Frontier Markets Blog

Saral Jeevan Branch Opening!

2011-08-22T15:21:00.008-04:00

After 6 months of operations in Rajasthan, Frontier Markets has supported our retail partner, Saral Jeevan to open their first retail store as a part of Frontier Market’s channel in Chomu Rajasthan. This retail point will be a concept store providing sales and service for local consumers in and around the Chomu area. Frontier Markets is an exclusive partner to Saral Jeevan, or “Easy Life,” an Indian branded retail channel created to better relate to low-income households in rural areas near Chomu. After months of understanding villages, and areas, Frontier Markets helped Saral Jeevan build market presence and chose Chomu as a central location for a retail point to ensure accessibility and accountability in service for households.

The store is located in the heart of Chomu's main market area, bringing over half a million consumers to the market every week. This is a central hub for all farmers, villagers, women, and families located in Jaipur, Renawal, and Chomu areas.

Located on Heera Bhawan, Thana Mod – 1^st Floor, the store and our posters attracted all crowds.

Frontier Markets and Saral Jeevan staff celebrate together awaiting customers and well wishers to support us.

We inaugurated the event with local women leaders who are working with us to create educational meetings in villages. These Sector Leaders are in charge of over 15-20 villages each, covering 5,000-10,000 households. We invited these women to our branch opening who brought their anganwadi workers, or child care leaders to see our clean energy products and join Saral Jeevan and Frontier Market's mission to light rural villages in Chomu.

For more photos, please visit: Saral Jeevan Branch Opening_Chomu Rajasthan - http://bit.ly/qinTrR

Frontier Markets Response to the Microfinance Crisis in India

2010-11-21T15:13:00.003-05:00

Dear Readers,

Many of you have asked me whether Frontier Markets (FM) is affected by the latest backlash against Microfinance in India, particularly in AP. We are all quite disappointed with many responses and allegations again microfinance institutions (MFIs) today. However, we would like to ensure you that we are NOT directly affected nor responsible for this.

FM has been paying careful attention to the crisis and have always gauged our MFI partner’s ability to prioritize both financial AND social performance. We have not and will not work with "super commercial and aggressive" microfinance institutions that either do not have control over their field activities, or do not prioritize responsible financing by assessing their member's ability to afford/handle loans.

Many articles have compared Microfinance in India to the sub-prime mortgage crisis in America, and this is simply not true. The problem with these articles is that they make ALL microfinance institutions look bad and make it seem like microfinance will suddenly end in India which is NOT true at all.

I am still a believer of microfinance and know that it is in fact improving low-come households' lives. The government will start paying more attention to microfinance institution's activities in the field and will force many aggressive microfinance institutions to instill social performance metrics to ensure their activities on the ground are not motivated by sales and growth, but rather service and impact. This will become a positive change in microfinance in India.

I learned a lot from working at with MFIs in India these last few years. As the director of SKS’s non-profit arm, I was able to learn about these metrics, the tools to measure them, and how to balance social and financial performance.

We are taking these tools and implementing them at Frontier Markets - it is a guided principle for us. Our field staff are not just measured by sales and targets, but rather, household satisfaction and interaction. There are incentives for positive feedbacks and we will check how many times a field staff decides not to sell a stove to woman because she does not have the capacity to handle a loan – it is important for us to motivate our field staff to act responsibly and not through greed.

At the end of the day, there are way too many people who NEED loans to advance their businesses, and the government or public/private banking just do not have the capacity to meet those needs, India NEEDS microfinance institutions to cover those gaps. We just need to be more responsible in the field, and there are microfinance institutions who currently act responsibly in their areas. And Frontier Markets will partner with those MFIs and continue to practice its own principles on the ground.

Thank you,

Ajaita Shah

(Founder/CEO of Frontier Markets)

Day 1: Entrepreneurs in the BOP

2010-08-18T11:03:00.002-04:00

The focus of Day 1's discussion was on the role of the entrepreneur in the development of business opportunities in low income communities. Although it is often said that those living in poverty need to be entrepreneurial in order to survive the grueling day-to-day realities of life, in reality many would prefer to have the stability of permanent employment. Therefore, although they may need to be entrepreneurial to survive this does not mean that they have the skills necessary to work with a company over a long period of time to launch a business.

How do companies and organizations looking to launch businesses in low-income communities identify entrepreneurs? What are the skills of a true entrepreneur? How do you engage them?

Frontier Market's Contribution:

My reasoning comes from the last 5 years of working with BOP women in India via Microfinance and my own company, Frontier Markets. I agree with both your points - it is not about whether entrepreneurs exist in the BOP but its identifying the right entrepreneur.
In response to entrepreneurs vs. salaried jobs: In India, there is a larger appeal to have service oriented jobs instead of being an entrepreneur. People prefer working on a farm, in a factory, as a construction worker, etc because its steady income vs. haphazard.
Creating Entrepreneurs in the BOP: Unilever or HUL and other companies will argue that creating an entrepreneur amongst women in villages is not only optimal but responsible (they have done so in their Shakti Model in India selling sache shampoos and numerous Unilever products in rural India) - this is simply not true. There is a huge opportunity cost and risk - if women cannot find people to sell products to, they LOSE their hard earned investment capital, it is a HUGE risk. If women do not know how to market, identify target consumers, and sell products regularly, they are going to take a huge loss by becoming an entrepreneur. There are clear skill sets required to be an entrepreneur and not everyone has it, nor can they be trained. HUL-type models and thinking is in fact dangerous in the BOP...
The Right Entrepreneur: The self-created entrepreneurs can become bigger entrepreneurs - these are the shop keepers, the vegetable vendors, the chai-wallas, the small restaurant owners... they reacted to a market opportunity and built a business. If we show them another opportunity, they would be willing to expand their businesses and take that risk - they have capital to expend, they have an entrepreneurial drive... it is important for us to identify them and guide them... we learned this through microfinance loans... we have seen entrepreneurs grow significantly through business loans - usually used to expand businesses, not create them. Women who herd cows and sell their milk, take a loan to buy another cow to diversify her products to sell milk and now butter. Retailers take a business loan to increase their inventory or try a new set of products because they responded to demand. Tailors take loans to buy a sewing machine to produce more clothing at a faster pace. And the list goes on and on....
At Frontier Markets, we focus on helping these types of entrepreneurs by offering them assistance with market linkages, building demand on the ground for their products, linking them to financial institutions, giving them financial literacy, and building their capacity.

Here is the overall summary:

Posted by Monica_Touesnard

See the original post here microlinks.kdid.org/speakers-corner-39-missing-links-business-development-base-pyramid-bop-communities/day-1-summary

Today’s conversation began with the premise that although many people living in poverty must be entrepreneurial in order to survive, in reality they would prefer to have stable employment. The discussion started by making a distinction between a person who is entrepreneurial versus an entrepreneur. There are numerous reasons why people who are entrepreneurial would not want to have permanent, stable employment, for example they may want a flexible work schedule or they prefer not having to report to a supervisor or they perceive that there is less pressure when self-employed. Thus, this type of “self-employment” may be a choice for some, although it does not mean that they are an entrepreneur in the tradition sense.

Those who are self-employed by choice are distinct from those we would consider traditional entrepreneurs – those who are trying to launch new businesses. Therefore, as a business trying to engage with local entrepreneurs, it is necessary to think about the type of entrepreneur you are seeking and their skill set in addition to understanding the context in which they live, work, and conduct business. However, working as an entrepreneur for a large company or multinational, is not without cost or risk. They could potentially lose everything - possessions, status, land, etc. if something goes wrong with their business. It was noted that in many instances entrepreneurs will have multiple income generating activities in order to mitigate risk and ensure a source of income.

Entrepreneurs have a distinct skill set and not everyone has those capabilities. Although someone may be resourceful and entrepreneurial you cannot necessarily train them to become an entrepreneur. It may be that self-created entrepreneurs such as shop keepers, vegetable vendors, small restaurant owners, etc. may be more willing to take risk and an ideal business partner to launch new businesses. Creating the appropriate enabling environment by providing access to markets, credit, and information, is key to ensuring their success.

While participants can continue to build on today’s discussion threads, in my next posting I will launch our next topic.

Monica Touesnard
Associate Director
Center for Sustainable Global Enterprise
The Johnson School at Cornell University

Missing Links - Business Development in the BOP

2010-08-18T11:00:00.002-04:00

Frontier Markets has been participating in a 3-Day discussion with colleagues of Entrepreneurs, B2B services, and general business development in BOP Communities.

Here is the overall theme of Microlinks discussion on Missing Links – Business Development – BOP Communities

Posted by Monica_Touesnard

See the original post here microlinks.kdid.org/speakers-corner-39-missing-links-business-development-base-pyramid-bop-communities/welcome-bop-discu

Welcome to the online discussion titled, “Missing Links of Business Development in Base of the Pyramid (BoP) Communities.” The Center for Sustainable Global Enterprise at Cornell University believes that the private sector has a critical role to play in helping solve the world’s most pressing social problems. How it will manifest itself at the base of the pyramid is still unclear.

As the world’s population continues to grow it magnifies the environmental and social constraints of our global system. Despite technological advances, environmental problems and the number of people living in the base of the economic pyramid are increasing. Multilateral and non-profit organizations are traditionally viewed as the entities best suited to respond to and address these problems. Recently, however, companies are beginning to realize that there is an opportunity to create new business enterprises while simultaneously trying to solve these environmental and humanitarian problems. As a result, companies are experimenting with new business models in low-income communities using both old and new technologies with limited success. In addition, locally-embedded entrepreneurs are also trying to respond to local needs through new business ventures. However, it is yet to be determined who will have more success and ultimately what factors will determine successful execution.

We hope that our conversation over the next three days will explore some angles of business development at the BoP whose importance is often overlooked – the role of the entrepreneur (Day1); business to business (B2B) opportunities (Day 2); and the role of youth (Day 3). Through your contribution to the dialogue we hope that all participants will gain new insight into the issues discussed. Therefore we invite you to join us each day to share your ideas and knowledge in the discussion forum.

Monica Touesnard

Associate Director

Center for Sustainable Global Enterprise

The Johnson School at Cornell University

I will be posting the summaries of discussions on our blog for everyone to follow.

Walmart vs. Kirana Shops

2010-07-31T01:06:00.003-04:00

VS.

In a recent article published in DNA Money: http://www.dnaindia.com/money/interview_it-is-not-easy-to-compete-with-kirana-stores-rajiv-lal_1416054

There were comparisons made between the strengths of Walmart and the strengths of the Kirana Shop. While Walmart might take over large consumer bases with its bulk and cheap prices, Kirana Shops have service and relationships that Walmart will be able to compete with...

General Description:

1. Purchases product on ad-hoc basis from wholesaler at haats (varied)

2. No sales reporting, no stock tracking, no regular purchase schedule

3. Gets avg. 10% margin on FMCG

Challenges

1. Inability to manage products or set a clear purchase pattern

2. Cannot manage funds , lack of financial planning

3. Too dependent on outside demand - do not attempt to create demand for products

Frontier Markets believes that Kirana Shops are the BEST suppliers for local households because there is a trust factor, convenient location, and these shops service households in various ways.

Through our model, Frontier Markets will build a network of retailers that are not only providing similar services and maintaining relationships, but they will be providing demanded products with high quality backing.

We will be building their capacity in the following ways:

1. Bring them into a network of preferred retailers

2. Build capacity for marketing and sales reporting

3. Provide consistent demand for products from FM field staff activities with BOP
consumers

4. Tie retailer to consumer, wholesaler and MNC company

Added Value

1. Better Sales Performance: Increased sales from consistent, aggregated consumer base and consistent demand

2. Better Margins: Gets better margins from FM wholesaler

3. Competitive Advantages: Marketing and sales knowledge is a
competitive advantage to other shops

4. Performance Rewards: High performers are rewarded directly
from the MNC

Microfinance Institutions Stepping into the Non-FInancial Game

2010-07-11T00:20:00.002-04:00

In the past few days, Frontier Markets has been examining a few MFIs that are beginning to think about ways to support this new demand for consumer durables and other non-financial needs for low income households. Many have started creating their own non-financial business development team focusing on healthcare, education and energy. Others have begun using their non-profit arm to vet proposals before starting pilots on the ground.... all sounds great, right?

EVERYONE love a PILOT, and EVERYONE works to make sure a PILOT is successful... but what about Scale?!!!

Here are some of the challenges FM forsees for SCALABILITY...

• Staff, Staff, Staff!: right now, neither the MFI nor the “Product Company” have sufficient resources to continue educating, marketing and monitoring products to MFI members. In a pilot, there are a few company reps that work with the MFI field staff to provide such services, but this is NOT SCALABLE. The sheer costs to involve a MFI field staff for any of the aforementioned services is just too high. A product company needs to invest in that resource, but for one product, again, too high of a cost!

• Casual Sales to Meeting Targets: during pilots, we are all gauging whether a product will sell, so targets are NOT the focus. However, once we’re at scale, suddenly it is about targets, margins, and field staff incentives. Marketing and education become sales goals – it is difficult for an MFI to balance company expectations and their own loan portfolio.

• Diversified Loan Portfolios: MFIs have JUST started thinking about consumer financing… they do NOT have energy, healthcare, or consumption loan products at the moment. The question is, is it worth processing a rs. 800-2000/- loan? Most MFIs argue the cost implication – its just too high to begin creating separate loans…

Long Term Solutions:

• Building an independent non-financial staff to educate, market and monitor products and services to MFI members: having separate field staff is really the only solution to maintain quality of interaction and understanding of products. This field force will become the point of contact for all members, providing them with assistance and support on products.

• Creating realistic targets at a pace where loans can be processed and determined by the member’s capacity to purchase: the MFI has a responsibility to gauge movement of products and sales cycles. It is unrealistic to assume that a large MFI’s member base will definitely purchase every product introduced in this setting. Targets should reflect demand assessments.

• Creating energy, healthcare, product portfolios and providing a line of credit: if MFIs can understand the range of products that are in demand in each sector, they can determine a maximum loan size that can be reformed for specific products. A women can use that line of credit to purchase 4-5 consumer durables in 4 to 5 years…

From Bombay to Delhi

2010-07-02T13:43:00.004-04:00

Frontier Markets has been interacting with interesting social enterprises, MNCs, and social investors in Bombay. We are now preparing for our next city, Delhi where we will meet with MFI networks as well.

In Bombay:

Yes Bank
IAN Network
Greenlight Planet
Unilever
Seed Fund
Intellecap
Aavishkar

We will clarify our relationships soon enough... be ready for a grand presentation early August.

Greenlight Planet

2010-06-26T07:47:00.003-04:00

Frontier Markets recently met with Greenlight Planet's team in Mumbai, India.

Greenlight Planet is an interesting company focusing on seling low-cost solar power lamps in rural India. Their main product, the Sun King Light, ranges to about rs. 850 or $19.00 per light.

The product has won a few awards and the model for delivering lights to villages is quite promising. Greenlight is currenly operating in 3 states: Orissa, Bihar, and Karnataka.

There are many synergies between Greenlight and FM. Stay tuned for updates on them.

For more info on Greenlight Planet, please visit: www.greenlightplanet.com

Latest Updates from Frontier Markets!

2010-06-26T07:29:00.000-04:00

Dear Friends and Well Wishers,

It gives us great joy to share with you the big news... FM has secured investors for its first round of funding. We are now ready to begin our Discovery Phase with a new MFI partner, and product companies.

We are also welcoming our new advisor, Nicola Armacost, co-founder and managing director of Arc Finance to the FM team.

Frontier is adapting its model for consumer durables - focusing on energy products like solar power lamps, smokeless stoves, low cost coolers, and other products that help generate income, savings, or livelihood skills for low income households.

Additionally, FM will continue identifying strategic partners focusing on low cost, FMCG products for low income households as well.

Please continue following us as we spend the next month meeting social enterprises, product companies, and MFIs - evaluating their products and determining the final combo of partners for Fall 2010.

Thank you,

Frontier Markets Team

P&G and Global Expansion

2009-12-12T11:30:00.000-05:00

href="http://www.nytimes.com/2009/12/12/business/global/12procter.html?emc=eta1">

In reference to this article, we are curious to hear your thoughts. P&G, like many other MNCs are entering global markets aggressively - specifically in India, wanting to further penetrate markets in rural India... however, while many MNCs find market opportunities, they have yet to really understand the end consumer... namely rural households ... when MNCs are willing to invest a substantial amount to research, relate and market to this segment, they will be able to make larger impacts in this market.

Frontier Markets Featured in MF Insights

2009-11-27T08:47:00.000-05:00

Frontier Markets Founder/CEO, Ajaita Shah, has written an article about innovations in marketing which was featured in the Microfinance Insights Magazine's 15th issue in November.

Please see the attached link to read the article.

/FM%20Article.pdf

Please visit Microfinance Insights at

ThinkChange India Post...

2009-11-27T08:32:00.000-05:00

Ajaita Shah is the Founder of Frontier Markets. She has 4 years of microfinance experience as a Credit Plus Manager at Ujjivan Financial Services, and Director for Swayam Krishi Sangam (SKS). She has consulted with the Social Performance Task Force through CGAP and Ford Foundation about microfinance in South Asia. Ajaita holds her B.A. in International Relations from Tufts University.

The Bottom of the Pyramid (BOP) is a demand heavy and relatively accessible market growing at a steady rate every year. However, there are some major challenges to fully penetrate this market: low infrastructure and accessibility for product distribution, insufficient understanding of the rural consumer, high upfront investments for staffing, and transportation, and high levels of illiteracy. Therefore, alternatives to traditional mass marketing strategies and tactics are necessary to open up rural markets and create consumer demand efficiently and effectively. Frontier Markets is creating the most sustainable and cost-effective model for base-of-the-pyramid market entry through its affiliation with Microfinance Institutions.

Ajaita Shah is the Founder of Frontier Markets. She has 4 years of microfinance experience as a Credit Plus Manager at Ujjivan Financial Services, and Director for Swayam Krishi Sangam (SKS). She has consulted with the Social Performance Task Force through CGAP and Ford Foundation about microfinance in South Asia. Ajaita holds her B.A. in International Relations from Tufts University.

The Bottom of the Pyramid (BOP) is a demand heavy and relatively accessible market growing at a steady rate every year. However, there are some major challenges to fully penetrate this market: low infrastructure and accessibility for product distribution, insufficient understanding of the rural consumer, high upfront investments for staffing, and transportation, and high levels of illiteracy. Therefore, alternatives to traditional mass marketing strategies and tactics are necessary to open up rural markets and create consumer demand efficiently and effectively. Frontier Markets is creating the most sustainable and cost-effective model for base-of-the-pyramid market entry through its affiliation with Microfinance Institutions.

Frontier Markets, a start-up founded by microfinance professionals, has studied the barriers to BOP market entry and will test an innovative approach to address these challenges. Our aim is to provide the “last mile connectivity” through a network of microfinance institutions without diluting their core lending business. We focus on non-financial health and hygiene, clean water and energy alternatives that will make the greatest impact on the lives of rural villagers. Customer insight certainly drives product selection but it is our understanding of the MFI dynamic that determines which products and services can be linked to the microfinance model successfully.

Frontier Markets emulates the MFIs in one key respect: the consumer is at the center of the equation. Our methodology is to gather insight from consumers; market to them directly; and, use our understanding of the BOP to inform MFIs and manufacturers of emerging opportunities and persistent risks that may thwart their plans for market penetration. We shift the initial conversation from product promotion to a deeper understanding of women’s needs and “shared human aspirations — for safety, for dignity, for a better life for one’s children.”1 Our “high touch,” below-the-line marketing strategy encompasses two critical steps: (1) educating consumers about health, hygiene, clean water and energy alternatives; and, (2) retailer capacity building to maintain product availability and quality assurance.

In October 2009, Frontier Markets completed a small scale pilot to market health and hygiene products to BOP households with Ujjivan Financial Services in Northern Karnataka. The pilot was successful, proving that P2P marketing encourages BOP women to consider healthy alternatives.

During the pilot, Frontier Markets trained local field staff to reach out to consumers at multiple touch points in peri-urban and rural areas. FM field staff placed Proctor & Gamble and Ranbaxy products directly with MFI “preferred retailers.” During this intervention, the Frontier Markets team provided basic product and financial literacy training for retailers. Finally, the FM team validated whether the products and services introduced were meeting the expectations of consumers, in terms of utility, value and quality.

Additionally, Frontier Markets developed reporting tools with MNC clients in mind, to ensure that we captured meaningful data to inform future product development, pricing, marketing and distribution strategies. While in Karnataka, our field staff and Project Managers continually sharpened the focus of marketing messages; improved operational processes; and, verified the accuracy and meaningfulness of daily reporting.

Here are the results of the pilot:

Reached 734 MFI members + 56 non-MFI members in 43 center meetings.

Placed product in 25 kirana shops.

Achieved a 13% conversion rate (one time sales) among 778 members for Whisper Sanitary Napkins.

Achieved a 23% conversion rate (one time sales) among 778 members for Volini Gel.

Conducted 40 product feedback surveys at center meetings.
80% of women respondents liked Whisper napkins.
76% of women respondents said they will use Whisper napkins in the future.
80% of women respondents liked Volini Gel.
76% of women respondents said they will use Volini Gel in the future.

Conducted 43 1:1 customer insight surveys.

Conducted 25 retailer surveys.
68% of retailers were willing to re-stock Whisper.
76% of retailers think it is a useful product for consumers.
80% of retailers were willing to re-stock Volini.
76% of retailers think it is a useful product for consumers.

The pilot proved that the model of peer-to-peer marketing works. FM’s Peer-to-Peer strategy focused on a ground up approach instead of top down marketing push. Using dynamic field staff to engage women directly, they became actively involved in understanding the product and its relevance to their daily lives. FM will continue using Peer-to-Peer marketing and retailer network-building as an effective means of community engagement. Additionally, we provided an easy mechanism for retailer sales reporting. FM require a tracking system to ensure that kirana shops within our network will maintain their performance over time as we plan to launch other products through this same channel. We also asked these members to provide us feedback on our engagement. Women responded positively and appreciated our intention to educate them about health and hygiene and introduce products that provide an immediate benefit. One woman said, “I think it is such a great opportunity for us to learn. I did not know about any of these things before you came. You teach us, talk to us, and make us feel good. Please keep coming.”

Frontier Market’s goal for 2010 is to conduct one large pilot covering an entire MFI branch. We will most likely work with Grameen Koota on this pilot, which can lead to a full scale product launch throughout the state of Karnataka in 2011.

Our core mission is to benefit the Microfinance sector through innovation and service to its members. Frontier Markets educates and brings high quality, affordable products that address a real need for MFI members. We conduct community engagement and discourse which re-inscribes the spirit of belonging that MFI members enjoy. Through our activities in the field, we seek to reinforce the trust and burnish the MFI brand.

1 – Judith Warner, “Domestic Disturbances,” The New York Times, October 1, 2009

Frontier Markets Launches its new website!

2009-11-26T16:28:00.001-05:00

Dear All,

Please visit Frontier Markets' webpage for the latest information about our work, links to articles, information about our partners and clients.

http://www.frontiermkts.com

Frontier Markets Retail Network: Kirana Shops

2009-11-26T16:16:00.000-05:00

One of the biggest challenges of bringing products to the people is understanding the channel to reach the households. There have been tons of innovative approaches to bring products to the people in the past, we want to focus on the oldest channel - Kirana Shop.

alt="Kirana Shop that adopted FM marketed products" width="450" height="337" />[/caption]

Which Kirana Shop?

The Kirana Shop comes in various sizes - for our purpose, we will focus on the Kirana Shop providing products for the BOP. This Kirana Shop has an owner who is a local member of the peri-urban slum or rural village. Usually, a family business, husband and wife are working together at the Kirana Shop where they stock 10-30 products for local households.

What does the Kirana Shop Stock?

The products range from soaps, to sache shampoos, hair oil, agarbatti, beedis, cigarettes, matches, biscuits, washing powder soap, tea, sugar, to some fresh produce. They have been stocking similar products for as long as they started their business because they respond to their neighbors' demand, as well as assess their capacity to stock a product for a period of time.

The Kirana Shop Owner is not like your typical supplier or retailer. While they too believe in margins, and try to understand trends, they are always willing to try new products if they feel their neighborhood demands it. They know their consumers inside and out. They are also extremely risk averse because of their capacity to invest in new products. So the question is, how to break their aversion?

By showing them the demand potential...

By marketing to women in MFI centers, we are able to introduce them to products that they have not directly encountered. (Direct = in person, in their daily life, as compared to an advertisement on tv). If they like the product, they want the product... we introduce them to their retailers who will provide them with that product.

Frontier Markets' target was to approach 10-12 kirana shops to place products for MFI members to purchase. We placed at 25 kirana shops who were happy to try a new product in their store knowing the demand was apparent since MFI members approached their stores asking for specific products.

Kirana Shop - The Local Retailer

Kirana Shops are THE supplier of non-medical products for the semi-urban and rural bop. Their products are usually FMCG (Fast Moving Consumer Goods) based because they are affordable for their target consumers. The most expensive product is usually rs. 15-20 which is the colgate toothpaste, and least expensive is ps. 10 which is a sachet or candy.

Kirana Shops cater to all types of consumer:

Children: biscuits, candy, pens, notebooks

Women: shampoo, soap, powder, hair oil, agarbattis, some produce, masalas, tea leaves, cooking oil

Men: beedis, cigarettes, matches

Usually, they re-stock their products on a weekly basis; the method simply being visiting their local distributor with a list of products and collecting them. Their sales reporting and inventory management is usually a piece of paper with names of products. When asking them how they keep track of what products they need to refill, a typical response is "When it seems to be less, I go to the shop to get more." While this may seem to be an irresponsible way to inventory management, they are very well aware of which products need high volume storage, and which products can be kept in small bulks.

A kirana shop, or retailer's margin ranges from 10-12%. They are advised by the local distributor on price points - selling the products at the assigned MRP. The distibutor takes a 2-5% margin when selling products to retailers. Depending the product, and the company's preference, a retailer either pays upfront, or has 5-7 days to pay for their stock. This leeway allows for more movement of the product, and naturally, risk for the retailer. This is the number one reason a kirana shop owner does not like to try new products unless there is an obvious demand for that product.

This does not mean that Kirana Shops do not test new products. If there is a solid margin, and they have heard of the product, they will give it a try - as long as they do not have to pay upfront costs. (which usually means, a new type of soap, or hair dye - in line with FMCG products) Many local distributors recieve new products from their manufacturers who encourage trial sales before they order large volumes of product. If Kirana Shops are successful in selling the product, they will then place larger orders to stock.

KiranaShops also promote products for companies. For example, when Airtel penetrated rural India, many Kirana Shops kept Airtel boards in their shops. If they like the product, they are willing to promote and advertise on the company's behalf.

Kirana Shop Owners are trusted in their neighborhoods. Most households have their favorite kirana shop they visit. When asked why customers come to their shop, they usually answer, "I have been here the longest." or "I let people pay me back later." or "I carry the products that people want."

Results from the Chitradurga Pilot

2009-11-10T16:11:00.000-05:00

Frontier Markets (FM) conducted a 3-week pilot with Ujjivan Financial Services Pvt. Ltd (Ujjivan) in Chitradurga, Karnataka.

Pilot Overview

Frontier Markets introduced Whisper Choice Sanitary Napkins (at the MSRP of 28 Rs.) and Volini Gel (at the MSRP of 5 Rs.) to Ujjivan members in Chitradurga, Karnataka.

Targets

Reach 50% of 750 MFI members: communicate effectively about health and hygiene issues and introduce both products to peri-urban consumers.

Place products in 10-12 kirana shops·

Sales: convert 5% of those exposed to marketing into consumers of one or both products

Conduct 50 Product Feedback Surveys at Center Meetings

Conduct 50 1:1 Customer Insight Surveys

Conduct 12 Retailer Surveys

Results

Reached 734 MFI members + 56 non-MFI members in 43 Center Meetings

Placed product in 25 kirana shops

Conducted 40 Product Feedback Surveys at Center Meetings

Conducted 43 1:1 Customer Insight Surveys

Conducted 25 Retailer Surveys

Achieved a 23% conversion rate among 721 members for Volini Gel

Achieved an 11% conversion rate among 721 members for Whisper Sanitary Napkins

Analysis

We proved that the model of peer-to-peer marketing works in a limited pilot.

A microfinance partnership helped us access bop households efficiently and effectively, enabling us to engage consistently with the same potential consumer base for 3 weeks

Frontier Markets will build a vast network of Kirana Shops who will be vital to expanding the organized sector of supply chains

Year 1 may focus on more FMCG related products to ensure this 1:1 engagement and test the capacity of retailer networks

Complicated products like water purifiers, stoves, etc will require knowing the consumer base's behavioral patterns which FM collects through the current model.

About Frontier Markets

2009-09-26T14:58:00.000-04:00

Frontier Markets is creating the most sustainable and cost-effective model for base-of-the-pyramid market entry through its affiliation with Microfinance Institutions.

Founded by microfinance professionals, Frontier Markets’ mission is to develop and promote goods and services for the BOP. We focus on innovations in health and hygiene, clean water and energy alternatives that will make the greatest impact on the lives of peri-urban and rural women and children in India. Our core values reflect what is most important to us as an organization. These are not values that change over time; rather, they frame every relationship with clients, partners, rural consumers, investors and employees.

Frontier Markets is committed to:

promoting the health and well-being of BOP households through basic education
getting to know rural villagers and peri-urban households through a two-way interaction
satisfying rural and peri-urban consumers by offering a choice of quality products
aligning our goals with microfinance institutional partners to extend their reach
working with manufacturers that care about the environment
supporting professional development and excellence among our employees
creating wealth through profitability and growth
engaging in long-term relationships that bind our success to the success of our clients and partners
About the BOP landscape

Approximately 70% of India’s 1.1 billion population lives outside of major urban areas, in villages scattered throughout the country. In the last decade, government and philanthropic organizations as well as private and public companies have attempted to bring goods and services to the rural poor. Although there have been impressive success stories, some efforts have been thwarted because of a lack of infrastructure; regional and cultural differences; inappropriate product or pricing; and, lack of quality assurance.

Microfinance institutions (MFIs) have proven to be the only service providers able to reach the poor on a very large scale, catering to 20+ million households throughout India. Their in-depth research as well as ongoing, personal relationships with credit customers has yielded incomparable insight into the BOP. Frontier Markets has partnered with Tier 1 MFIs, to leverage their existing distribution channel to bring other, non-financial products to the field.

We believe that improving the quality of life for the BOP is a matter of educating consumers about healthcare, water and energy options and making affordable products available even in the most remote regions.

Frontier Markets Pilot: Chitradurga

2009-09-01T16:27:00.000-04:00

Frontier Markets has been in Chitradurga, Karnataka for the past 3 weeks conducting our first pilot.

The purpose of the pilot is to test our theory of connectivity and market penetration. We believe there is a new market potential out there - the rural and urban bop are capable of spending and are demanding products to improve their standard of living, however because of lack of infrastructure and awareness, companies are not responding. It is time to break the barriers of communication and penetrate this gap.

Companies like HUL, ITC, Godrej, Coca Cola, and others all understood, so why not J&J, P&G, Ranbaxy, and others? Why not break the norm of the FMCG (Fast Moving Consumer Goods) market and start delivering products that are more complicated and significantly more useful to this sector?

The approach is through Microfinance Institutions. Til date, the CEO (Ajaita Shah) believes she has not encountereed a better infrastructure/system that reaches these households in a direct and efficient way - MFIs today have been able to penetrate vast households and deliver products. Why not use that infrastructure for more products and services?

Using the MFI infrastructure, we can better engage these households and understand their needs... We believe that low touch point marketing is not reaching the bop. We need to understand the barriers and strategically message and reach the bop in a more high touch point, or a peer-to-peer interaction to help educate and explain concepts and lifestyles.

PILOT PROJECT: JULY – NOVEMBER 2009

Frontier Markets is studying various models in which a strategic partnership between public and private companies, MFIs, government and NGOs create the infrastructure necessary to introduce goods and services to the rural poor in India. The field is changing so fast that new opportunities and new questions are emerging all of the time. Our team will work in North Karnataka from August through November to gather quantitative and anecdotal information to shore up our business intelligence and refine the tools we have developed for successful market entry.

During this pilot, we will introduce femine hygiene and other health-related products that would make a demonstrable improvement to the quality of life of bottom of the pyramid households.

Frontier Markets will:
• Clarify the expectations and goals with each partner;
• Develop survey instruments, metrics and reporting tools to ensure that we capture meaningful data to inform future product development, marketing and distribution strategies;
• Cultivate individual relationships to gain consumer insight throughout the pilot;
• Develop marketing materials that are intended to raise health awareness and financial literacy;
• Introduce four products and ask consumers to respond using evaluative criteria;
• Place product with reliable central distributors and village retailers;
• Build retailer capacity by offering training, materials and support;
• Report on sales volume and product integrity through the life of the project;
• Share findings and facilitate a post-flight analysis with the participating partners.

The MNC will:
• Endorse the pilot;
• Supply quantities of products and relevant marketing materials for testing and getting feedback on the product
• Share information about pricing strategy, messaging, current distribution and adoption rate; and, sales goals for rural market;
• Share the current cost structure so we can forecast what it would cost to scale the marketing, sales and distribution and where cost savings might occur to preserve and increase the profit margin.

The Micro-finance institution and Healthcare Partner and will:
• Provide feedback to the scenario for the pilot project;
• Endorse the pilot;
• Share demographic research about one branch in North Karnataka (1500 households, covering one town: Chitradurga, Karnataka);
• Introduce us to 1500 credit customers (included kirana shop retailers) at bank center meetings;
• Provide limited field coordination to execute the pilot project.
• Provide feedback to the evaluative criteria we use to vet products;
• Help us define the benefits and liabilities of various product options;
• Provide feedback on the final product selection and pricing;
• Provide feedback to health awareness and product marketing materials;
• Dedicate a healthcare clinician to join us in the field to educate consumers about the problem and to introduce the product-solution;
• Train the Frontier Markets field staff to communicate effectively about health and hygiene issues to rural consumers. Our goal is to inform consumers about various product options and how they will reduce or eliminate common health and hygiene problems.

Targets
1. Reach 750 MFI members·
2. Place Products in 10-12 kirana shops·
3. 5% conversion of 750 members·
4. Sell 35 units of each product

We will be updating our progress shortly.

Meet Frontier Markets: About Us

2009-09-01T16:25:00.000-04:00

We staff a client project with a Client Liaison, Senior Analyst, a Project Manager and Customer Service representatives from the region. Each member of the team combines industry expertise with a keen understanding of the culture, the lifestyle, consumption pattern and structure of rural households.

1. Ajaita Shah, Client Liaison, is the Founder of Frontier Markets. She has 4 years of microfinance experience as a Credit Plus Manager at Ujjivan Financial Services, and Director for Swayam Krishi Sangam (SKS). She has consulted with leading MFI organizations, foundations, and universities about microfinance in Latin America and South Asia. She has her B.A. in International Relations and International Development from Tufts University.

2. Caren Rabbino, Senior Analyst, is a seasoned entrepreneur and principal of her own consulting practice in New York City. She has brought her extensive experience in strategic planning and managing operations to more than fifty businesses and non-profit institutions in the U.S. and Latin America. Ms. Rabbino received an M.P.S. degree from New York University (in 2000); both an M.A. (in 1984) and a B.A. (in 1982) from the University of Pennsylvania.

3. Manu Sharma, Project Manager, is a researcher and field practitioner in the arena of finance and international development. She has two years of experience working as a hedge-fund analyst in New York as well as two years of microfinance experience in India working with Intellecap and ACCESS Development Services. Ms. Sharma holds a B.A. in Economics and English from Barnard College, Columbia University.

4. Firdush and Salma - Field Staff - local trained marketers who are enthusiastic and well trained in Frontier Markets principles and strategy. Originally from Devangere, Karnataka are commited to social engagement and speak Hindi, English, and Kannada.

Our Partner

Ujjivan Financial Services Pvt Ltd. is a microfinance company based out of Bangalore, India. Founded in 2001 by Samit Ghosh, Ujjivan is one of the fastest growing and innovative Non-Banking Financial Companies in India. Ujjivan is present in 12 states in India including Karnataka, Tamil Nadu, Haryana, Jharkhand, West Bengal, Orissa, Rajasthan Uttar Pradesh, Uttarkhand, New Delhi, Maharashtra, and Chennai. To date, Ujjivan has disbursed over Rs. 4,754 million to over 400,000 customers with 202 branches across India and plans to expand nationally to serve 2,000,000 customers in 500 branches by 2010.

Samit Ghosh, Chief Executive Officer and Managing Director, pioneered consumer banking in India with Ravindra Bahl and Jaitirth Rao at Citibank in 1985. He subsequently led the launch of retail banking for Standard Chartered in the Middle East and South Asia and for HDFC Bank in India. His last commercial assignment was Chief Executive, India of Bank Muscat. He has had international banking experience for over thirty years. He is an alumnus of Jadavpur University and the Wharton School.