Models for Last-mile Distribution

© 2011 Intellecap. All rights reserved

www.intellecap.com

September 2011

Strategy for last-mile distribution channel Product Type High Involvement

Low Involvement

• Product is high value, impacts household income; consumers are aware of product usage

product usage • Corporate looking for a complementary

• Limited competency in BoP retail distribution

distribution channel

• Limited investment budget

• Limited investment budget

• Emphasis on low transaction cost

• Products distributed are common and commodity

• Example: Villgro Stores

• Example: Sakhi Retail Private Limited

• Product is high value; impacts household income;

• Product is low value • Intimacy with customer is desired

substantial awareness building required

High

Channel Control

Low

• Lower time to market

• Product is low value; consumers are aware of

• Channel integrates into core business and support all other business lines

• Target is expansion into new market segments; complementing existing channel

• Intimacy with customer is a key desire

• Emphasis on nurturing entrepreneurial activity in

• Substantial investment budget

the BoP

• Example: MCX Gramin Suvidha Kendra

• Example: HUL Shakti

Financing Support Regulatory/Policy Support BoP – Base of the Pyramid © 2011 Intellecap. All rights reserved

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HUL’s Shakti Amma model Model Operations Facilitation

HUL Rural Sales Person (RSP) Interest income

Self-Help Group / Banks

Revenues

Revenues Delivery

Hindustan Unilever

Distribution

Shakti Amma (Mother) Finance Revenues

Sales and Distribution of FMCG products (7% - 10% margin)

End Consumer/ Small Retailers Consumer finance

Business Model

Product Offering



Initially offered personal care products; soaps, detergents and food products added to the product portfolio in 2003



Offers 5% – 10% discounts to end consumers/ small retailers on purchase of bouquet of products



Currently, HUL is diversifying from FMCG goods to other products/ services such as mopeds (TVS Motor) and insurance policies

Distribution and Marketing Strategy



SA is responsible for sales and distribution of HUL products to the end consumer/ small retailers



HUL appoints a Rural Sales Person (RSP) at each district; RSP is responsible for warehousing and distribution; SA procures products from the RSP



HUL has employed a dedicated pool of staff known as “communicators” or “The Shakti Pracharanis” for marketing and awareness building; © 2011 Intellecap. All rights reserved

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Sakhi Retail Private Limited (SRPL) Model Operations Revenues

Facilitation

SRPL

Sakhi Samuday Kosh (MFI)/ SHG

Interest income

Revenues

Warehousing Distribution

Deliver the product

Manufacturers/ Suppliers

Sakhis Finance Revenues

Interest income

Sales and Distribution of White goods

End Consumer Consumer finance

Business Model 

SRPL through the network of women distributors known as Sakhis markets white goods such as Oorja stoves, Chotukool fridge, solar lanterns, solar water heaters, water purifiers and biomass fuel pellets

Product Offering



Clients of SRPL include First Energy, Honeywell, Villgro, Tata Sky, Godrej and Boyce, BP energy and HUL



SRPL offers products are targeted at base of pyramid markets; currently diversifying in low cost health insurance service

Distribution and Marketing Strategy



Each SRPL unit procures products from different partners at the wholesale price



SRPL stores the products at its warehouse, and these products are further distributed to the Sakhis



The transportation cost of the products from the warehouse to the village of Sakhi is borne by SRPL



Each Sakhi is responsible for the sales and distribution of these products to the end consumer



Marketing initiatives of SRPL include village fairs, roadside demonstrations and last-mile distribution using mobile vans © 2011 Intellecap. All rights reserved

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Villgro Stores Model Operations

Ecosystem Revenues

Villgro’s Stores Revenues Interest income

Warehousing, Distribution, Consumer finance

Manufacturers/ Suppliers

Deliver the product

Village Level Entrepreneur (VLE) Revenues Interest income

Sales and Distribution Consumer finance

End Consumer

Business Model 

The Villgro stores markets agriculture and household products such as fertilizers and pesticides, seeds and planting material, cattle feed, venus burners and orja stoves

Product Offering



Villgro stores are also used as practical testing platform for products at incubation stage – ideal for early stage enterprise



The product is transferred from the company warehouse to the Villgro store, which is the retail division of Villgro in small towns

Distribution and Marketing Strategy



The Villgro store is used as a warehouse and functions as a hub to distribute product to VLEs in the nearby villages



Each Villgro store manages 5 VLEs and approximately 20 villages in an area (4 villages per VLE)



VLEs are street-on-fleet responsible for retailing products Villgro stores to the consumers © 2011 Intellecap. All rights reserved

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