PERF RMANCE 04 - The Performance Portal - Ernst & Young

In demographic terms, rural India is more
advantageously placed, with the number of
working population there outnumbering the
total urban population (see Table 3).
Table 3. Age distribution of rural
population in India
Age group
Population (rural) mn
Greater than 70 22
61 to 70 33
51 to 60 56
41 to 50 77
31 to 40 107
21 to 30 127
Less than 20 311
Total working population
A clear demonstration of the importance
of rural India is shown by looking at the
number of organizations which derive a
significant proportion of their overall sales
from outside of the country’s largest towns
and cities (see Table 4).
Table 4. Company presence in rural
markets
concentrated. For example, there are
4,700 towns and over 600,000 villages
spread across the length and breadth of
India. Yet more than half of the population
and approximately 60% of the total rural
wealth is concentrated in just 17% of these
same villages.
Given these characteristics, deploying an
optimal distribution structure for such
a market becomes a challenge for any
company, especially those which have been
geared toward managing a distribution
chain predominantly in urban markets. For
instance, decisions on distribution networks
have to take into account both the size of
the potential market as well as the cost
required to service the dispersed demand
that rural India represents. The two maps
(see Map 1 and Map 2) demonstrate this
point. Map 1 is an evaluation of all districts
in a particular state MP (Madhya Pradesh)
on the basis of market potential and the
second is based on cost-to-serve. It is clear
that both present very different outcomes
for any district.
Company Category % sales from
rural markets 4
Hindustan Household
45%
Unilever products
Hero Honda Two wheelers 60%
Dabur Personal
40%
products
Dish TV Media 33%
TVS Two wheelers 50%
However, while rural India has tremendous
market potential, there are some inherent
characteristics which make it significantly
different from urban India. In particular,
the way in which the population is
simultaneously dispersed and yet
“ Distribution equity refers to
the maturity and flexibility of a
business’s distribution network.”
4 Publically available information