You Can't Get There From Here

Nugget readers who have traveled in emerging markets have surely witnessed ineffective distribution channels. One Vital Wave employee recently shared a ferry to an island off the coast of Tunisia with a truckload of sheep. Upon arrival at the island dock, she saw an identical truckload of sheep waiting to board the return ferry to the mainland. Distribution channels, especially for physical goods, plague most emerging-market business ventures, and well-intentioned programs are often derailed by this obstacle. OLPC’s Chief Connectivity Officer, Michail Bletsas, highlighted the distribution issues in a recent interview: “Actually, what we're trying to do is not distribute any PC ourselves….but right now, no one else is trying to do that.” Other organizations are naively ignoring this hurdle. The Australia-based “Be A Hero” aid organization and Bigshop.com announced plans last week to provide underprivileged artisans in Thailand, Cambodia, Papua New Guinea, Manilla, Kenya, Zambia and Zimbabwe with the opportunity to sell their wares to a global audience. There is no mention of how the organizations will manage business process issues such as payment, quality control, distribution, warehousing, delivery or support.

Organizations such as Peoplink and Novica have built similar businesses and continue to struggle with distribution. Delivery times can exceed one month, and the need to warehouse stockpiles of products drives up costs. Distribution presents challenges for all suppliers – those selling products out of the developing world into the developed and vice versa. Some of the predominant issues include lack of reliable infrastructure (roads, railways, electricity, fuel access and postal service), corruption (stolen merchandise and unjust taxes), and extreme environments (dust, rain and heat). While reliance on volunteers and aid organizations may get a program off the ground, distribution is more likely to be successful when sustainable business models provide clear and compelling incentives along the entire distribution chain. Thamel.com, a Nepal-based marketing company that provides gift-giving services for the Nepalese diaspora, stresses the importance of business benefit for all involved. Even with one of the more successful developing-world distribution networks, Thamel.com sometimes puts the burden of product distribution, at least for goat delivery, on the gift recipient.

For businesses expanding into developing-country markets, whether delivering goats or laptops, it is essential to address distribution with creative and reliable solutions. Business managers may be required to invest in local infrastructure to ensure reliable product delivery. For this level of investment, businesses would do well to work closely with senior government leaders to ensure benefits for such investments (similar to traditional benefits given for investments in manufacturing facilities). Local partners, such as Thamel.com, have regional knowledge and established delivery systems that can also point to successful distribution strategies. As effective distribution models are built in developing countries, local industries will benefit from increased efficiencies, and fewer truckloads of sheep will pass each other on the dock.

Also in the news:

• HCL releases Classmate PC for consumers
• Sears sells sub-$200 Linux desktop PCs
• Businesses make progress in designing for developing world