Fast-moving consumer goods (FMCG) companies are gradually understanding the importance of inclusive distribution. However, despite this realization, the most leading consumer good consumers have only been able to scratch the tip of the iceberg of market potential.
In this blog, we’ll be providing you a detailed guide to what inclusive distribution is all about.
Table of Contents
What is inclusive distribution?
Inclusive distribution is a type of distribution that is used by companies that want to approach low-income consumers, distributors and retailers.
By doing so, such businesses are able to reach out to low-income entrepreneurs and low-income farmers. However, to adopt this business model and strategy, companies must adapt their products to cater to local needs and requirements. This requires extensive market research as companies may have to modify existing products for a wider consumer base.
Why do companies opt for inclusive distribution?
Over the past decade, numerous FMCG companies have started to employ new models of inclusive distribution. Companies often use this strategy to engage with low-income micro enterprises and entrepreneurs.
Diversifying target reach not only increases sales but boosts product awareness in new markets.
Challenges of adopting inclusive distribution
Like other types of distribution, inclusive distribution offers its own unique set of advantages and disadvantages. For maximum results, companies should carefully evaluate the products they are offering and should conduct a thorough market research.
Conducting a detailed market research will also help companies determine whether their product is ready for the new market or not. Some major challenges of adopting inclusive distribution include:
Limited Funding Opportunities
One of the major challenges of implementing inclusive distribution is the limited funding opportunities amidst public finance and donors. For optimum results, companies must work hard to identify the most suitable technological solution to obtain favorable outcomes.
Readapting Business Model
Since most initiatives target areas with low population density, companies may have to readapt their business model to suit social differences and cultural values of the specific area. This can be an extensive process, often involving a plethora of resources.
How can technology aid inclusive distribution?
Technology can greatly aid inclusive distribution models by reducing costs, improving communication and standardization in target areas. This is all made possible due to the incredibly high mobile penetration rate in developing countries.
In fact, companies are now shifting towards geo-mapping software and other popular mobile-based software to aid entrepreneurs and distributors.
Examples of Inclusive distribution
Many leading companies are adopting new models of inclusive to increase sales in downstream value chains to expand into new markets. One of the most notable examples includes Danone Kiteiras that gathers women from the poorest communities of Brazil.
These women work as door-to-door vendors in the outskirts of the city, providing awareness about health and nutrition to poor communities and distributing Danone products.
Through its program, Danone has managed to create employment opportunities by employing women as micro-distributors.
Companies like Nestlé are also not far behind. The world’s largest food and beverage company has created a partnership with Banco ADOPEM, an institution that is well reputed in the microfinance sector.
Together, they have teamed up to create a special loan product for vendors suited in the Dominican Republic. In addition to providing loans, the partnership also provides insurance plans and savings accounts along with other financial assistance. This collaboration has not only relived Nestlé of the risks of inclusive distribution but it has also benefited ADOPEM build a diverse customer base and product portfolio.
All in all, many companies have benefited from implementing inclusive distribution. Do you want to learn more about other types of market distribution? Check out our other marketing blog posts.