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Extending the franchise
Financial Express - 16 Dec 2006

Interview : S Sivakumar, Chief Executive-agri Business, ITC

A topper in his 1983 batch from the rural management school IRMA, Sivakumar worked in a farmers'cooperative GROFED in the oilseeds sector for six years before joining ITC in 1989. Now he is the chief executive of ITC’s Rs. 750 Crore International Business Division (IBD) headquartered in Hyderabad. A leading exporter of agricultural products the IBD is behind the acclaimed e-choupal network and is expanding into retail with its Choupal Saagar malls. Shijith PK spoke to Sivakumar on ITC’s plans for the rural retail sector.

What was the rationale behind setting up the Choupal Saagar stores? What are your plans for the Choupal Saagar in the future?

The Choupal Saagars are an integral part of the ITC eChoupal initiative. One Choupal Saagar is set up for a cluster of 40 eChoupals in a hub & spoke format. While eChoupals facilitate information and knowledge transfer digitally within walking distance of farmers / rural consumers, Choupal Saagars are the points of physical transactions within a tractorable distance from the same villages. These physical transactions are not just in retail, but warehousing of agri produce, fuel station, health services, soil testing, farm management training, food court, banking, tractor servicing and so on. We are working towards our vision of the eChoupal services reaching 100,000 villages by 2010. This geographical spread will be complemented by 700 Choupal Saagars.

What is the business opportunity in rural retail for ITC? It is said that there are low margins present in retailing. Why does ITC think retailing in rural India will work?

If all that one is targeting is to gain a larger share of the same small rural wallet, the margins are certainly low. ITC eChoupal actually increases the size of that wallet by ensuring that farmers earn more through better farm productivity and higher prices through value addition to the agricultural products.

What is the kind of product mix sold at the Choupal Saagar? Is it directed more at meeting the day-to-day needs of the rural consumer or longer-term ones, like consumer durables?

The product mix at Choupal Saagar covers a wide range of categories like Agri-inputs, Apparel & Footwear, Grocery, Consumer Durables, For-the home, Toys & Games, Music, etc. to ensure that Choupal Saagar is the one-stop shop for both rural & small town consumers.

Who are the consumers the Choupal Saagars target? Is it the higher income farmers or other population segments as well? Will this change in the short term?

The wide range of products and multiple price points in every category ensure that we are not forced into such a trade-off. The Hypermarket format serves consumers from multiple income segments simultaneously.

What is the kind of ‘catchment’ area are you looking at for customers? Or do the Choupal Saagars subscribe to an ‘outshopping’ model where consumers travel from distant villages to shop at the store?

The typical Choupal Saagar catchment is 30 km radius. For categories like durables, apparel and certain agri inputs it is an ‘outshopping’ model. For categories like FMCG rural consumers do buy in bulk at Choupal Saagar when they sell their harvest. On the other hand, eChoupals facilitate distribution of the FMCG products right into the micro rural outlets in villages with a thousand population also.

Will technology play a role in the Choupal Saagars as they do in the e-choupal network?

Although very different from the technology used in eChoupals, any organised retail is a high-tech business, whether it is to do with data warehousing & mining, or supply chain & inventory management, or POS & CRM systems, or planograms & merchandising management. Choupal Saagar does have cutting edge technology support in all these areas.

What are the challenges you expect the Choupal Saagars to face in operating in rural India?

Most critical challenge is recruitment and retention of retail talent in rural areas, especially when the opportunities in this sector in urban India are also huge. But the larger ITC eChoupal mission of “improving quality of life in rural India” excites many of our retail team members.

What has been the level of acceptance of the Choupal Saagar? What issues do you typically face when introducing the format to new consumers? For example, was the format seen as too alien and not approachable?

The combination of buying farmers’ produce and retail helped overcome the possible intimidation of a typical large format retail. Different elements of Choupal Saagar’s interior design and the profile of customer support team also ensured that the format is not seen as alien.

Is there any change in rural consumer habits required? What is the kind of consumer education involved? For example, how have they accustomed to fixed prices and the absence of bargaining?

Self service was one shopping habit that required change. Our customer support teams facilitated this transition.

What is the image or identity you are looking to build for the Choupal Saagars? What kinds of advertising or promotions are done for the stores?

The brand name ‘Choupal Saagar’ brings in an immediate association with eChoupal and transfers the values of “trust and transparency” from that relationship.Choupal Saagar is positioned as a ‘One stop shop’(“Jarooratein Anek. Jagah Ek.” i.e. “Many needs. One Destination.”) and offers the value proposition-“Uttam Quality, Sahi Jaankaari, Kam Daam.” Each Choupal Saagar is launched with an extensive marketing campaign using local media like hoardings, local cable TV scrolls etc.In addition to this there is a calendar of other promotions that are occasion-based like Diwali, New Year or specific ones like ‘Mangal Bandhan’ –for the wedding season.