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Post-COVID-19 era | Are FMCG companies ready for digital growth explosion in rural markets?

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Rajesh Radhakrishnan

Tapping rural India has been the biggest challenge for follower brands when it comes to the fast-moving consumer goods (FMCG) space.

The companies in the top three positions in a particular category always had an advantage in terms of rural distribution compared to other players in that category. The early-mover advantage helped leader brands to create entry barriers for others.

Why does the age-old distribution model (Distributor-wholesaler-retailer), created donkey’s years back, still prevail in the FMCG space? It’s not surprising that this is an entry barrier created by market leaders!

We know that next-door Kiranas or retailers still play a vital role in influencing the consumer on their brand choice when it comes to rural India. Effective servicing has helped brands win the confidence of these retailers/Kirana shops, and follower brands who want to make entry find it difficult.

The emerging smaller FMCG players despite having good products fail to sustain, sometimes even lose track and get into positioning themselves as low-cost lookalikes of bigger brands.

The million-dollar question is why the emerging brands in the FMCG space are unable to make inroads into rural India.

The real problem is these companies still take the traditional route of trying to market their products through a distributor who is already associated with big brands. What is needed is for these brands to have a different approach to their marketing. They must do away with the traditional Distributor-wholesaler-retailer model and create an alternate channel model.

They need to tap the full potential of the ongoing digital revolution across the rural markets by providing localized digital marketing and communication for their products across these markets.

They can invest in retail POP software solutions and service the retailers/Kirana shops directly instead of going through a distributor.

With internet penetrating most of rural India, there is a tremendous potential for localised digital communication for brands via new-age social media such as Youtube, Facebook or via google SEO. Even if some digital content is used for rural, it is borrowed from the content for the urban audience, often resulting in a poor outcome.

There are several regional and sub-regional brands of FMCG companies, the stories about which if properly communicated via localised Youtube videos would result in sure-shot marketing success.

With a good understanding of a region’s tastes, culture, language and aspirations, proper digital communication strategies could be crafted for regional and sub-regional brands. The communication could be customized to a district or tehsil level.

Certain products could be targeted to the specific geography, say Kolhapur or a Ballia. Understanding how certain products are aspired purely by a particular set of people, how they buy and react online, a complete promotion programme could be crafted around ‘Choose local & Act local’ strategy.

The new generation startups that are coming with single brands have realized the importance of digital marketing at a localised level. These companies are expected to give a tough time to the leading FMCG brands.

Some of the national FMCG brands are already struggling to enter certain parts of the country dominated by local players in certain segments such as teas, masalas etc. Most of the regional FMCG brands too, spend a lot of money on BTL (below the line ) activities, without an inkling about digital.

Companies are still thinking that rural is not yet ready for localised digital marketing and communication. However, the fact is that rural is ready for solid adoption of digital marketing strategies.

However, brands are not convinced yet. Increased bandwidth availability, cheap data plans and increased awareness through government plans have resulted in a strong rural internet penetration primarily driven by smartphones in rural parts of the country.

According to recent research by Kantar IMRB, India’s Internet users have reached about 627 million. Of this, 293 million active users reside in urban India and 200 million active users in rural India. The rural internet users are growing by a whopping 35 percent annually in comparison to an urban user growth of 7 percent.

The Internet penetration in semi-urban and rural areas is creating demand for more convenience shopping in the form of retail and e-commerce, resulting in increasing presence of retailers and e-commerce players in tier-2 and 3 regions.

There is an increasing awareness about the urban brands in rural markets. However, proper marketing of these products could be achieved only with localised digital marketing on platforms such as Youtube.

The brands are effectively using platforms such as Amazon for marketing premium products targeted at an urban audience. However, Amazon services are yet to be digitally tapped for rural. Channels such as Tiktok and WhatsApp are available for rural marketing, where advertising is used in bits and pieces.

However, these apps have not been effectively leveraged for rural digital marketing. Once again, the post-COVID-19 scenario in rural digital marketing story is in for major growth explosion and I am not sure how many companies are ready for it as most company websites are still in English and do not have regional languages.

Retailer/Kirana shops will take online orders and deliver at home providing convenience. Digital payments will increase in leaps and bounds and many interesting insights could emerge which will change the digital landscape. The time has come where the existing brands, follower brands and the emerging brands all need to embrace digital
technology and digital marketing aggressively, given the changing mindset of rural India.

(The author Rajesh Radhakrishnan is CMO, Vritti Solutions)
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