Join the global collaboration community of 24,230 professionals from business, government and civil society working together on the world’s most pressing challenges.
In the second part of this three-part series, which deals with challenges of digitizing indirect FMCG distribution channels in emerging markets, I explore why developing and deploying appropriate technologies to gather data has been a challenge and will provide some examples of how N-Frnds, a technology platform company focusing on digital distribution in emerging markets is addressing this challenge.
With the widespread proliferation of mobile phones, most of the leading FMCG players have attempted various initiatives to use technology to reach and gain visibility of mass-market businesses. However, while mobile phones are a true game-changer, common misconceptions have plagued many of these initiatives:
Assumption 1: Mobile Phone = Mobile Data
The majority of mobile usage in these markets remains through simple phones and while smartphone penetration is increasing as the price of smartphones declines, the cost of mobile data still remains prohibitive in many of these countries. (For example, a small merchant user using data services for business related services on a daily basis will require more then 500MB/Month, which is out of reach for over ~2 billion people(State of Connectivity 2015; A Report on Global Internet Access)). So, while a shop owner may have a basic smartphone, her usage may be highly selective, limited both by data bundles and phone memory space which makes her very selective in the applications she is willing to download. It is very common for these users to run out of mobile data for example and then only re-charge when they have the cashflow to do so. A business solution that relies on mobile data is therefore somewhat problematic when the merchant can access it on Monday or Tuesday but by Thursday she is again ‘unconnected’ until she is able to buy more data.
Assumption 2: mobile phone = desire or willingness to use it as a business tool
While in developed markets we are often quick adopters of new technologies that promise to make our lives easier, faster, simpler, this is often less common when we looking at wholesalers or retailers operating in developing markets. In my experience, a wholesaler’s profile is often of conservative older men who have been doing business the same way for decades. They earn a comfortable living and are risk adverse at trying new technologies and approaches that challenges their tried and tested business tools (most commonly a pen, calculator, few slips of cases and maybe a receipt book),which are familiar and serve their needs. Similarly, at an outlet level the owners are often men or women who rely on their children for handling any new technology and are very cautious and protective of their ‘bottom line’.
Assumption 3: Wholesalers or outlets are uniform with similar business practices
Perhaps one of the greatest challenges of distribution channels reaching the last mile is how disperse and non-uniform these channels are. Even taking into account the above technology challenges, once convincing a predominantly paper-based wholesaler or small outlet to use your technology, ensuring that this technology is on the one hand simple enough for them to use and understand but on the other hand has the flexibility and back-end complexity to serve their unique needs is no easy task. Wholesalers’ business practices are usually highly non-uniform, not only does each wholesaler have his own product catalogue and stock but they have different methods for pricing, discounts, deliveries that differ from wholesaler to wholesaler and often follow their own internal logic. For example, one wholesaler may offer discounts based on quantity purchased, another categorizes his customers into A, B, C categories based on prices he knows they are willing to pay, and others may offers discounts based on personal loyalty and relationships. In order to transfer these practices to the digital era a platform is needed that allows adaptability for these different needs that can also be modified on an ongoing basis based as wholesalers response to real world events or seasonal buying patterns (e.g. increase prices, offering discounts etc. over Christmas, Ramadan or different seasons) while at the same time is scalable across the mass market.
In our work in South East Asia and Sub-Saharan Africa we have encountered repeated examples of how ‘Digital Road-to Market’ attempts for indirect distribution channels have failed as a result of some of these technology challenges, even for some of the world’s largest companies. Part of the reason our FMCG partners have bought into the N-Frnds model so quickly is that we address these issues through high tech solutions that on one hand are highly flexible and highly scalable and on the other have a very high ‘human touch’ component:
Overcoming the dependency on mobile data: The N-Frnds platform is accessible, through any mobile phone over regular GSMA networks ensuring anyone can have access anywhere with no limitations from lack of mobile data or internet access.
A human centric approach: N-Frnds Pre-seller/agents (youth on motorbikes) drive the adoption of the platform through the 1-1 relationships they create with the wholesalers and outlets with whom they work. We recognized that gaining the trust of the individuals – wholesalers, retailers and salespeople, who make up indirect distribution networks is as important as the technology we seek to have them adopt and our pre-sellers play an important role in creating that trust.
Flexible & Scalable Technology: The N-Frnds platform is both highly flexible, enabling each wholesaler or outlet we work with to set its own SKUs, product categories, prices, discounts, delivery logic etc. and widely scalable, thanks to a strategic partnership with Microsoft who is working with N-Frnds to scale our solutions across emerging markets.
How do large FMCG Principals make profit selling to remote outlets that are difficult to reach and make very small yet frequent orders, and how do small outlet gain access to capital that can enable them to increase sales and expand their businesses? Look out for Part III in the New Year to learn more.
Why not join one of the many open collaboration Challenges we are running to address pressing global issues? Join your peers, share your passion and add your expertise!
Our Challenges are made possible thanks to our Supporters and Partners. If you'd be interested in supporting a current or new Challenge, please get in touch.Learn more