in rural market was dependent upon the

satisfaction of the rural customers. If the rural customers didn’t get the products of good

quality, acceptable size, affordable price, good packaging and also availability of

products, range of products, regularity of supply of products in case of stock-out, and the

proximity of the shops where all these products were available, then the entire

distribution channel was considered to be ineffective. Taking that into consideration, the

researcher developed a scale for nine Fast Moving Consumer Goods – edible oil, tea &

coffee, biscuit, bathing soap, washing soap, washing powder, face powder, face cream

and shampoos to measure effectiveness of FMCG distribution channels, which in turn

was the rural customer satisfaction.

The researcher intended to develop a statistical model to predict customer satisfaction for

a product which was dependent on different parameters. The researcher believed firmly

that apart from the psychological factor, the following eight factors – Quality, Size, Price,

Packaging, Availability of products, Range of products, Regularity of supply of products,

and Proximity of retail shops, would be predictors to predict dependent variable customer

satisfaction for that product.

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In order to develop the statistical model to measure customer satisfaction, the researcher

thought Multivariate Linear Regression Analysis (MVLRA) was the best tool which can

be used only under the assumptions of normal distribution. Ordinal regression and log

linear regression are the tools that can be used when the measurement of variable is on an

ordinal scale. The researcher developed the statistical models (scale) for each of the

following products – Edible oil, Tea and coffee, Biscuits, Bathing soap, Washing soap,

Washing powder, Face powder, Face cream and Shampoo.

For edible oil

Y=0.012 + 0.106 X1 + 0.102 X2 + 0.132 X3 + 0.129 X4 + 0.269 X5 + 0.108 X6 + 0.144 X7

For tea & coffee

Y=0.026 + 0.068 X1 + 0.122 X2 + 0.131 X3 + 0.118 X4 + 0.289 X5 + 0.107 X6 + 0.139 X7

For biscuits

Y=0.042 + 0.123 X1 + 0.097 X2 + 0.074 X3 + 0.130 X4 + 0.136 X5 + 0.130 X6 + 0.102 X7

+ 0.175 X8

For bathing soap

Y=0.024 + 0.095 X1 + 0.106 X2 + 0.096 X3 + 0.125 X4 + 0.299 X5 + 0.111 X6 + 0.143 X7

For washing soap

Y=0.043 + 0.143 X1 + 0.101 X2 + 0.098 X3 + 0.097 X4 + 0.270 X5 + 0.122 X6 + 0.134 X7

For washing powder

Y=0.027 + 0.151 X1 + 0.109 X2 + 0.091 X3 + 0.113 X4 + 0.283 X5 + 0.100 X6 + 0.130 X7

For face powder

Y=0.013 + 0.093 X1 + 0.113 X2 + 0.099 X3 + 0.131 X4 + 0.145 X5 + 0.147 X6 + 0.112 X7

+ 0.149 X8

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For face cream

Y=0.008 + 0.117 X1 + 0.138 X2 + 0.086 X3 + 0.115 X4 + 0.133 X5 + 0.140 X6 + 0.110 X7

+ 0.153 X8

For shampoo

Y=0.028 + 0.086 X1 + 0.125 X2 + 0.132 X3 + 0.115 X4 + 0.135 X5 + 0.132 X6 + 0.103 X7

+ 0.147 X8

Where, Y = Customer Satisfaction for products (edible oil, tea & coffee, biscuits,

bathing soap, washing soap, washing powder, face powder, face cream

and shampoo)

X1 = Quality,

X2 = Size,

X3 = Price,

X4 = Packaging

X5 = Availability of Products,

X6 = Range of Products,

X7 = Regularity of supply of Products, and

X8 = Proximity of retail shop for buying products.

5.15 Conclusions

While the rural market certainly offers a big attraction to marketers, it would be naïve to

think that any company can enter the market without facing any problems and walk away

with a sizable share. Distribution is the most important variable in the marketing plans of

most consumer goods manufacturers, because managing such a massive sales and

distribution network is in itself a huge task.

Firms rely mostly on their marketing channels to generate customer satisfaction and to

achieve differentiation over competition. Majority of the companies are incurring huge

costs to make their products available in the 3.5 million rural outlets. There are a whole

lot of channels involved in the distribution network. FMCG distribution has the

maximum channel partners in the Indian rural market. The wholesaler is the most

important source of information for the retailer. The wholesaler is also the most important

influence on the retailer. The marketer would try their best to motivate the wholesaler to

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get the retailer in the rural market to stock his company’s products, particularly the newer

products.

The extending of credit by retailers to customers depends upon their location and product.

Earlier rural consumers purchased most of their requirements from nearby towns. But in

recent times, a shift has been seen towards purchasing locally. Rural retailers could

capitalize on consumer satisfaction and provide outstanding value and service to keep

local customers in local markets. Customer satisfaction was essentially the result of a

series of customer experiences. Hindustan Unilever Limited (HUL) and Godrej

Consumer Products have the highest combined market share in rural markets Sangli and

Kolhapur districts and have a strong presence of their products in almost all villages.

They have all types of channels members to reach rural markets. The distribution levels

identified were – Distributors, Super-stockist, Wholesalers, Stockists, and retailers. The

conventional approaches to reach rural customers of Kolhapur and Sangli districts in

Maharashtra have different models. There is a distinction between urban and rural

distribution to create special focus on their individual market. The rural distributor covers

large market where road connectivity is available. The wholesaler keeps large

assortments which induce the rural retailers. The rural traders play a key role in the

buying decision of rural customers.

Generally distributors and wholesalers are not present in all the villages but retailers exist

in all villages regardless of the population. Most of the channel members spent huge

amount on immovable products and the main reason for immovable products was damage

in transit or on the shelf. Marketers have introduced the system of taking immovable

products back from distributors recently not because it’s damaged but unsold and

compensated with another products. Most of the channel members were satisfied with the

present system of FMCG distribution in the rural market of Sangli and Kolhapur districts

in Maharashtra. The frequency of coverage was less for the channels that were located far

away from the feeder village, taking cost factor into consideration. Shrinkage cost was

the biggest threat distributors were facing in Sangli and Kolhapur rural market. The rural

distributors could not run their businesses without credit to the down line channel

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members. Some retailers had grievance over excessive lead time. There is a dearth of

promotional schemes in rural markets.

Channel conflict was there among the rural and urban distributors over the jumping of

territories allotted by the companies. There is discrimination as distributors didn’t get

credit from companies but they had to give some credit period to wholesalers and

retailers. There is a prevalence of spurious goods with the same brand name and packing

colours and many rural consumers were becoming victims of such menace. It was

heartening to see that youngsters between the age group of 18 to 30 years and that too the

married ones had emerged as decision makers in the family who could communicate

well. Less educated people did not buy branded products and became victims of duplicate

products. The researcher felt elated to note that the majority of the families had less

members in family. The majority of the rural consumers had no investment at all. Many

major brands of FMCG were available in rural area. The good behaviour and courtesy of

the retailers had great influence on rural customers. If required brand was not available

rural consumers postponed buying. FMCG shopping was still dominated by male. The

rural customers traveled more distance outside the village to purchase goods.

The reasons to buy outside the village were the variety, the high quality goods of their

choice which they did not find in their villages and reasonable prices and there was not a

single customer who traveled for better product services. The reason for changing the

existing brands was that new brand was of better quality and quantity. Many rural

consumers wanted to test the new brand and not the new brand was cheaper. Traders had

incredible influence on purchase by rural customers. In all purchase he had small or

greater role and customers’ family members were also asked for their preferences. The

purchase decision was not limited to one person from family but it was a collective

decision. Peer group had almost no role in their purchase decision. Neighbors and friends

did not have predominant role in purchase decision. Once the frequently-purchased

products were out of shelf it took a lot of time to reach the shelf back. Very few rural

consumers had awareness about different consumer protection acts and also whoever

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knew it was difficult to recall which had become again a serious concern for the

marketers.

It was again an eye opening for the marketers that there was a strong presence of

duplicate brands in rural areas which was perhaps difficult for the customers to identify

and less awareness. It was good that customer lodged complaint with retailers but most of

them had taken very strong measure by switching over to other shop and some of them

returned the goods and took money back in case of complaints against the goods. No

legal case filed and no replacement with the new goods. Retailers requested

manufacturers to provide information on new products and customers expected to give

good products, to provide discount at par with their urban counterparts, producers to have

check on retailers, producers to catch retailers who were doing malpractices and

prosecuted and producers to ensure implementation of any scheme (promo-offer) in

villages. There were limited stocks of products at village retailers. If the products were

out of stock, rural customers had to wait some days. So, it compelled them to travel

outside their villages to meet their demands. Whenever there was poor quality in FMCG

bought by rural customers they returned the goods and took money back from the rural

retailers. Most of the rural customers could now differentiate between original and

duplicate brands so they switched over to other brands if duplicate ones were found.

5.16 Recommendations for further research

1. The present research study was limited to Sangli and Kolhapur rural markets. The

study can be extended further by identifying other districts in Maharashtra.

2. An in-depth study can be done on the consumer durable goods industry in rural

markets as this has become one of the fastest growing sectors in the rural market.

3. There are some unorganized distribution channels in rural markets i.e., mandi and

weekly markets. These can be studied to analyze their impact on sales of branded

products.