Consumer Goods – Servicing Small Groceries in Emerging Markets

Servicing small groceries, mom & pop shops, dukas or souks in emerging markets is no easy undertaking. Many companies don’t even try, even with the right product portfolio, volume and revenue. Servicing small groceries can be an expensive and painful experience. Below are a couple of issues to consider prior to rolling out your strategy.

Product flow & reasons for purchase – Have a good understanding how products flow in the market. Often small groceries purchase product directly from the wholesale channel. In some cases they might purchase certain stock keeping units from modern trade (e.g. consumer goods Thailand). The wholesaler is often in close proximity to these outlets (2-5km radius). They provide a basket of goods, and in some cases credit, if they have a good relationship with the small grocery.

Wholesale structure – Tapping into the wholesale structure can be a sound strategy, but for many brand owners the wholesale channel is also a barrier. Wholesalers limit the number of brands and stock keeping units and only stock high turnover products. For brand owners, additional wholesale support and account development can go a long way to create demand. However, product portfolio and margins will determine if this is always a viable strategy.

Stockholding – Small groceries often have limited cash flow and, in some cases, limited space to stock product. During a project assessment in Cambodia, we discovered a night market with great potential for growth, but informal traders didn’t have adequate space to safely store their inventory. Hence, they only bought products and volume that they were certain to sell on the day. They never bought slower moving brands. On a daily basis they ran out of stock. By creating a micro supply depot in close proximity, we managed to double sales and significantly increase the off take of slower moving brands.

Break bulk – Small groceries often require an intermediary, such as wholesaler, to break bulk. For example, on a market visit to Kaduna, Nigeria, we identified the ability to break bulk as one of the key value drivers for smaller distributors or wholesalers. With limited volume and cash flow they refrain from buying cartons or cases, and might even purchase single items, e.g. single bottle or pack (e.g. Ethiopia).

Infrastructure – Often small groceries are situated in congested areas, with narrow gravel roads where trucks can’t enter. In these markets you might find pushcarts, trolleys or motorbikes (e.g. Vietnam). Tapping into their distribution structure, can lower cost and increase product availability. Some consumer goods companies, have also successfully managed to organize these lower cost distribution models and make it work for their operations and product portfolio.