In rich nations, […] leaders have uncritically accepted the myth that the poor have no money. In reality, low-income households collectively possess most of the buying power in many developing countries, including such emerging economies as China and India. If businesses ignore the bottom of the economic pyramid, they miss most of the market. Another myth is that the poor resist new products and services, when in truth poor consumers are rarely offered products designed for their lifestyles and circumstances, leaving them unable to interact with the global economy. Perhaps the greatest misperception of all is that selling to the poor is not profitable or, worse yet, exploitative. Selling to the world’s poorest people can be very lucrative and a key source of growth for global companies, even while this interaction benefits and empowers poor consumers. (Foreign Policy)
It might surprise you but products targeted to poor consumers can improve their quality of life. The direct selling industry reaches out to and recruits from all levels of the economic ladder. As an industry, we have the power to increase access among the poor to both products and economic opportunities. One of my favorite photos is of an Avon lady demonstrating deodorant to Tembe People in Brazil’s Amazon region. I don’t know if she made the sale. What I do know is that as companies move into emerging economies, they must identify the needs of the poor and share products with them.
The low-cost entry and distribution system of direct selling creates the unique opportunity to enter markets that pose problems to traditional retail companies. And, by virtue of their on-the-ground presence, direct sellers are uniquely poised to identify the needs of poor consumers.
Direct selling companies can target their products to fill the needs of the poor. One example is an Indian company, Modicare which expanded into direct selling in 1996. Because the company grew up in India, the founders had unique insights into how people at all economic levels approached purchasing. In 2011, Modicare developed low-cost personal care product lines in an effort to reach out to and build trust with rural customers.
In some cases, selling to the poor might mean packaging products in smaller quantities and selling for less. For example, poor consumers are often better able to buy single-serving packages of products that middle-class consumers buy in bulk.
More than 60 percent of the value of the shampoo market and 95 percent of all shampoo units sold in India are now single-serve. Many are designed explicitly for the poor and do not even require hot water. Because of these efforts, nearly all Indians now enjoy access to shampoo. Companies selling small unit sizes at affordable prices make money, expand markets, and generate broader access to goods and services that improve people’s quality of life. (Foreign Policy)
Another reason direct selling companies have been successful around the world is their ability to innovate. One such company, Hindustan Unilever Limited (HUL), recognized the need in India for better access to iodine and designed a way to stabilize and transport iodized salt. In addition, HUL sold the product in smaller amounts which provided a way for low-income consumers to purchase the product. Stabilizing iodine to remain intact during transport and throughout the Indian cooking process was an innovation that provided critical health benefits.
Low-cost entry and distribution
The barriers for traditional selling have not been a big problem for direct selling. But poverty presents unique challenges both in terms of product development and designing a business opportunity.
It’s common for women and children to suffer the most from the bounds of poverty. If I don’t have money to purchase products, how can I possibly have enough money to start a business? If I am so poor that I don’t have enough resources for food and basic hygiene, how can I put resources toward improving my situation? As usual, there are no easy or short-term solutions. However, providing a low-cost opportunity to start a business is one way to break the cycle of poverty.
Distributing the product to the poor also provides challenges. Using a direct selling model, companies can overcome the distribution barrier. Direct sellers can set up stalls at local markets. This means that the company does not need to invest in distribution spaces. “’Person-to-person’ cosmetic giants Amway Corp. and Avon Products, Inc. use direct-distribution strategies in India and Brazil, respectively, to sell beauty products among a wider circle of customers — increasing the corporations’ reach and employing poor people as entrepreneurs.”
Emerging markets accounted for 50% of the world GDP. Most of the increase in buying power has occurred in India, Brazil, Russia, and China. However, all emerging markets have potential for direct selling companies to identify needs and overcome barriers. Not all direct sellers make products that will be of value to the poor, but many do. If those companies modify their strategy to capture poor consumers they can increase their profits while improving lives. One of my favorite parts about being involved in the direct selling world has been the economic boost that comes at a low cost of entry. Access to necessity products—personal care items, cleaning products, even sunscreen—can better the health of poor consumers and their ability to secure career opportunities, in sales and in other fields.
Hammond, A.L., & Prahalad, C.K. (October, 2009). Selling to the poor. Foreign Policy. http://www.foreignpolicy.com/articles/2004/05/01/selling_to_the_poor