Heterogeneity in rural marketsUnlike in urban markets where demand is highly concentrated, rural markets tend to be spread out. This increases the sales efforts and costs

Most market size data on rural India takes the aggregate households or household spend for a predetermined geographical boundary. District boundary is the most used defining characteristic, though some of the more research savvy look at market sizes down to the block level, and almost no one looks at up-to-date village level data for their sales and market planning.Unlike in urban markets where demand is highly concentrated, rural markets tend to be spread out. This, of course, dramatically increases the sales efforts and costs. Consequently, though many rural markets look good on paper, in reality they are quite costly to service.The best way to compare rural locations is, therefore, to look at market density, or expenditure per unit area. The accompanying graphic provides the 10 best rural locations in India as per this parameter. We find that markets that are otherwise quite large, do not show up as the best in terms of market density.Large parts of Gurgaon have highly educated households with organized-sector jobs living in its rural areas. Moreover, high land values have also dramatically increased the wealth and incomes of its traditional residents. Gurgaon’s rural area, therefore, scores high because of the growing suburbia.The story of Kerala is different. Cash crops combined with returning international workers, continued repatriations and high educational profiles make its rural markets similar to urban markets.The story of Jharkhand and West Bengal’s districts is, however, different. These rural markets are characterized not by high per household expenditure, but a high population density.

Source: Market Skyline of India

The districts of Malda, Murshidabad and Birbhum in West Bengal and Sahibganj in Jharkhand have extremely fertile land fed by the Ganga that has contributed to the high population densities in these areas. Cross-border trade with Bangladesh also contributes to the high market density levels.These four contiguous districts have a large number of poor, underprivileged tribal population, and poor education levels. These rural markets, therefore, are more agriculture-dominated, combined with low per capita incomes. Consequently, these are not premium markets such as the ones in Gurgaon or Wayanad, Kollam or Kottayam. They are large markets characterized by greater demand for low-quality, low-cost goods and services.Density, therefore, is just one measure that companies interested in servicing rural markets need to look for. There is a large heterogeneity in the character of rural markets. The Union territories of Daman and Diu, Lakshadweep and Chandigarh top the charts in rural market density, while among the states it is Kerala, West Bengal and Haryana that lead.However, there are significant differences in the market characteristics in these states. Some such as those in Kerala are large markets of premium goods and services—but they have a mobile consumer base that can travel to neighbouring cities for major purchases.At the other extreme are the large markets such as those in West Bengal, that are characterized by a poorly educated, poor and underprivileged, relatively immobile but large consumer base. These markets would be low in purchases of premium products or durables. Demand Curve is a weekly column by research firmIndicus Analytics Pvt. Ltd on consumer trends and markets.

Unlike in urban markets where demand is highly concentrated, rural markets tend to be spread out. This increases the sales efforts and costs

Source: Market Skyline of India