Heterogeneity in rural markets
Most market size data on rural India takes the aggregate
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
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.

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
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.