Wednesday, March 30, 2011

the basics

I recently presented on my research at the Fulbright conference in Goa. It was a great opportunity to digest my research and relate my findings as of yet, and it inspired me to return to some of the basics I initially covered on my blog.

I've drawn from two key reports to shape the framework through which I am evaluating companies' distribution strategies. I’ve already mentioned the Lighting Africa report, which describes different distribution models for solar portable lighting products in Africa. Earlier this week the Centre for Development Finance (CDF), a Chennai-based research think tank affiliated with the Institute for Financial and Management Research, released a new report on distribution challenges for India’s rural Base of the Pyramid population. It’s a very digestible report and definitely worth a read, and it does a great job of mapping out distribution models in India's solar lighting market.

As I have already discussed, I am focusing on two of the three key pillars (accessibility + liquidity + affordability) of solar lighting delivery, as described by Mayank Sehksaria of Greenlight Planet. In its report CDF describes a more specific set of components that are critical to product distribution in the rural BOP market. Four key components from CDF's list fit neatly into Mayank's framework:

I’ll begin by narrowing in on the “accessibility” pillar first. Both Lighting Africa and CDF describe general channels through which an organization can promote, sell, and deliver its solar lighting products to rural BOP consumers. Rather than recreate the wheel, I’ll borrow from these two reports to categorize the three main distribution models employed by India's solar portable lighting entrepreneurs.

Distributor – retail channels: A company sells its solar products through traditional distributor-retail channels through which most normal “fast moving consumer goods”* (i.e. soap, toothpaste, etc.) are channeled.

Proprietary distribution: A company has its own salaried or commissioned sales force that promotes its products and facilitates distribution from stock rooms or warehouses.

Institutional partnerships: A company partners with another entity to promote, sell, and even deliver its products. Such partners can include:

  • NGOs (and affiliated self help groups)
  • Cooperatives
  • Microfinance Institutions (both for- and non-profit)
  • Distribution companies
  • Other rural-focused companies
  • Rural banks

While some companies are focusing their strategies on specific channels, most are trying out a little bit of each. I’ve mapped some of the companies I’m looking at to the different models they are implementing:

Some of these distribution channels also play a role in the “liquidity” component of the delivery model. For example, microfinance institutions (MFIs) can help with both the promotion and distribution of products as well as consumer financing. Self help groups (SHGs) are another useful channel for both product promotion/distribution and financing; companies can partner with an NGO to gain access to its SHG networks, and in turn train an SHG member to promote and sell its products. Ideally, when members are convinced to buy the product, they have a ready loan facility through the SHG to purchase the product. Rural banks can also serve as distribution and financing channels.

*According to Wikipedia, FMCG are “products that are sold quickly and at relatively low cost. Examples include non-durable goods such as soft drinks, toiletries, and grocery items.”

1 comment:

  1. Dear Emily,

    Congratulations on your awesome research. I am very impressed with the depth that you have gone to write about rural lighting.

    We are also a Company that you may be interested in, once we are able to publicly talk about some of the work we are doing for the same segment.

    We are focusing more on the sustainability of the underlying technology for BOP households. I totally dig the work you have done and would love to get your feedback on our initiatives.

    Ramana Gogula
    CEO, Earthen Glow