CONSTRUCTING A SCALE TO MEASURE THE

EFFECTIVENESS OF FMCG DISTRIBUTION CHANNELS

IN RURAL MARKETS IN MAHARASHTRA

Submitted by

Pravin Kumar Bhoyar

For the degree of

Doctor of Philosophy

(Faculty of Management)

Symbiosis International (Deemed University)

PUNE

In

October, 2010

Under the guidance of

Dr (Mrs) Asha Nagendra

Director

Symbiosis Centre for Management Studies (UG)

Noida

Introduction

The rural market offers a big attraction to marketers, it would be naïve to think that any

company can enter the market without facing any problems and walk away with a sizable

share. Unfortunately, it is not possible to transplant successful urban marketing strategies

to rural markets, namely, deep and intensive retailing and continuous customer-pull

generation through advertising and promotions. Distribution is the most important

variable in the marketing plans of most consumer goods manufacturers. It is estimated

that there are over a million market intermediaries – distributors, super-stockists,

wholesalers, stockists, transporters and retailers – who are involved in the distribution of

a variety of consumer goods all over the country. Marketers use this network to access

nearly 5,100 cities and towns and over half a million villages. The distribution network in

India is characterized by a predominance of family-owned proprietary concerns. Urban

areas have a variety of distribution outlets, ranging from large supermarkets and

superstores to the smaller neighborhood retail stores. In contrast, in villages, small shops

alone are the backbone of the local retail network.

There is a need to access retailers in towns and larger villages and promote products

there, so that the products that are purchased locally can reach smaller retail outlets in

villages. Consumer royalty can be to the brand or to the retailer. It follows that the type of

consumer loyalty exhibited by the target group has implications for the marketer. The

influence of the retailer is perceived to be high in the rural market.

The aims and objectives of the present research

1. To identify conventional approaches to reach Rural Maharashtra.

2. To find the problems perceived by channel members in distribution of Fast

Moving Consumer Goods to Rural Market in Maharashtra.

3. To assess the level of satisfaction of rural consumers with regard to Fast Moving

Consumer Goods distribution system.

4. To construct a scale to measure the effectiveness of rural FMCG distribution

channels.

Review of Literature

Sastry et al18

have studied the pertinent issues in rural market such as uniqueness of the

rural consumer, uniqueness of the structure of rural markets and the peculiarities of

distribution infrastructure in rural areas. These are special to rural markets and hence,

require unique handling. Practically in every aspect of marketing, rural markets pose

certain special problems, but the following are found to be important form the marketing

point of view: Distribution logistics, storage, transport and handling, Location and degree

of concentration of demands, dealers’ attitude and motivation, consumer motivation and

buying behaviour, Transmission media, their reach and impact, & organizational

alternatives. Thus, the rural market bristles with many problems and to achieve a firm

footing, a marketer has to grasp these problems and provide innovative solutions to them.

The impact of spurious brands in rural market and how it chokes the market for authentic

items was studied by Bhattacharya2. The color and almost identical cover graphics are

used for passing off spurious products as original. Even the names may sound similar.

Many distinctive features between the original and fake versions can not usually be

detected by the unwary and average customer anywhere in the market. Blockages - at

present, most products reach the rural customers generally through wholesale channels.

These intermediaries are not sufficiently under the control of manufacturing firms, which

intend to enter the rural market in a big way. Skewed Distribution of Outlets - not

surprising therefore, 76% of the estimated 3.7 million rural outlets are concentrated in

seven states. They have all sprouted in relatively sizeable and well-off villages where

sufficient consumer demand exists to sustain them. Then again, there are about 60,000

villages which do not have even a shop each. Poor infrastructure for most villages in most

areas which chronically suffer from lack of periodic supply of goods, poor availability of

credit and capital and low purchasing power of patrons.

The FMCG companies change the track of distribution to attract customers as studied by

Bhattacharya3. Several FMCG companies have taken to unconventional modes of

distribution. CavinKare Pvt. Ltd. has created two separate brands - Chinni for smaller

pack sizes and Priya for larger packs - And instead of using the conventional distribution

route, they have created a `sachet' sales force that sells only sachet packs to small

retailers, including cigarette and pan shops. Emami Ltd. tied up with the Post and

Telegraph Department to place its products across 5,000 post offices. Wipro Consumer

Care and Lighting (WCCL) have been using the Andhra Pradesh Government's e-seva

project, which aims at enhancing the common man's interface with the Government.

Coupled with traditional distribution methods, this approach allows WCCL to reach

consumers who otherwise may not come to a retail point. Alternative distribution

channels do not offer better margins and are, at best, tools to gain accessibility in certain

areas. Also, distribution margins across these channels are identical to those in

conventional routes, so there is little cost saving. So, while alternative distribution

options are gaining acceptability, it may be some time before these become a rage.

Rajagopal12

reported that the performance of global brands in low-profile consumer

market segments is constrained by high transaction costs and coordination problems

along the brand promotions, consumption and consumer value chain. Hence, firms

looking towards managing brands in Bottom of the Pyramid (BoP) market segments need

to reduce brand costs by increasing the volume of sales and augmenting consumer value.

Brands of BoP market segments are socially and culturally embedded. They are co-

created by consumers and firms, and positioned with the influence of brand equity of the

premium market. Unlike traditional brands, BoP brands may be sufficiently malleable to

support brand interpretations in the rural and suburban consumer segments. The paper

offers new business strategies to managers on brand positioning and targeting in suburban

and rural markets with convenience packaging, pricing and psychodynamics.

Khicha8 studied that television and direct marketing activities help rural consumers learn

about different brands, ensuring product availability is even more critical. Marketers in

rural India claim that setting up a supply chain that reaches the remotest rural areas is

extremely arduous given the infrastructure in the country. HUL Project Shakti targeted

rural women from existing self-help groups to work as “direct-to-home” distributors for

HUL products, and helped the company break into a market they were unfamiliar with. A

“hub and spoke” model of distribution is the “future.” As he explains Dabur has

successfully adopted the hub and spoke model in India and it has worked very well. Here,

feeder towns, primarily on the highways serve as hubs, where companies can rent a

warehouse and stock their products. Spokes are comprised of ‘cyclist salesmen’ who then

distribute products to small retail outlets in nearby rural pockets.”

There are two distinct segments of consumers in the rural market. Sarangpani et al17

studied that one set of rural consumers is less educated or even illiterate. They cannot

read, write or understand with ease. They do not buy branded products. They have their

own method of identification of products and communication with the retailers. For

instance, they ask for Erra Sabbu (for Lifebuoy), Pacha Sabbu (for Nirma), Neeli Sabbu

(for Rin), etc. Rarely do they purchase branded packaged goods and values associated

with them. On the contrary, there is a different segment of consumers, the younger 18-35

years age group; they are educated, more mobile and have urban exposure. They are

brand conscious. They ask for brands of their choice. Their brand usage and recall rate is

comparable to their counterparts in the urban areas.

Methodology

Purpose of the study

There is a greater degree of rural base elite who would be going for greater consumption

of FMCG products with reference to Kolhapur and Sangli districts. It is interesting to

note that there is a greater degree of rural population much more oriented towards urban

patterns of living and life style and their preferences for FMCG are on larger scale. There

is a predominant concentration of well-to-do rural population who have recently migrated

and settled in urban areas of Sangli district, therefore their consumption pattern would

sway between rural taste and the elite urban style of preference. Some impressive facts

about Sangli and Kolhapur districts are - Sangli and Kolhapur districts11

have the highest

literacy rate in India, i.e. 77.23 and 77.19% respectively. Per capita district domestic

product11

is Rs 20,411/- and Rs 20,019/- of Kolhapur and Sangli districts respectively

which are one of the highest in the country.The prosperity and the resulting spending

prowess of Kolhapur and Sangli people5

was famously reported in a list of districts with

the highest number of Mercedes Cars in the state of Maharashtra, where Kolhapur came

second only to Mumbai. Retaining experienced channel members to cater to rural market

is a big challenge for all the marketers because the attrition of rural channel members is

double the urban counterparts. So it needs to study the various attributes such as

promotional schemes, number of assortments and their availability which decide the

channel satisfaction. Presently, there is a lot of gap between the urban and rural

distribution system and to make rural customers to visit and buy their needs from the

local shop requires in-depth analysis and suggest how to catch them hold so that the

customers regain their confidence.

Statement of Hypothesis

For the present study, the following hypotheses were formulated:

Existing FMCG channels of distribution in rural Maharashtra serve the customers

well

Channel members are satisfied with the distribution of FMCG in rural market

Selection of sample

Two companies - Hindustan Unilever Limited (HUL) and Godrej Consumer Products

Limited (GODREJ) which are pioneers in Fast Moving Consumer Goods (FMCG) in the

rural market were selected to study their distribution channels in rural districts of

Maharashtra. The researcher wanted to focus on two rural districts of Maharashtra to

study the FMCG distribution channels. Sangli and Kolhapur districts rural market were

found to have all types of channel levels. In the initial stages, details of only one

distributor who caters to the Kolhapur urban market was obtained from the Pune based

HUL distributor. There are only three HUL distributors in one district. After meeting

with him personally, the details of one rural distributor of HUL who covers three

Taluquas in Kolhapur district were sought. After establishing rapport with him and

gaining his confidence, a comprehensive list of other members from different levels were

sought. The distribution levels identified were- Distributors, Super-stockist, Wholesalers,

Stockists, and Retailers.

Once the questionnaires were finalized, the researcher started establishing contact with

distributors of HUL and Super-stockist of GODREJ who then provided a comprehensive

list of wholesalers, stockists and retailers with their contacts. Side by side, the researcher

began tele-calling and fixing appointments explaining the objectives of the present study,

after which questionnaires were administered. The researcher was often required to meet

them personally and assure them that all the information sought would be kept strictly

confidential and would be used exclusively for the research study. With the prior

permission from retailers, the questionnaire for rural consumers was administered which

was a surprise for them. Interestingly, a few literate customers (contacts suggested by

retailers) were contacted immediately to ascertain the authenticity of their responses and

followed up with them promptly. Many of them evinced keen interest to offer additional

information and discussed certain points out of the topic.

In all, 16 distributors/stockists, 1 super-stockist and 48 wholesalers were interviewed but

the researcher was able to get the responses from only 11 distributors/stockists and 40

wholesalers. The remaining 6 questionnaires for distributors/stockists and 8

questionnaires for wholesalers were found to be invalid. Similarly, the researcher

attempted to cover 10–12 retailers under wholesalers and distributors from randomly

selected 45 villages, but again only 60 were found to be valid. 3 customers at each retail

shop were interviewed, i.e. a total of 170–180 rural customers but again only 100 fully

filled up questionnaires were finally selected for the research analysis since the remaining

were incomplete in many respects and hence were discarded from the final research. The

non-probability purposive/judgmental sampling technique was used. The researcher

chose the sample based on common trait of interest that would be appropriate for the

study. The research study being conducted with a purpose in mind, the sample was

selected to include people who evinced interest and excluded those who did not suit the

purpose.

Validation of hypotheses

To validate hypotheses, researcher used the statistical tools like Spearman’s Rank

Correlation and Chi-square Test.

Constructing a scale to measure the effectiveness of FMCG distribution channels in

rural Maharashtra

The main purpose of the researcher was to construct a scale so that it can come out as a

benchmark for companies to measure satisfaction of consumers regarding nine fast

moving consumer goods. To do this, the researcher thought Multivariate Linear

Regression Analysis (MVLRA) was the most appropriate tool to analyze the data.

Results and Discussion

Table: Extent of Satisfaction for Action Taken Against Channels’ Complaints

Extent of Satisfaction Distributors (N=11) Wholesalers (N=40) Retailers (N=60)

X F1 XF1 F2 XF2 F3 XF3

Delighted 1 0 0 4 4 9 9

More Than Satisfied 2 0 0 16 32 10 20

Satisfied 3 0 0 10 30 32 96

Less Than Satisfied 4 5 20 10 40 9 36

Disgusted 5 6 30 0 0 0 0

∑F1=11 ∑XF1=50 ∑F2=40 ∑XF2=106 ∑F3=60 ∑XF3=161

Mean=4.55;Mode=5 Mean=2.65;Mode=3 Mean=2.69;Mode=3

a. Distributors: The values of median and mode indicate high degree of dissatisfaction

in regard to “actions taken against channels’ complaints” and also the value of mean is

4.55; it was apparent that 45% of the respondents were less than satisfied and also 55%

were disgusted. So the question of more than satisfied or delighted in regard to system

did not arise at all. On the whole, response to distributors’ satisfaction with “actions taken

against channels’ complaints” was quite significant. Territory jumping by the urban

counterpart was not allowed as per memorandum of understanding and such complaints

remained unresolved. There was a big conflict between both urban and rural distributors.

b. Wholesalers: The values of median and mode indicate high degree of satisfaction in

regard to “actions taken against channels’ complaints” and also the value of mean is 2.65;

it was apparent that 40% of the respondents were more than satisfied and 25% and 10%

were satisfied and delighted respectively. Only 25% were less than satisfied with the

system. On the whole, response to wholesalers’ satisfaction with “actions taken against

channels’ complaints” was quite significant. Wholesalers’ complaint was in the form of

spurious products entering the supply chain.

c. Retailers: The values of median and mode indicate high degree of satisfaction in

regard to “actions taken against channels’ complaints” and also the value of mean is 2.69;

it was apparent that 54% of the respondents were satisfied, over and above 17% were

more than satisfied and 15% were delighted with the system. On the whole, response to

retailers’ satisfaction with “actions taken against channels’ complaints” was quite

significant. Treatment meted out to the rural retailers was far inferior as compared to

urban retailers.

These observations are in agreement with that of Brown et al4 who found that the impact

of manifest conflict was found to be mediated by the degree of channel member

satisfaction. In other words, channel member satisfaction and manifest conflict within the

channel were both antecedents and consequences of each other.

Problems perceived by channel members in distribution of FMCG

During the discussion and interview with distribution channel members, it was learnt that

there were many problems perceived by them in distribution of Fast Moving Consumer

Goods (FMCG) in rural markets of Sangli and Kolhapur districts in Maharashtra which

are discussed below:

1. Immovable products

Distributors had to spend more on immovable products due to their large turnover as they

were the suppliers to wholesalers. Wholesalers spent lesser as compared to distributors

due to fewer turnovers and retailers spent the least in immovable products. Overall all

channel members spent considerable amount on immovable products and the main reason

was the damage of products in transit. Many times such immovable products were sold at

discount prices or returned to the manufacturers. These results are partly in agreement

with those of Thakur19

who found that the commodities which have fixed life, pose

special problems to retailers and distributors as these have to be sold before their shelf-

life. Retailers offer discounts on perishable products nearing their shelf-lives to

encourage consumers to buy and studied how many units of the commodity they should

stock on the shelf to maximize their expected profit.

2. Dumping of goods

There was a scheduled dumping of the goods by the Carrying and Forwarding Agencies

who were appointed by the marketers irrespective of the requirements in a particular

month at distributors’ level so it was creating so many inventories which blocks the

money. The frequency of coverage was less for the channels that were located far away

from the feeder village, taking cost factor into consideration. Therefore all channel

members felt that it was very important to address such issues. These results are not

totally in agreement with those of Sangameshwaran15

observed that to remove the

conflict between the manufacturer and its distributors, the consumer goods giant

Hindustan Unilever (HUL) has tied up with a third-party logistics service provider to

manage the entire back-end distribution chain to streamline distribution.

3. Payment terms

It was quite disturbing to note that majority of the distributors had problems of mode of

payment. The reason behind this was that advanced cheques were issued to the

manufacturers; very same day of delivery it was to be cleared; distributors had to give 8-

10 days credit period to their wholesalers and retailers, obviously had to have overdraft

facility with banks which was very costly so they felt it needed to be addressed by the

manufacturers either by raising their margins or allowing credit period. These results are

not in agreement with those of Banerjee et al1 who observed that working capital crunch

or expansion plans of channel members going haywire has become the cause of payment

issue.

4. Excessive costs

Many of the channel members expressed their grievance over cost incurred in their

businesses. Shrinkage cost was the biggest threat distributors were facing in Sangli and

Kolhapur rural market; one distributor lost approximately Rs 22 – 24 lakhs in previous

years. The fuel consumption and cost of recovery of credit was more. The rural retailers

could not run their business without credit. These results are in agreement with those of

Nottingham10

who reported that the Indian retail industry suffered a total loss of

staggering Rs 9,691 cr due to shoplifting and waste in 2007. The study found that the

average shrinkage rate (stock loss from crime or waste expressed as a percentage of retail

sales) for India is 2.90 per cent of sales.

5. Excessive lead time

Depending upon the turnover of the distributors’ products delivery was done by CFA, but

some of the distributors faced from over dumping of products and not because of long

lead time. Whereas majority of the retailers had grievance over excessive lead time due to

lack of pucca road and hence inadequate transport facilities, therefore, their waiting

period was longer especially those who located far away from the distributors /

wholesalers. These results are in agreement with those of Kashyap et al6 who reported

that poor road connectivity - lack of all-weather roads and inadequate transport facilities

are responsible for long lead time.

6. Dearth of promotional schemes

FMCG companies categorized wholesalers in 2 – 3 types depending on their monthly

billing so extra commission was given if he achieves the levels as prescribed by the

manufacturers. There were some distributors who were closely associated with the same

manufacturers but they never got benefits and the promo-offer was given directly to

wholesalers bypassing the distributors.

7. Lack of cooperation and cohesiveness

Existing rural distributors expected to have distributorship of the same company in other

areas of rural market to cover the remotest places and smoothen the distribution system

which would help in reducing lead time and proper coordination and also would help in

long association with the same company but there was no response from company even

after discussion and assurance. These results are in agreement with those of Rajiv et al13

who found that co-operation among distribution channel members could be fostered

through the use of participative and supportive activities which helped in improving

performances of the channels and fostered the relationship between co-operation and

channel member performance.

8. Unresolved issues

As per company norms, there were different distributors for urban and rural market and

different territories and they were not supposed to jump it. Rural wholesalers were

supposed to buy goods from rural distributors, but to increase sales urban distributors

tried to jump their territory and approached the rural wholesalers giving some 3 – 4%

discount which was huge on bulk purchase. These results are partly in agreement with

those of Ramachandran et al14

who at ‘All India Distributors' Association Stir’ reported

that the distributors raised a strong protest with leading fast moving consumer goods

(FMCG) companies for bypassing them and selling their products directly to large retail

stores because making direct supplies would have a negative impact on the turnover of

distributors.

9. Lack of action

Some times urban distributors used to jump their territory and would sell their products to

the wholesalers who came under the rural distributors’ territory. Two times such violators

were caught with their delivery van and people, photos were taken, sought apology letter

and forwarded to corporate office demanding termination of contract, but till today no

action had been taken. Some wholesalers had complaint against distributors about ill

treatment due to long distance, consequently more lead time which adversely affected

their sales; after lodging complaints against such distributors no action had been taken

and subsequently they could not deliver in time to their retailers.

10. Discrimination

Manufacturers didn’t give credit period to the distributors but distributors gave some

credit period to wholesalers and because of that they had to have overdraft facility with

bank and interest was high. Rural customers normally used to buy their products on credit

so retailers couldn’t pay cash to wholesalers in turn distributors also didn’t get cash in

time. Therefore all the distributors demanded at least 5-7 days credit period from

manufacturers which they felt extremely important. But the situation in urban market was

exactly reverse. These results are in agreement with those of Banerjee et al1. Their study

revealed that almost all organized retailers are seeking longer credit. Small format

retailers, who don’t have an extensive network and therefore the bandwidth to negotiate

with companies, are feeling the squeeze more than the big retail players.

11. Menace of Fake Products

Many distributors, wholesalers were losing profit margins due to prevalence of spurious

goods with the same brand name and packing colours and many rural consumers were

becoming victims of such menace. Kaul7 also studied counterfeiting and how FMCG

companies were facing problems due to the spurious goods entered in the distribution

channels. He added that other than pulling down the profits of the FMCG companies, a

counterfeit product of lesser quality gave a "bad name" to the brand.

Levels of rural consumer satisfaction with channel members

Rural consumers were highly satisfied with the availability of food items (54%), and

satisfied with toiletries (70%) and cosmetics (67%) though the specific products / brands

not available. At least one product was available under all categories which just solved

their purpose without specific brand and they were least bothered about good / bad

quality products. These observations are in agreement with those of Sarangpani et al17

who studied that there are two distinct segments consumers in rural market. One set of

rural consumers who can not read, write and understand with ease. They do not buy

branded products. They have their own method of identification of products and

communication with the retailers. For instance, they ask for Erra Sabbu (for Lifebuoy),

Pacha Sabbu (for Nirma), Neeli Sabbu (for Rin), etc. Rarely do they purchase branded

packaged goods and values associated with them.

There was extremely high dissatisfaction (69% food items, 80% toiletries, and 60%

cosmetics) among the rural consumers regarding range of products because product

length was too short that only 2-4 products were available under each category;

customers had no choice but to buy the available ones. These observations are in

agreement with those of Saran16

who emphasized that the rural FMCG market with its

promise of millions of rural consumers is not yet touched by the cornucopia of brands

and products.

Once the frequently-purchased products were out of shelf it took a lot of time to reach

the shelf back, min 5 days and max might be more than 10 days also. Therefore

customers were dissatisfied (69% food items, 80% toiletries, and 66% cosmetics) with

regularity of supply of products. These observations are in agreement with those of

Kucuk9 who provided clear insights into the influence of product availability, and thus

distribution on double jeopardy (DJ) patterns, for frequently-purchased products (FPP).

The distribution created behavioural brand loyalty when Frequently-purchased Products

are widely available (excessive availability) in the market.

If required products were not available at local shop then they had to look for other

shops, i.e. bigger villages or town which was far away from their villages so they

couldn’t go regularly. Therefore many customers were dissatisfied (69% food items, 80%

toiletries, and 66% cosmetics) with the proximity of retail shops. These observations are

in agreement with those of Kashyap et al6 who observed that there are 3.5 million outlets

spread over 6 lakh villages whereas there are 1.68 million outlets spread over 5000 towns

and cities, i.e. there are only 6 shops per village and 340 shops per town / city. There are

hardly any shops in 2.3 lakh villages.

Summary

The researcher studied various attributes such as mode of delivery, coverage pattern,

mode of payment, costs, number of assortments, lead time, execution of promo-offer,

display of products, understanding of channels’ requirements, communication, issues

handled, actions taken against channels’ request, responsiveness during implementation,

meetings with territory in-charge, time taken for query resolution, actions taken against

channels’ complaints, quality of sales-kit, domain knowledge with territory in-charge,

attitude of territory in-charge, and credit period for satisfaction of distributors,

wholesalers and retailers and their responses were found quite significant. Most of the

channel members were satisfied with the present system of FMCG distribution in the

rural market of Sangli and Kolhapur districts in Maharashtra.

Consumerism

It was unfortunate that very few respondents (83%) had awareness about different

consumer protection acts and also whoever knew it was difficult to recall (13%) which

had become again a serious concern for the marketers.

Major Complaints / Problems with regard to Purchase of Products

It was again an eye opening for the marketers that there was a strong presence of

duplicate brands (58%) in rural areas which was perhaps difficult for the customers to

identify and less awareness. Prices were almost same and they were charged as per MRP.

Customers Complaints & Measures

It was good that customer lodged complaint with retailers but most of them had taken

very strong measure by switching over to other shop (71%) and some of them returned

the goods and took money back (29%) in case of complaints against the goods. No legal

case filed and no replacement with the new goods.

Suggestions offered by rural consumers

Retailers to provide information on new products; retailers to give good products;

retailers to provide discount at par with their urban counterparts; producers to have check

on retailers; producers to catch retailers who not doing malpractices and prosecuted and

producers to ensure implementation of any scheme (promo-offer) in villages.

Hypotheses validation

Hypothesis I: Existing FMCG Channels of Distribution in Rural Maharashtra serve

the customers well.

Range of products at local retailers vs distance traveled by the rural customers

A negative correlation and significance level was two tailed and p value = 0.01 and 0.05

between Distance traveled by the rural consumers to buy products with Satisfaction of

rural customers with range of products at local retailers.

Inference: The rural customers were dissatisfied with the range of food items, toiletries,

and cosmetics available at the local retailers, i.e. there was a lack of product width and

depth. Only a limited range had been observed in food items, toiletries, and cosmetics.

Therefore, it implies that the rural customers have to travel away from their villages to

towns / cities to buy their desired products.

Regularity of supply of products vs distance traveled by the rural customers

A negative correlation and significance level was two tailed and p value = 0.01 and 0.05

between Distance traveled by the rural consumers to buy products with Satisfaction of

rural customers with regularity of supply of products in case of out of stock at local

retailers.

Inferences: There were limited stocks of products at village retailers, i.e. 1 to 3 products

in one category. If the products were out of stock, rural customers had to wait for 5 days /

10 days / even more. So, it compelled them to travel outside their villages to meet their

demands. Therefore, the rural consumers had to travel distance away from their villages

to taluquas or cities or towns to buy the products and hence they were not satisfied with

the regularity of supply of products at local retailers.

Proximity of retailers vs distance traveled by the rural customers

A negative correlation and significance level was two tailed and p value = 0.01 and 0.05

between Distance traveled by the rural consumers to buy products with Satisfaction of

rural customers with proximity of retailers.

Inferences: If there was no range of products available at local retailers and poor

regularity of supply of products, the rural customers had to approach other good shops

wherein the desired products were available, which were far away from their places.

They had to travel to Taluquas or towns or cities which were far away and could not be

approached regularly. Therefore the rural consumers were not satisfied with the

proximity of retailers for buying their daily needs.

Availability of products vs distance traveled by the rural customers

A positive correlation and significance level of two tailed p value = 0.01 and p value =

0.05 was seen between Distance traveled by the rural consumers to buy products with

Satisfaction of rural customers with availability of products.

Inferences: Availability means the presence of at least one product in one category of

FMCG, i.e. 1-2 products in bathing soap category, one product in washing soap category,

one product in edible oil category etc. irrespective of the brand and variants. The rural

customers are satisfied when the presence of the products at local retailers solves their

temporary purpose. At least one product was available under all categories which solved

their purpose without specific brand as they are not bothered about good/bad quality

products.

Poor quality of products vs measures initiated by the rural customers

A positive correlation and significance level was two tailed and p value = 0.01 between

Measures initiated by rural consumers – returned goods and took money back with Poor

quality with regard to purchase of products.

Duplicate brands vs measures initiated by the rural customers

A positive correlation and significance level was two tailed and p value = 0.01 between

Measures initiated by rural consumers – switched over to other brands with Higher

prevalence of duplicate brands with regard to purchase of products.

Inferences: Whenever there is poor quality in FMCG bought by rural customers they

return the goods and take money back from the rural retailers. Most of the rural

customers can now differentiate between original and duplicate brands so they switch

over to other brands if duplicate ones are found. It implied that there was either poor

quality or prevalence of duplicate brands in rural market. Therefore, rural customers were

not getting good quality and authentic brands in rural market of Sangli and Kolhapur

districts.

Hence the Hypothesis I: ‘Existing FMCG Channels of Distribution in Rural

Maharashtra serve the customers well’ is not validated.

Hypothesis II: Channel members are satisfied with the distribution of FMCG in

rural markets

There was a dependency and the two discrete variables had a strong relationship. As the

Chi-square statistic increased, the likelihood that a relationship existed between two

variables, i.e. the type of FMCG channels and attributes increased.

The researcher interpreted the results by observing the difference between the observed

and expected counts. In this case, the level of significance was 0.001. There was a

significant difference.

Result: X2 (2) = 28.369, p < 0.001

Hence Hypothesis II: ‘Channel members are satisfied with the distribution of

FMCG in rural market’ is validated.

Constructing a scale to measure effectiveness of FMCG distribution channels

The researcher intended to develop a statistical model to predict customer satisfaction for

a product which was dependent on different parameters. The researcher believed firmly

that apart from the psychological factor, the following eight factors – Quality, Size, Price,

Packaging, Availability of products, Range of products, Regularity of supply of products,

and Proximity of retail shops, would be predictors to predict dependent variable customer

satisfaction for that product. In order to develop the statistical model to measure customer

satisfaction, the researcher thought Multivariate Linear Regression Analysis (MVLRA)

was the best tool which can be used only under the assumptions of normal distribution.

Ordinal regression and log linear regression are the tools that can be used when the

measurement of variable is on an ordinal scale. The researcher developed the statistical

models (scale) for each of the following products – Edible oil, Tea and coffee, Biscuits,

Bathing soap, Washing soap, Washing powder, Face powder, Face cream and Shampoo.

For edible oil

Y=0.012 + 0.106 X1 + 0.102 X2 + 0.132 X3 + 0.129 X4 + 0.269 X5 + 0.108 X6 + 0.144 X7

For tea & coffee

Y=0.026 + 0.068 X1 + 0.122 X2 + 0.131 X3 + 0.118 X4 + 0.289 X5 + 0.107 X6 + 0.139 X7

For biscuits

Y=0.042 + 0.123 X1 + 0.097 X2 + 0.074 X3 + 0.130 X4 + 0.136 X5 + 0.130 X6 + 0.102 X7

+ 0.175 X8

For bathing soap

Y=0.024 + 0.095 X1 + 0.106 X2 + 0.096 X3 + 0.125 X4 + 0.299 X5 + 0.111 X6 + 0.143 X7

For washing soap

Y=0.043 + 0.143 X1 + 0.101 X2 + 0.098 X3 + 0.097 X4 + 0.270 X5 + 0.122 X6 + 0.134 X7

For washing powder

Y=0.027 + 0.151 X1 + 0.109 X2 + 0.091 X3 + 0.113 X4 + 0.283 X5 + 0.100 X6 + 0.130 X7

For face powder

Y=0.013 + 0.093 X1 + 0.113 X2 + 0.099 X3 + 0.131 X4 + 0.145 X5 + 0.147 X6 + 0.112 X7

+ 0.149 X8

For face cream

Y=0.008 + 0.117 X1 + 0.138 X2 + 0.086 X3 + 0.115 X4 + 0.133 X5 + 0.140 X6 + 0.110 X7

+ 0.153 X8

For shampoo

Y=0.028 + 0.086 X1 + 0.125 X2 + 0.132 X3 + 0.115 X4 + 0.135 X5 + 0.132 X6 + 0.103 X7

+ 0.147 X8

Where, Y = Customer Satisfaction for products (edible oil, tea & coffee, biscuits,

bathing soap, washing soap, washing powder, face powder, face cream

and shampoo)

X1 = Quality,

X2 = Size,

X3 = Price,

X4 = Packaging

X5 = Availability of Products,

X6 = Range of Products,

X7 = Regularity of supply of Products, and

X8 = Proximity of retail shop for buying products.

Conclusions

Channel conflict was there among the rural and urban distributors over the jumping of

territories allotted by the companies. There is discrimination as distributors didn’t get

credit from companies but they had to give some credit period to wholesalers and

retailers. There is a prevalence of spurious goods with the same brand name and packing

colours and many rural consumers were becoming victims of such menace. It was

heartening to see that youngsters between the age group of 18 to 30 years and that too the

married ones had emerged as decision makers in the family who could communicate

well. Less educated people did not buy branded products and became victims of duplicate

products. The researcher felt elated to note that the majority of the families had less

members in family. The majority of the rural consumers had no investment at all. Many

major brands of FMCG were available in rural area. The good behaviour and courtesy of

the retailers had great influence on rural customers. If required brand was not available

rural consumers postponed buying. FMCG shopping was still dominated by male. The

rural customers traveled more distance outside the village to purchase goods.

The reasons to buy outside the village were the variety, the high quality goods of their

choice which they did not find in their villages and reasonable prices and there was not a

single customer who traveled for better product services. The reason for changing the

existing brands was that new brand was of better quality and quantity. Many rural

consumers wanted to test the new brand and not the new brand was cheaper. Traders had

incredible influence on purchase by rural customers. In all purchase he had small or

greater role and customers’ family members were also asked for their preferences. The

purchase decision was not limited to one person from family but it was a collective

decision. Peer group had almost no role in their purchase decision. Neighbors and friends

did not have predominant role in purchase decision. Once the frequently-purchased

products were out of shelf it took a lot of time to reach the shelf back. Very few rural

consumers had awareness about different consumer protection acts and also whoever

knew it was difficult to recall which had become again a serious concern for the

marketers.

Recommendations for further research

1. The present research study was limited to Sangli and Kolhapur rural markets. The

study can be extended further by identifying other districts in Maharashtra.

2. An in-depth study can be done on the consumer durable goods industry in rural

markets as this has become one of the fastest growing sectors in the rural market.

3. There are some unorganized distribution channels in rural markets i.e., mandi and

weekly markets. These can be studied to analyze their impact on sales of branded

products.

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