Reaching China’s ‘Last Mile’
Economists say that in order to survive the global downturn and the resulting drop in trade, China will need to develop its domestic market. But some companies are hitting a wall when it comes to accessing rural China’s 2,812 counties, 35,000 towns and 640,000 villages.
In a keynote address at the Wharton Global Alumni Forum in Beijing this month, Zhang Ruimin, CEO and chairman of Haier Group, said his company has made progress in this regard, but that it isn’t easy. Recognizing the “huge domestic opportunity” in China’s rural markets, the appliance manufacturer is “now exploring a way of combining virtual networks with ‘real’ networks. Virtual networks exist on the Internet; the ‘real’ network is the ‘last mile’ — [on-the-ground] logistics, sales and service.” The modern supply chain technology that has helped companies like Haier establish a global presence won’t carry these firms into rural areas, where “electricity is expensive” and local political structures and policies can be particularly idiosyncratic.
In light of this, Haier has spent time building up “a huge [sales] network” in rural areas. “Many of our competitors have even asked us to be their rural sales agent,” he said. “Why? They don’t have the capability to serve every county and village…. Understanding the market is important. What kind of service are you going to provide? It has to be closely connected with the market.”
In India, a similar story is emerging. Because of the recent strong performance in the agricultural sector, companies are reshaping their products and services to cater to rural demand. As one expert told India Knowledge@Wharton, rural India is forcing marketers to rethink the traditional four P’s of marketing — product, price, place and promotion — and replace them with four A’s: Affordability, awareness, availability and acceptability. See: “Why Companies See Bright Prospects in Rural India.”