Raymond Chimhandamba, Handas Consulting, Johannesburg, South Africa12.07.18
The following micro-franchising model would work very well in low-income channels/Base of the Pyramid Channels. I launched a diaper brand in Zimbabwe and in three other markets in Africa. The lessons that I talk about here come from that experience. A good part of the lessons also come from my almost 20 years of working in the Africa and Middle East regions, with world-class customers and partners, in the modern trade as well as Bottom of the Pyramid/low income channels. Some of the lessons come from joining the dots of what I learned from as export manager and having the challenge of negotiating rates with shipping lines at the beginning of every financial year.
Diapers are some of the items that consumers with babies require and use daily. Therefore they make a good portion of the fast moving consumer goods portfolio. For that reason I believe that it is possible to have a micro-franchising model that focuses on hygiene products: baby diapers, sanitary pads, baby wipes, adult diapers and panty liners. In my mind, these categories are actually arranged by the size of the opportunity in Africa. I have a very good understanding of what the BoP customer looks for in all of these categories. For my colleagues who are part of the Disposable Diaper Network (DDN), we have had robust discussions around these categories.
The following are the five steps to setting up a Micro Franchising model for your hygiene range in the low income channels.
1. Use Your Shipping Line to Access Used Shipping Containers
If you are part of a multinational, this part becomes very easy for you.
As a part of a multinational, talk to your global procurement team to establish which shipping line is the preferred partner for the group. Find out how much volume you do with them per month/year on a global level. Use those numbers to negotiate good prices for used containers.
If you are battling to get an audience, use your influencing skills to escalate the discussion, either to a regional/global level. In other words, use “bigger guns.” Use the price at which you will get the containers to start working out your costs for the micro franchising model.
2. Talk to the “Chamber of Commerce” in the BoP /Low Income Community
I deliberately write “Chamber of Commerce” in quotes. That is because, in case you didn’t get the memo, the meeting has moved from the glass tower on the 5th floor to the open space next to the informal retail shop or “tuck shop” or spaza shop (as it is called in South Africa). And no, there are no boardroom chairs. You will probably sit on bricks or empty crates. But you will discuss business. Real business. This is BoP my friend. This is not business as usual. Call it business unusual. There are no formalities here. There is an informal “Chamber of Commerce” in every BoP community on the globe.
I have not been to the favelas of South America or the low income areas of Mumbai, but I can assure you now, as sure as today is Wednesday, that there is a “Chamber of Commerce” in these areas. Drop me there for a week, give me a budget to socialize and I will find it. I will find the “Chairman,” “MD” and “COO” of this “Chamber of Commerce” in hiding.
The people who own businesses in these communities have a loosely (and sometimes closely) arranged business community. People hang out with like-minded souls. That is what is also happening here. These business people have the same interests so they meet often. It is the closest to the Chamber of Commerce as things get in the Bottom of the Pyramid. They are actually very helpful. And guess what…they want business to work. It is in their best interest. These are people who have learned to get on with things, when systems are not in place.
True to the indomitable nature of the human spirit, these are business people who organize their own “Chamber of Commerce at the Bottom of the Pyramid” in order to get business done, in the absence of formal systems. Big businesses are probably ignoring them so they do it their way. This lesson is from Diepsloot, Johannesburg. I was attempting to launch a diaper brand for a global diaper manufacturer. The project never saw the light of day…but I kept the lessons
I want to go as far as to say, as a business, it may be in your best interest to actually help this group to get a voice. Help them to get organized. But that is a discussion for another day.
The “Chamber of Commerce” will know the young men and women who have what it takes to be your new business partners. They know the people with the entrepreneurial flair that can be trained to start a business. They know the people with a burning passion for business, but who have no access to capital to do it. Use them. Such people are your new franchisees.
It may even turn out that this very circle is ready to expand into new areas that may include your business. They may even have the capital and ideas because they are already in business. Find these people, train them and make them your new team of franchisees.
3. Use the Idle Capacity in the BoP Community
You may not believe the amount of trucks and “lorry-type” vehicles in any BoP community. I am battling to find the right term because I know they are called different names in different parts of the world but I want everyone to get my point. In South Africa we call it a “bakkie,” in Zimbabwe we call it “pick-up.” They may be big and some small. And small may just be what you need because the “pick ups” (no pun intended) and drops may be fairly small. And BoP communities are practical. There are quite a number of people who know that this is a type of vehicle that can carry the family as well make them money every now and then.
At the end of the month there is always someone moving house in the BoP community and that is when these trucks get busiest…just like in any other community. Now why do we forget that? For this lesson, back to Diepsloot, Johannesburg. I learned that the costs per km of formal transport companies are way higher than the ones charged by the informal “truckers.”And if the owner/driver is assured of regular business, he will be prepared to bring down the cost for moving your product and dropping it off at your newly appointed franchisee. And you can pat yourself on the back. You are providing employment. See how the benefits are already piling up?
SAB Miller, the highly innovative South African brewer, innovated and came up with an owner driver model that has been very successful. 65% of SAB’s deliveries in South Africa are through this program. At at some point you can consider applying this model as your business grows. It would be a great way to empower the community and entrench your brands in this channel.
4. Give Your First Orders on Consignment Basis
If the product sells, your new franchisee will know that they will be able to make money from it repeatedly. Make the first consignment work and you have your new partners. If the product sells any retailer will be happy to carry it. If the product sells any “tuck shop”/ independent grocer/neighborhood grover will be happy to squeeze it into the small space that is available. If it sells, the new franchisee will make money, you will change their fortunes, their lives, and you will have created a customer that raves about you and your brand. A customer who is fiercely loyal.
When you make your first delivery, ensure you have a person running demos to demonstrate how well your product fares versus competition. Especially if the brand/type of product is new. Again because of the high unemployment rates of most BoP/low income communities, you have a chance to make a difference yet again. And you will not need to pay an arm and a leg. It just has to be reasonable. Give away samples.
When I did this I was launching a diaper brand. If a mother walked out of the shop with a pack of diapers, we would ask what size it was and we gave her a single diaper to go and try. If your product is better and your price lower, they will return the following day, but this time to buy. If she walks out of the shop and she was holding a baby, we would ask for the diaper size and give the mother a sample. In both scenarios, you know you are giving product to 100% users. In return for the free samples, they just have to leave their cell phone numbers in your book. The book also helps to account for the sampling stock. You are already creating a data base of users in the area. And you also already have a sampling stock control system. The next time you run a promotion, you can send bulk SMSs to this 100% targeted audience. And I discovered there is a way that you can buy bulk SMSs for these sort of promos, through smartphones and apps.
5. Get Started and Learn
Have about four or five franchisees to pilot the program. Learn from them. Have regular feedback meetings to understand their challenges. Work with them to come up with solutions. Spend time at the outlets, talk to the customers. Engage the customers. Spend time at the outlets, talk to the customers. Listen. Learn. Iron out the challenges that your new franchisees are facing and you are already getting your education in BoP Micro Franchising 101. After a few months/years, armed with all the lessons from the BoP, you are ready to roll. The franchisees can pay back the cost of the container over time, but then you may want to own the container so that you still have a hold of some sort. There are a lot of options with this one.
Conclusion
As a parting note, I want to revisit the point of used shipping containers. I like them because they have the following advantages:
Until next time…keep learning. Keep an open mind.
Diapers are some of the items that consumers with babies require and use daily. Therefore they make a good portion of the fast moving consumer goods portfolio. For that reason I believe that it is possible to have a micro-franchising model that focuses on hygiene products: baby diapers, sanitary pads, baby wipes, adult diapers and panty liners. In my mind, these categories are actually arranged by the size of the opportunity in Africa. I have a very good understanding of what the BoP customer looks for in all of these categories. For my colleagues who are part of the Disposable Diaper Network (DDN), we have had robust discussions around these categories.
The following are the five steps to setting up a Micro Franchising model for your hygiene range in the low income channels.
1. Use Your Shipping Line to Access Used Shipping Containers
If you are part of a multinational, this part becomes very easy for you.
As a part of a multinational, talk to your global procurement team to establish which shipping line is the preferred partner for the group. Find out how much volume you do with them per month/year on a global level. Use those numbers to negotiate good prices for used containers.
If you are battling to get an audience, use your influencing skills to escalate the discussion, either to a regional/global level. In other words, use “bigger guns.” Use the price at which you will get the containers to start working out your costs for the micro franchising model.
2. Talk to the “Chamber of Commerce” in the BoP /Low Income Community
I deliberately write “Chamber of Commerce” in quotes. That is because, in case you didn’t get the memo, the meeting has moved from the glass tower on the 5th floor to the open space next to the informal retail shop or “tuck shop” or spaza shop (as it is called in South Africa). And no, there are no boardroom chairs. You will probably sit on bricks or empty crates. But you will discuss business. Real business. This is BoP my friend. This is not business as usual. Call it business unusual. There are no formalities here. There is an informal “Chamber of Commerce” in every BoP community on the globe.
I have not been to the favelas of South America or the low income areas of Mumbai, but I can assure you now, as sure as today is Wednesday, that there is a “Chamber of Commerce” in these areas. Drop me there for a week, give me a budget to socialize and I will find it. I will find the “Chairman,” “MD” and “COO” of this “Chamber of Commerce” in hiding.
The people who own businesses in these communities have a loosely (and sometimes closely) arranged business community. People hang out with like-minded souls. That is what is also happening here. These business people have the same interests so they meet often. It is the closest to the Chamber of Commerce as things get in the Bottom of the Pyramid. They are actually very helpful. And guess what…they want business to work. It is in their best interest. These are people who have learned to get on with things, when systems are not in place.
True to the indomitable nature of the human spirit, these are business people who organize their own “Chamber of Commerce at the Bottom of the Pyramid” in order to get business done, in the absence of formal systems. Big businesses are probably ignoring them so they do it their way. This lesson is from Diepsloot, Johannesburg. I was attempting to launch a diaper brand for a global diaper manufacturer. The project never saw the light of day…but I kept the lessons
I want to go as far as to say, as a business, it may be in your best interest to actually help this group to get a voice. Help them to get organized. But that is a discussion for another day.
The “Chamber of Commerce” will know the young men and women who have what it takes to be your new business partners. They know the people with the entrepreneurial flair that can be trained to start a business. They know the people with a burning passion for business, but who have no access to capital to do it. Use them. Such people are your new franchisees.
It may even turn out that this very circle is ready to expand into new areas that may include your business. They may even have the capital and ideas because they are already in business. Find these people, train them and make them your new team of franchisees.
3. Use the Idle Capacity in the BoP Community
You may not believe the amount of trucks and “lorry-type” vehicles in any BoP community. I am battling to find the right term because I know they are called different names in different parts of the world but I want everyone to get my point. In South Africa we call it a “bakkie,” in Zimbabwe we call it “pick-up.” They may be big and some small. And small may just be what you need because the “pick ups” (no pun intended) and drops may be fairly small. And BoP communities are practical. There are quite a number of people who know that this is a type of vehicle that can carry the family as well make them money every now and then.
At the end of the month there is always someone moving house in the BoP community and that is when these trucks get busiest…just like in any other community. Now why do we forget that? For this lesson, back to Diepsloot, Johannesburg. I learned that the costs per km of formal transport companies are way higher than the ones charged by the informal “truckers.”And if the owner/driver is assured of regular business, he will be prepared to bring down the cost for moving your product and dropping it off at your newly appointed franchisee. And you can pat yourself on the back. You are providing employment. See how the benefits are already piling up?
SAB Miller, the highly innovative South African brewer, innovated and came up with an owner driver model that has been very successful. 65% of SAB’s deliveries in South Africa are through this program. At at some point you can consider applying this model as your business grows. It would be a great way to empower the community and entrench your brands in this channel.
4. Give Your First Orders on Consignment Basis
If the product sells, your new franchisee will know that they will be able to make money from it repeatedly. Make the first consignment work and you have your new partners. If the product sells any retailer will be happy to carry it. If the product sells any “tuck shop”/ independent grocer/neighborhood grover will be happy to squeeze it into the small space that is available. If it sells, the new franchisee will make money, you will change their fortunes, their lives, and you will have created a customer that raves about you and your brand. A customer who is fiercely loyal.
When you make your first delivery, ensure you have a person running demos to demonstrate how well your product fares versus competition. Especially if the brand/type of product is new. Again because of the high unemployment rates of most BoP/low income communities, you have a chance to make a difference yet again. And you will not need to pay an arm and a leg. It just has to be reasonable. Give away samples.
When I did this I was launching a diaper brand. If a mother walked out of the shop with a pack of diapers, we would ask what size it was and we gave her a single diaper to go and try. If your product is better and your price lower, they will return the following day, but this time to buy. If she walks out of the shop and she was holding a baby, we would ask for the diaper size and give the mother a sample. In both scenarios, you know you are giving product to 100% users. In return for the free samples, they just have to leave their cell phone numbers in your book. The book also helps to account for the sampling stock. You are already creating a data base of users in the area. And you also already have a sampling stock control system. The next time you run a promotion, you can send bulk SMSs to this 100% targeted audience. And I discovered there is a way that you can buy bulk SMSs for these sort of promos, through smartphones and apps.
5. Get Started and Learn
Have about four or five franchisees to pilot the program. Learn from them. Have regular feedback meetings to understand their challenges. Work with them to come up with solutions. Spend time at the outlets, talk to the customers. Engage the customers. Spend time at the outlets, talk to the customers. Listen. Learn. Iron out the challenges that your new franchisees are facing and you are already getting your education in BoP Micro Franchising 101. After a few months/years, armed with all the lessons from the BoP, you are ready to roll. The franchisees can pay back the cost of the container over time, but then you may want to own the container so that you still have a hold of some sort. There are a lot of options with this one.
Conclusion
As a parting note, I want to revisit the point of used shipping containers. I like them because they have the following advantages:
- They are movable. If the setting is not right you can move it.
- It can be branded. You have two big sides and smaller sides to use as billboards and brand as you wish.
- They are strong, durable, spacious and almost tamper proof. It would be difficult to cut into a container without using electrical equipment and that cannot be done easily or silently.
- If you need to establish a mini warehouse in the Bottom of the Pyramid, you can use a 40ft HQ container. It’s bigger.
Until next time…keep learning. Keep an open mind.
