By Amir Ullah Khan
Vijay Mahajan has been researching neglected markets for over two decades. His first work on this issue pointed out that Africa was rising. The second discussed the 86 per cent solution where the corporate world focuses only on the top 14% of the world and now must look at the rest. Mahajan’s third stated that the Arab World was a large market indeed. His latest that releases this month talks of the rural consumer in ten countries with the largest rural populations, with India leading the pack. The book titled Rise of Rural Consumers in Developing Countries: Harvesting 3 Billion Aspirations discusses the strategies being used to reach 3 billion rural consumers in developing countries, a vibrant, aware and aspirational market yet untapped.
The argument Vijay makes is that it is forward-looking companies and NGOs with a rural DNA that are developing inclusive strategies that take them beyond developed country markets and urban centres into a vast space that holds tremendous potential. This is not really the Bottom of the Pyramid model that CK Prahalad has pointed out. There it was the poorest level in the income hierarchy that was targeted. Here Mahajan talks of the rural, which includes people with high disposable incomes and huge unmet demands.
The rural top ten countries are India, China, Indonesia, Pakistan, Bangladesh, Nigeria, Ethiopia, Vietnam, Egypt and Philippines. The United States actually comes ninth in this list with a 60 million rural population but is excluded for obvious reasons. The GDP of these ten countries chosen comes to 15 trillion dollars with a large informal economy that thrives and does not get reflected in these GDP calculations. The rural are migrating to cities, but even then, by 2050, rural areas will contain more than a third of the world population.
The first big point is that extreme poverty is reducing in rural areas while spending is going up. China alone has contributed most to this reduction in poverty. While 60 per cent of the country was poor in 1990, China managed to bring this figure down to 9 per cent by 2010 itself. Remittances are a major source for rising rural consumption. Worldwide, 440 billion dollars are sent from affluent countries to the developing world. Even within national borders, large scale migration results in huge amounts of money remitted. India has the largest number on internal migrants, 336 million who send between 14 to 20 billion dollars a year back to their village homes.
The book then describes a variety of initiatives that have raised rural incomes. From the public sector, it is Ethiopian Airlines that has helped farmers raise export income. The private sector company – Olam in Nigeria alone has helped thousands of farmers export cashew to India. The cooperative sector has done its bit — Amul in India works with 3.6 million members to raise their incomes. Social enterprises like the World Health Partners, supported by the Bill and Melinda Gates Foundation deliver top quality healthcare to more than 20000 villages through webcams in SkyCare centres.
Religion has a huge impact on sales figures. Across the Muslim world, Ramzan is when markets get really busy. Footwear inventories are prepared in advance by shoe companies and car sales peak at the same time. Mosques are among the largest buyers of toilet paper in rural Bangladesh, underscoring the importance of hygiene while at prayer. Six of these 10 largest rural countries are predominantly Muslim, but India, Ethiopia and Philippines have significant numbers of Muslim consumers. In all these countries, Ramzan sees sales figures go up significantly.
There is a frenzy of gold-buying during the festival season in India. Bali records huge tourist traffic not only for its beaches but also its temples. And the biggest shopping festival happens during January and February every year when nearly 800 million Chinese travel home for the New Year, bringing with them gifts, appliances and money. In Egypt, large sales campaigns are undertaken by Nestle during events such as celebrations on Prophet Muhammad’s birthday in village fairs called Mouleds. At the Kumbh Mela in Allahabad, Unilever reached out to 100 million people by stamping on each roti a small message – did you wash your hands with Lifebuoy? The same message was used in Pakistan in 2015 during Ramzan.
Some firms have used their rural reach to improve public health. Unilever with its “Help a Child Reach 5” campaign, Marico with its anti-lice shampoo, Dabur selling its mosquito repellent, are a few of the examples that show how rural health was impacted through strategic marketing efforts. Lal Teer sells high-quality vegetable seeds to small Bangladeshi farmers, Unilever sells beauty products through Guddi Bajis in rural Pakistan, while Shakti and Aparajita are initiatives that empower and provide livelihood to women who help sell products in rural India and Bangladesh respectively.
Technology and innovation are the big game changers, especially in reaching remote rural areas. Monetised missed call services, community radios, free internet and green SIM cards have worked well in various parts of the world. DNet in Bangladesh uses InfoLadies who travel with laptops on their cycles providing internet access to villagers wanting to make Skype calls, look for jobs or use mobile banking services. Eko and FINO provide reliable remittance facilities. The Swasthya and GeneRadar are diagnostic tools that allow patients access to mobile pathological testing.
The book with its multiple insights into rural markets across the developing world ends by pointing out the five barriers that firms face in reaching the last mile. The challenges that rural development faces are infrastructure, education, poverty, public health and gender issues. The question that emerges is why does such a large market not harness its potential and develop new mechanisms to tackle large scale poverty and deprivation? Why can’t there be a rural top 10 alliance? Like the G8 and the G20 and the ASEAN and NATO?
The author proposes an annual summit focused on rural markets. The Consumer Electronics Show in Las Vegas every year is an example of success where new ideas emerge. India and China with large rural populations should host this event. Competitions on rural innovations, internships, rural hubs and VC funds for rural initiatives must be encouraged. Zakat funds alone in the Arab world generate as much as 25 billion dollars a year, according to Vijay’s estimates, that could be invested in funding rural entrepreneurs. There is enough reason to suggest that with innovation and drive, much of the problems faced by the poor can be solved through reaching the last mile.
The book is an excellent read. It is simply written, has the most refreshing insight that is possible, and examples are interwoven all over the text and solutions are provided everywhere. For anyone interested in rural development, rural market access, social entrepreneurship and public policy, this is a must-read. What is missing however is an examination of failures. There have been large interventions by the state and by the corporate sector that have resulted in huge losses to the exchequer or the shareholder. Some of these and lessons learnt from them would have been really useful in this analysis.
Also missing is a critique on what the Government’s role has been in these ten economies, and why public goods have not reached rural areas yet, and why rural infrastructure is still poor. How have countries like Malaysia and South Korea overcome their problems and become developed? How does the US, with its large rural population, handle the “last mile” issue? The book does not cover these issues. Maybe Vijay is planning his next book – Rural markets and poverty in the richest ten countries?