Planning expansion? Targeting rural India can reap rich dividends
An objective of every business, expansion helps you generate more sales and profits, increase brand recognition and widen your customer base. While the urban market does offer growth opportunities, here’s how targeting rural India can prove to be more fruitful.
1. Huge rural population
More than half of India’s total population resides in rural areas. According to World Bank’s Collection of Development Indicators, rural population of India was reported at 66.46% in 2017.
Such a huge population gives you ample opportunity to choose and segregate your target audience based on age and demographics. Even if you can successfully target 2-3% of this population, it will significantly widen your clientele and boost revenues manifold.
2. Faster consumption growth rate compared to urban areas
Due to increase in government spending on infrastructure, the consumption growth rate of rural India has outpaced urban areas. In FY 2018, the annual consumption growth in rural India stood at 9.7% against 8.6% of urban India.
Rural households in the country are spending more on a range of items like consumer durables, food and beverages, health and personal care today than before. This growth rate is expected to sustain in the coming days with increasing literacy and income levels along with changing lifestyle habits among rural consumers. Riding on this growth rate and expanding in rural areas can help you significantly boost revenues of your business.
3. Accelerated growth in rural infrastructure
Rural infrastructure has witnessed tremendous development of late. For example, the government has advanced the target year for completion of the first phase of the Pradhan Mantri Gram Sadak Yojana (PMGSY) from 2022 to 2019.
Also, pace of construction of roads under PMGSY reached an 8-year high in 2017-18 at 134 km per day, compared to 73 km between 2011-14. The accelerated growth of rural infrastructure, particularly roads, will help in easy transportation of raw materials and finished goods to and from the factory to end customers.
How to expand?
While the above facts are lucrative enough to prompt expansion in rural areas, it’s important to take a measured approach and work on the following before undertaking the journey:
1. Know the rules for acquiring land and setting up infrastructure
Prior expansion, you must be aware of the rules regarding land acquisition and setting up infrastructure in rural areas. Make sure the process aligns with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013.
2. Develop a strong distribution network
A crucial step that can aid in successful expansion to the rural market is developing a strong distribution network. This can be achieved through different methods encompassing:
- Conventional distribution where goods are distributed by small sub-distributors or through van delivery
- Technology through which orders can be procured and delivered online
A major consideration for expansion is the availability of funds at a competitive interest rate. Business Expansion Loans from Reliance Money can aid you with finances during expansion. Click here to know more about this offering.