Rural mall: One of the 47,000 such haats that dot India

Saunda Haat
Meerut District, Uttar Pradesh, February 2

Santari Devi, 54, is busy looking for new designs of "paajeb" (silver anklets), rifling through the box in which the jeweller keeps his stock. Suman, her 18-year-old daughter is to be married in March, and the family (other members here include husband Madan Singh and daughter Babli) are out shopping for the trousseau. They haven't chosen to shop in the nearest town, Muradnagar, though; instead, they are here at Saunda Haat. The family works the fields and mill of a sugarcane farmer in Saunda. There's work for nine months of the year, a monthly income of between Rs 8,000 and Rs 9,000, and the family saves around Rs 30,000 to Rs 40,000 a year, money that will run the household, pay off debts, and fund the weddings of the daughters. Santari trusts the jeweller; she has bought from him in the past (for the weddings of two other daughters). "I know his (the jeweller's) family," adds Singh.

Residents of at least four villages visit Saunda Haat every Thursday, as do merchants from the same villages, even the nearest big town, Muradnagar. There are around 60 stalls in the haat selling everything from groceries to apparel to kitchenware to fresh produce. Few of the brands are familiar, Parle G, Tiger, Dabur Lal Dant Manjan, Parachute, and Lifebuoy. Most aren't. "Being a wholesale market, this haat is cheaper than the shops in the villages which are anyway few," says Chowdhary Vedpal, a member of the Muradnagar Panchayat, adding that the haat does business of Rs 60,000 every week.

Saunda Haat is one of 47,000 that dot India, serving the needs of around 70 per cent of India's rural population of 742 million. According to the National Council for Applied Economic Research (NCAER) such haats do business worth Rs 100,000 crore every year. "Most of these haats have been in existence for the past 100 years," says Pradeep Kashyap, Managing Director, mart, a rural-marketing consultancy. "They haven't lost their relevance because the consumers they cater to remain untapped by the organised industry."

According to Census 2001, there are 6,38,365 villages in India; a study by the Federation of Indian Chambers of Commerce and Industry estimates that 35 per cent of these have no shops. Even consumer products companies with enviable reach such as HLL and ITC have not been able to go beyond the top 250,000 villages. "We reach only around 2 lakh villages through our regular distribution network and an additional 34,000 through the e-choupal programme," says S Sivakumar who heads ITC's agri-business division. "The rest of the rural India is out of our reach."

Inaccessibility is one reason why; 60 per cent of India's villages is not connected by all-weather roads and 80 per cent does not receive regular power supply. Low population density is another. Census 2001 indicates that the population in over 45 per cent of India's villages is between 500 and 2,000 and in another 42 per cent, below 500. Then, the per capita income of consumers in these rural markets, between Rs 1,000 and Rs 8,000 a month, according to IRS 2005, is also low. "The cost of setting up retail network in these areas would be more than the business generated," says Sivakumar. "Unit sales in these villages are so small that it doesn't make sense to set up an independent distribution and retail network," adds an HLL spokesperson.

Haats gain significance in this backdrop. These are, essentially, gather-and-disperse rural supermarkets held mostly once a week. "Haats are the only centre for commercial, cultural and social activity for the not-so-connected parts of the country," says Pradeep Lokhande, Chairman, Rural Relations, a Pune-based rural marketing agency. No big-ticket purchases happen in these markets simply because liquidity is an issue for rural consumers. "Shopping for expensive items like durables or automobiles happens only once in a year, usually after the harvest season when these consumers have cash to spare," says Priya Monga, Business Head, Rural Communication and Marketing. Such transactions happen in mandis, which are different from haats; they happen once a year after harvests.

Despite such constraints, the rural market, especially for fast moving consumer goods (FMCGs), apparel, footwear and fuel, is bigger than the urban market for the same products. According to mart, the size of rural FMCG market was around Rs 65,000 crore in 2002; the current size of the organised FMCG market is only around Rs 55,000 crore. "That's mainly because around 60 per cent of the goods sold in rural markets, mainly haats, are manufactured locally and their contribution remains unmeasured," explains Kashyap. Rural India is a big market for durables (Rs 5,000 crore) but haats are not the relevant markets for these. Says Girish V Rao, Vice President, Sales, LG: "Over 40 per cent of our total sales comes from rural markets but these sales mainly happen during the harvest and festive season."

The true potential of haats as points of sales has not yet been explored by marketers, says Monga. "Around 50 per cent of rural India has no access to traditional media, thereby limiting the points of interaction with rural consumers. Haats can be used as media platforms for marketing and promotion," she says.

Some banks and insurance companies, in fact, are already looking at such opportunities. Life Insurance Corporation, which sells 35 per cent of its policies in rural India, is looking at haats as premium collection centres for groups of four or five villages. "Almost 50 per cent of our agents work in rural markets but because of infrastructural problems collecting premiums becomes a major problem," says A K Shukla, Chairman and Managing Director, LIC explaining the logic behind this move.

Meanwhile, Santari Devi and Suman are done with their shopping. Suman wants to pick up some nail-polish and lipstick for herself but her father is furious.

"Your husband will be ruined if you squandered his money like this," he thunders. "I am spending my own money," she shrugs. "Why should anybody complain?". And she is off running towards the small pushcart selling the stuff.