Monday, June 25, 2012

Untapped Market – “THE POOR”

The world is getting smaller as a result of Globalization. The distance between people, cities, states and nations is narrowing down to very minimal because of the development in the technology in the areas like tele communication, internet and transportation and so on. It was very difficult for someone who lived during 1800’s to think of reaching England from India in just a journey of less than 24 hours; the local transport from one city in south to capital city of India would have cost a more than 24 hours of time for a person during those days. Likely it was next to impossible to think about having an instrument called mobile phones which will make the communication easier than just easy.

But look at today; the generation living today is more equipped with all those speedy and flashy gadgets and instruments which have made life more and more comfortable. Almost every product from every company – from a pencil to a laptop to a limousine to an airplane is available in every part of the world. The markets throughout the world are almost covered and companies are looking forward to find new fresh markets to get into.

SO, what could be the left over untapped market which these companies should be planning to get into? The answer is not hidden somewhere; the companies have actually found out the world’s only untapped market and the market is “the market for BPL (below poverty line)”.

Many companies (nationals and multinationals) are investing their time and money on conducting research to find out ways and means to tap their feet into this untapped market. The primary base for this kind of market is the rural areas. Majority of the companies in the world are heading towards finding out the ways and means to get in to the rural markets of the continent of Africa and the subcontinent of India.  Now, the developed world already reaching its saturation level and the developing world still figuring out ways and means to develop, corporations are vetting their luck upon the rural markets which they feel are the most potential and less exploited markets ever.

Let us see some examples of companies and industries getting into the rural markets with focus upon the Indian subcontinent. Hindustan Unilever Limited- the sister concern of the FMCG giant Unilever entered the rural areas of India during the early 80’s with an innovative idea set of providing its products in the form of the sachets at very minimal and affordable prices to the rural customers. HUL still backs upon its much acclaimed “Lady Shakti” program which it launched in the rural areas where female residents of the rural India goes from door to door explaining about HUL’s products and selling it and making their living out of it.

Likely, it would not be surprising to know that rural India uses and subscribes to mobile phone and its services far much more than the urban Indians do.  Same is the case with the DTH technology; the growth of DTH technology is more in the rural areas when compared to the urban areas.

The reasons may be many. Firstly rural India has a mix blend of poor and rich people. There are people as rich as an owner of BMW or Mercedes in urban India who lives in rural India. For example few rural citizens in Punjab own their personal limousine and Bentleys which a moderately rich class of people in urban India cannot afford. But also on the contrast there are also rural residents who survives on $2 a day which in India is considered moderate (Indian law as today says that BPL= <20 rupees a day).

There are various schemes and innovations being done in the area of selling which is being customized for the prospects in the rural areas (mostly the poor customers). Understanding that it would be troublesome for the people in BPL category to invest in the products which are very expensive- the companies have started pool buying - where individuals in the same locality or community buy a product together and use it for mutual benefits. The seller (the company) will provide financial assistance for the same. For example: farmers can buy one tractor and use it mutually or a community can buy one washing machine and use it for mutual benefits wherein the cost is distributed and shared. This is one type of scheme few companies have come up with. Few other have collaborated with the micro loan or the micro finance companies to reach the audience. For example German giant METRO, has reached nook and corner of the state of Andhra Pradesh by creating their retail distribution lines with the mom and pop stores (kirana stores) in the rural areas with the help of SKS finance (the much talked about micro finance company recenlty in news). Few others are trying to hold upon the "we finance" you buy schemes.

The companies are trying their best to make the best use of these type of markets and have figured out that there lies a great potential and prospective market which is still untapped in the rural areas of the world mostly focusing upon the rural segment. That’s why its said as – “Poor- the untapped market”. 

Rohit Tiwari

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