High cost of maintaining a single brand distribution network
While some of the most profitable companies in the world are working on solutions for the last mile, the costs of maintaining these distribution networks remains a challenge, given the low profit margins. Even when product costs are low, maintaining a network of sales reps to serve millions of tiny outlets is significant. Since most Principals focus only on their own products and brands there is often unnecessary duplication of costs in building such distribution networks. A sales rep for a drinks company, for example could very easily also be selling toothpaste or other personal care products for other Principals which are both non-competing and stocked in the same small consumer facing stores. What’s more when some of these companies do attempt to ‘go digital’ in the indirect market it can result in a multiplicity of applications where each Principal has its own application which a small store owner must download.
Having identified the above challenge, we saw a very clear need for a single consolidated network and digital platform that can be leveraged by multiple brands to drive sales and collect data from the last mile. We set up a powerful network of ‘Pre-sellers’ who drive adoption of the N-Frnds platform to sell all products stocked by a wholesaler. The Pre-sellers (usually in their early 20’s) are hired by N-Frnds and assigned to pre-selected wholesalers in each geographic location. The Pre-sellers are responsible for signing up outlets and collecting orders (of all bands) from each outlet through the platform. These digital orders are then fulfilled by their wholesalers. This is a win-win for all:
- The wholesaler benefits from a free pre-seller who collects orders on his behalf (after ~3 months we see approximately 25% increase in sales for wholesalers who generally continue to double their business in a year), the Pre-seller also assists the wholesaler to gradually begin using the app to monitor and approve his orders and track sales.
- The small outlets benefit from the convenience of a pre-seller directly coming to collect their orders as well as special promos specially designed by our FMCG partners for these last-mile outlets (for example outlets can collect points for purchases of Coca Cola products on the platform which once accumulated can be redeemed for products). The outlets also have the option to place orders themselves directly through the app or simple phone ordering menus.
- Our FMCG partners (e.g. Coca Cola) benefit from the data collected through this system, providing them with visibility of last mile purchases and enabling them to design promos and marketing strategies for this elusive market segment.
Because our distribution network is not limited to any one FMCG player, multiple companies work with us to gain sales data about their products and extend promos to their end users. Each player receives data only about their products that they can use to enhances their sales strategy while sharing the costs of managing these networks.
Access to Finance
Profitably serving the last mile, also requires that the last-mile outlets themselves are profitable and able to extend their businesses. Lack of working capital is a major constraint. Even the time of day can be a key determinant in whether they have cash-in hand to make a purchase. Working capital loans are rarely available for small ‘risky’ informal retail outlets, however this can make a huge impact on their ability to grow and expand their businesses.
The N-Frnds model solves this challenge by creating a digital footprint for these small businesses, our financial partners use the digital records collected through our platform to provide loans or terms of payment to the outlets in our network. After only 3 digital orders, we extend loans to outlets, enabling them to purchase goods on credit and pay later through their Pre-seller. This gives the outlets the ability to increase their inventory and sales. It is also a very attractive opportunity for credit providers who effectively extend credit on behalf of a wholesaler and gradually reduce interest rates and increase loan size and duration over time as the outlets credit history continues to improve. (We have less than 0.5% default rates).
At N-Frnds we believe our hybrid model that includes the traditional players in the value chain and uses a gradual human centric approach to introduce technology is answering many of the challenges of reaching the last mile. By offering a single digital platform and agent-based networks that can be utilized by multiple FMCG brands and also leveraged to offer financial services and other digital products to last-mile outlets we are offering a scalable, sustainable and profitable model that benefits our FMCG and corporate partners, wholesaler partners and in particular the last mile outlets we seek to serve.
For more information on the N-Frnds digital distribution model see this short video produced by Microsoft who are partnering with us to digitize distribution networks in Indonesia or contact me ca****@nf****.com, www.nfrnds.com
