Four billion people live on less than two dollars a day in the developing world. These people represent a huge and growing market for goods and services. For those of us who are familiar with the sophistication of modern retailing, it is easy to forget that the vast majority of people around the world still shop in far simpler stores. These simpler "stores" are collectively referred to as the traditional trade, to distinguish them from the modern trade, common in the more economically developed world. It is the traditional trade that plays a large role in the growing cities of India, Indonesia, Brazil and China – in fact, in cities, towns and villages all across the developing world. The traditional trade ranges from well-organised independent players, to small road-side shacks and single market stalls. How can brand suppliers best understand this growing retail opportunity? What are the key challenges to consider in order to be an effective supplier to this trade?
Challenge number one: The store is not four walls…
Supplying the traditional trade forces a rethink on what constitutes a store – market stalls, roadside shacks and even itinerant sellers are all relevant, but do not fit the classic selling model of the modern trade. In some locations, at-home stores and even back-of-bike operations are common. Supplying these markets requires different approaches in both marketing and distribution. One key focus can be on approaching the community and isolating local leaders or opinion makers, who may be able to provide understanding to the marketer, and drive local acceptance by the market.
From a manufacturer’s perspective, this also means considering things like how a lack of continuous electricity may affect the ability to actually sell, for example, cool beverages or treats. Having a link with local communities through their leaders may help with finding unusual but highly effective solutions. These solutions can then be deployed across markets and regions.
Some may be surprised that internet retailing plays a growing role in the traditional trade. In many markets, the only means to use the internet is via mobile phone and smartphones. These are already becoming common day-to-day tools in even remote areas of major economies such as India and China. The question then becomes: when the internet is seen on a "two-by-two" screen, how can companies optimise the experience to deliver a clear and effective online sales proposition? This is both a major challenge and an opportunity for the years ahead.
Challenge number two: Shop keepers are gate keepers
In contrast to modern trade, where stores are designed to be self-service and shoppers are more autonomous, in traditional-trade stores the emphasis is on the shopkeeper, for several reasons:
- For security reasons – trade may be conducted via gated doors.
- For practical reasons – not all items may be on display.
- For credit reasons – the shopkeeper may offer credit within a community.
- For guidance reasons – the seller may offer advice and reassurance for selecting products.
These last two reasons make the shopkeeper an integral and personal link between the community and the products and services its members need.
There are several ways for a manufacturer to leverage the realities of the traditional trade: firstly, the distribution network plays a crucial role. Using the regular delivery team to "partner" with shopkeepers can be an excellent strategy. Secondly, credit terms and sales aids may provide very tangible benefits and support a brand campaign.
Thirdly, in smaller shops, the owner will in many cases buy directly from a larger supermarket or a cash & carry, far away, and then re-sell the goods locally. So understanding these needs and offering suitably packaged products could also be, indirectly, a great way to drive traditional trade sale. This last point means that rethinking the packaging could very well generate substantial gains for major manufacturers, with packages that can double up as display stands, or offer advice for selling and merchandising items.
Challenge number three: Merchandising has a different meaning for the traditional trade – focus on channel-relevant execution
Merchandising and point-of-sale materials (POSM) play a radically different role in the traditional trade – many stores have limited shelf organisation and POSM is not replaced regularly and might in fact overlap across competing brands. Manufacturers tend to have very few customised solutions – some will provide storefront decoration services (awnings or walls painted the colours of a brand, especially relevant for beverages and cigarettes); others will focus on very similar materials provided to the modern trade, knowing these are likely to be discarded or incorrectly implemented. Yet there is significant potential to have unique and relevant POSM or merchandising solutions – ranging from unique storage to distribution or refill options, to facilitate the delivery of products in the traditional trade.
Challenge number four: Basic considerations are prime considerations
For low-income consumers just as for everybody else, basic needs come first – although for them, satisfying these basic needs is very much a critical survival requirement. Ensuring that goods bought are safe, uncontaminated, storable and transportable are key issues. In this context, manufacturers have a tremendous opportunity to help improve daily lives while also building their brand, by providing packaging and distribution solutions that support these basic needs. Furthermore, supporting these basic considerations may provide forward-thinking companies with a tremendous opportunity to play a more active role in communities – by championing these needs (or failing to do so) a brand owner will seal its future. For example, understanding usage occasions combined to storage requirements has provided leading brand manufacturers with the opportunity to introduce innovative single-usage packs, providing both an affordable solution and a true brand experience to low-income consumers in the Philippines or China.
Challenge number five: Brands are important… but are they real?
Brands are both a reassurance and an aspiration and as such play a critical role in the traditional trade – but this also presents some serious challenges. Firstly, consumers are savvy, no matter what they can afford – so brand equity is very much a precious commodity when dealing in the traditional trade, as shoppers seek the reassurance and guarantees a well-known brand can provide. In some markets, counterfeits abound, and ensuring that what you buy is genuine is a very real consideration. Secondly, while not all brands are necessarily represented in the traditional trade, this should not prevent manufacturers from seeking to engage consumers – the aspirational nature of many brands may help drive future consumption but can also have an immediate role in communities. Finally, the risk for a brand is to have, either via counterfeiting or via an unscrupulous local associate, its image tarnished. Taking extra care of how the brand is used (POSM, sponsorship, actual products on shelves) should be a major priority in developing markets: the global future of your brand may just hinge on this.
Overall, marketing to traditional trade shoppers requires not just local knowledge but a true mindset change for international brands. Competing against well-established local players, faced with an incredibly fragmented distribution network, you need to re-engineer your entire marketing strategy to match the needs and complexities of these retail channels. The investment is significant but the pay-off may well be worth it – establishing top-of-mind in the fastest growing and most populated economies in the world might well be tomorrow’s pay day.
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