ADVANCED BIOMASS COOKSTOVE DISTRIBUTION · 2020. 10. 21. · its fintechplatform, Equitel, that allows qualifiedEquity Bank customers to get instant approval and take an EcoMoto loan

SEPTEMBER 2017

ADVANCED BIOMASS COOKSTOVE DISTRIBUTION

ACRONYMSB2C Business to consumerBOP Bottom of the pyramidCSR Corporate social responsibilityFI Financial institutionIWA International Workshop AgreementKUSCCO Kenyan Union of Savings and Credit CooperativesMFI MicrofinanceinstitutionSACCO Savings and credit cooperative

ACKNOWLEDGMENTSThis study was conducted under the Developing a Sustainable Cookstove Sector project, a 5-year (2012–2017) project funded by the United States Agency for International Development and implemented by Winrock International. The goal of the project is to develop sustainable cookstove markets that will lead to widespread adoption of clean, efficient cooking solutions by strengthening private commercial distribution of high-quality biomass stoves, encouraging innovative partnerships, increasing availability of local financing for enterprises and consumers, and expanding consumer access to quality stoves and fuels.

This study was written by Katie Gross, Genia Sokolova and Javier Lascurain on behalf of Winrock International. Other Winrock International staff and partners who provided valuable inputs include Elisa Derby, Jechoniah Kitala, Bernard Ngetich and Bikash Pandey. Winrock is grateful to all the organizations that provided interview and survey information for this study. The study greatly benefits from your willingness to share your experience working to find the most effective ways of getting high quality stoves out to consumers.

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BEST PRACTICES, CHALLENGES, AND TRENDS IN ADVANCED BIOMASS COOKSTOVE DISTRIBUTION

EXECUTIVE SUMMARY Thecookstovesectorhasevolvedsignificantlyinthepastfewyears,withastrongcommitmenttohigherqualitytechnologies (including efforts to develop international voluntary standards) and market-based approaches.The sector has benefited frommacro-level trends that facilitate distribution. Our research identified thefollowingtrendsthathaveimprovedcookstovedistribution.Thisreportelaboratesontheinterplaybetweenchangesonthesupplyside(improvementintechnology,emergenceoflocalmanufacturingfacilities)andthedemandside(increasedmarketingandawareness),andrelateshowthathasimpactedfinanceforand,finally,distribution of stoves.

1. Significantrecentinvestmentintechnologymeanshigherqualityandaestheticallypleasingbiomassstovemodels thataddresskeyconsumerneedsandwantsarenowavailable inmanymarkets,leadingtohigherdemand.Thesestovesaremadewithmoreprecision,greaterqualitycontrol,andhigherqualitymaterials.Theycomewithwarranties,whichmeansconsumerscanmakemoreconfident, higher-priced purchases. Advances inmaterials and designmake stoves lighter andeasiertodeliver,furtherenhancingdistribution.Totalannualsalesofadvancedbiomassstovesarenowinthehundredsofthousandsforeachofmultiplemanufacturers.Leadingmanufacturersweinterviewedareselling1,000tomorethan10,000stovesamonth.

2. Higherqualitystovesalsomeanbiggerbenefitstotheconsumer, improvingdemand. Benefitsincludesignificantcostsavingsthatcanbeasmuchas10%ofauser’smonthlyhouseholdincome,accordingtoFarukKarim,CEOofSolaYetu(aKenyandistributorrecentlyacquiredbyPamojaLife).Thishasattractednewdistributors,likeSolaYetu,whoseethepotentialforlargersalesvolumes,withthecostsavingsbothincreasingdemandandfacilitatingacustomer’sabilitytopurchasethesehigher priced products. The demand side has also been helped by an increase in marketing and awareness-raisingactivitiesbyprivatecompaniesandothers,suchastheGlobalAllianceforCleanCookstoves’ awareness campaigns in keymarkets.Manufacturers that have investedheavily inmassmarketingfortheirproductshavebroughtgreaterawarenessofthebenefitsofthesestoves,whichinturnattractsadditionaldistributorsandsupportstheirsales.

3. In-countrymanufacturingorassemblyhasbroughtamoreconsistentsupplyofthesehigherqualitystovemodelsclosertotheenduser(e.g.,inKenya).ThishasgreatlyimprovedavailabilityofstovesinthemarketandreducedthesupplyuncertaintythathadplaguedthesectorwhenallproductswerefullyimportedfromChina.Thisseemstohaveinjectednewconfidenceinthesector’sabilityto maintain consistent supply at higher volumes and attracted the interest of key distribution partners,suchasfinanciersandcorporatepartners.Localmanufacturingandassemblyfacilitiesreducetransportationcostsandshortenworkingcapitalcycles.It’simportanttonote,however,thatthesefactorieshaverequiredsubstantialprivateinvestmentinadditiontotraditionaldonorsupport.Localmanufacturingandassemblyrequireshighvolumesofstovesalesforprofitability,whichismucheasierinadvancedmarkets,eithercountrywideorregional,wherepurchasingpowerandconsumerdemandandawarenessarestrong.

4. Technologies and systems are emerging that enable easier installment payment collection. For example,inKenyavastswathsofthepopulationalreadyusemobilemoneythroughtheM-Pesaplatform. When paired with a user-friendly payment tracking platform (such as LivelyHoods’partnershipwithAngaza–seetextbox),distributorscancollectandmonitorcustomerpayments.In2017,EquityBanklaunchedadigitalloan,availableonbothfeatureandsmartphones,throughitsfintechplatform,Equitel,thatallowsqualifiedEquityBankcustomerstogetinstantapprovalandtakeanEcoMotoloanforastoveorsolarlightonthespotintheirlocalretailshop.Stovesarealsobeingsoldastop-uploansthroughpay-as-you-gosolararrangements,paidininstallmentsthroughexistingmobilepaymentplans,givingthedistributoradditionalleveragetoensurepaymentsare

receivedontime.Kenyaisuniqueinitsproliferationofmobilepaymentoptions,butothermarketsareseeingariseinthelevelofinterestinoruseofmobilepayments,andmobilephoneownershiprates are high in many markets.

5. Buildingon this,manystovecompanieswespokewitharepartneringwith third-partyfinancialinstitutions, suchasmicrofinance institutions (MFIs), savingsandcreditcooperatives (SACCOs),financialservicesassociations,andcommercialbanks toprovidecredit forstovepurchasesandexpandthestovemarketbytappingintonetworksofaggregatedclients(potentialcustomers)whoalreadyborrowfromtheseinstitutions.Thesepartnershipsbringadegreeoftrustandcredibilitytostovecompanies.Theirgrowth in recentyearscanbeattributed,at least inpart, toamorereliablesupplyofhigher-qualityproductsonthemarket.Financialinstitutionswouldnototherwiserisk their reputation if stockoutsorpoorqualityproductswerecommon.Financial institutions(FIs) themselvesarecomingupwithcreativewaystoreachmorebottomofthepyramid (BOP)consumers. They are offering financing options for lower-priced, life-improving products (suchasstoves)bystreamlining lendingthroughtechnology (EquityBank), reducingbarriers toentry(KenyanUnionofSavingsandCreditCooperatives,orKUSCCO),andassessingabilitytorepayusingpsychometrictesting(JuhudiKilimo)orotherout-of-the-box,innovativeappraisaltools.

6. Otherinformationandcommunicationstechnologiesareenablingstovecompaniestomakeuseof robust market analytics and customer relationship management systems to service customers. ThisincludesplatformssuchasEchoMobile(seetextbox)andsalesforce-basedsystemsthatcan1)collectandtrackcustomerdatatoevaluateeffectivenessofsaleschannelsorsalesagents,2)registerwarranties,and3)delivercustomer-facingsurveysthatcanprovidevaluable(existingorpotential) consumer information for marketing and after-sales services.

LIVELYHOODS INSTALLMENT PAYMENT ARRANGEMENT (LIPA) LivelyHoodspartneredwithpay-as-you-goserviceproviderAngazatodevelopaninstallmentpaymentsystemtocollectM-PesapaymentsforstovesinKenya.Whencustomersdonothavecashonhandforthestove,aLivelyHoodsagenttakesadownpaymentof500Kenyanshillings(~$5USD)throughM-Pesatransfer,whichisthenregisteredontheAngazaplatformusinganAndroidapp.Thisautomaticallysendsaregistrationmessagetothecustomerwithauniqueaccountnumber.Thesystemsendsreminderandpaymentacknowledgementmessagestothecustomer’sphone.Branchmanagerscanviewcustomerpaymentstatusthroughtheplatformand alert sales agents during ongoing training sessions. When the stove payment is complete thecustomerreceivesaconfirmationmessagetoarrangeforpick-upordeliveryofthestove.Morethan700customershaveregisteredstovesalesthroughthisprogramasofMay2017.Theaveragepaymentperiodforcustomersisjust25days,withstovespaidoff-onaverage-in11separatemicro-payments.Theseminiinstallmentsareakintotheamounttheywouldusuallyspendoncharcoal,e.g.,KES100perday.LivelyHoodshasfoundthatgivingpeopleflexibilitytopayanyamounttheywantwithinasetamountoftime,ratherthanfixingpayments,helpswiththespeedandratesofrepayment.

Much of the evidence for these trends comes from larger, more advancedmarkets in Kenya and India.However, some are spreading to othermarkets. Extracting lessons from themarkets that have had thehighest degree of success in sales can help demonstrate the progress that can be made in stove distribution ifsimilarcircumstancesandpartnershipscanbenurturedelsewhere.Althoughitwasclearfrominterviewsthatdifferentmarketshavetheirownchallenges(purchasingpowerinUgandaorMalawiisnotthesameasinKenya,forexample),distributiontrendsthathelpstovecompaniesaggregateconsumersandprovideflexiblefinancingarrangementsappeartobehavingthebiggestimpactoncrackingtheuniversallylamentedlast-miledistribution challenge.

ECOMOTO LOAN PROGRAM—ECHO MOBILE SURVEY:ThroughBURNManufacturing’sEchoMobilePlatform,theEquityBankEcoMotoloanprogramwasabletosurveymorethan400customersontheirmobilephones(whohadpurchasedeitheraBURNJikokoa stove or a solar lantern) to gather key customer feedback that helped inform future marketing anddistributionefforts.Throughthissurvey,theydetermined:

• Averagecostsavingsfromusingthestoveorsolarlight:• $10USDpermonth=returnoninvestment(ROI)of334%inthefirstyearperfamily

• Whatcustomersareusingsavingsfor:• schoolfees,repayingexistingloans,expandingbusinesses,food,other

• Whattheylikebestabouttheircleanenergyproduct:• savesmoney#1–59%ofrespondents

• Impactofavailablefinancingondecisiontopurchase/opinionofFI• 66%saidyes,theloanhelpedthemdecidetopurchasetheproduct• 96%saiditimprovedtheiropinionofEquityBank

2017 Winrock International | www.winrock.org6

During implementation of theDeveloping a Sustainable Cookstove Sector project,Winrock Internationalworkedwithcookstovemanufacturersanddistributorstofindthemostefficientandeffectivewaysofgettinghigh-qualitystovesintothehandsofthosewhoneedandwanttousethem.Tounderstandthatchallengerequiresadefinitionofwhatwemeanby:

EFFICIENT: avoids unnecessary distribution costs that make the stove cost-prohibitive for target customers topurchase,withoutslicingmarginstothepointprofitabilityisimpossible

EFFECTIVE: products are affordable and physically reach target customers

HIGH QUALITY: productsaredurable,attractive,andreliable;offerfuelsavings,reduceemissions,areeasytouse,cookstaplefoodswell,andsavetime.

NEED AND WANT. Thekeywordisand.Worldwide,3billionpeoplecookwithbiomass,thevastmajorityusingopenfiresorrudimentarystoves.Findingtherighttechnologyforeach,andeducatingconsumersaboutthebenefitssothereisdemandforthestovesrequireseffortandinvestment.

USE: Thebest,mostpromisingstoveswillmakenodifferenceifthey’renotusedconsistentlyandcorrectly.Stoveshave tomeet consumers’ everyday cookingneeds, andconsumersmust knowhow towork themproperly.

Trendsandchallengesindistributingstovesemergedthroughoutthecourseofthiswork.Wewantedtodelvefurtherintoexactlywhatittakestoefficientlyandeffectivelyreachtargetcustomersatscale.ThisreportistheresultofWinrock’sresearchin2016–2017,basedoninterviewswithmorethantwentymanufacturersanddistributorsaroundtheworld.

Primarydistributionchallengesraisedininterviewsandaddressedinthisreportinclude:• Product-specificchallenges(stovesareheavyandbulky;theyrequiremoredemonstrationandbehavior

change than other household energy products)1• Sales volatility

INTRODUCTION

1Agoodassessmentofmanyotherproduct-specificchallengesthatplaguethestoveindustrygenerally,butdonotaffectsimilarindustries(likesolarproducts)isinHystra’s2017reportReachingScaleinAccesstoEnergy-seepage87“Focus:WhyhastheICSmarketnotdevelopedasfastasthesolarlanternone?”.Forthisstudy,wefocusonthedistribution-specificchallengesforadvancedbiomassstoves.

Wisdom Innovations

http://hystra.com/a2e

72017 Winrock International | www.winrock.org

• Working capital constraints• Staff turnover• Training needs and cost• Lowproductorbrandawareness• Difficultyaccessingend-userand

workingcapitalfinance• Timerequiredtodeveloppartnerships• Noone-size-fits-alldistribution

solutions• Logisticschallengesreachingthelast

mileinlow-populationdensityareas

The distribution channels analyzed inthis report have, to varying degrees,successfully addressed these challenges. We do not promote one channel over the other.Rather,wehighlightthehurdlesandconditions that promote success for each. Wherepossible,weindicatewhereandtowhatdegreesaleshavebeensuccessful.

FOCUS, LIMITATIONS, AND METHODS OF THIS STUDYThe distribution strategies and challenges of the artisan stove market are very different from those of the advanced stove market (price difference alone creates distinct dynamics).Forthisreason,Winrockchoseto focus primarily on advanced biomass stoves.Wedefineadvancedstovesasthosethatprovide1)greaterreductionsinfueluse(Tier2accordingto InternationalWorkshop Agreement 11:2012 guidelines for fuel use and efficiency in the InternationalOrganizationforStandardization),2)qualitycontrolandstandardizationinmanufacturing(throughcentralizedmanufacturing),3)high-qualitymaterials,and4)warrantiesandafter-salesservice.Advancedstovesalsohavebrandrecognition.Brandsprovideassuranceofperformanceandquality,andleadtomoredesirableproductsthat do more than simply meet needs.

Thestudyexcludes liquidandgasfuels,becauseoftheiruniqueinfrastructureandotherchallenges.Newtechnologiesaremakingthesecleanerfuelsaccessibletoconsumerswhohadbeenexcludedduetoloworunstableincomes—peoplewhocouldnotaffordlargeexpendituresforfuel.Industryplayersaredesigningandtestingnewtechnologiesandpaymentsystemsthatallowaccesstothesecleanerfuelsinsmallerquantities.However,whatworksforthesecategoriesofstovesandtheirdistinctdistributionchallengesisverydifferent.Narrowingthefocustoadvancedbiomasscookstovesprovidesthemostusefulassessmentofdistributionbestpractices.Wealsoseeadvancedbiomassstovesasoneofthelargestgrowingsegmentsofthestovemarket.Monthlysalesnowexceed10,000forindividualmanufacturers.Thesheerscalewarrantsacloserlookathowthisoccurredandthemostsuccessfulstrategiesforsalesinvariouscontexts.

STOVE SALES PER MONTH

BY % OF INTERVIEWEES

0-49928%

500-99929%

1,000-4,99929%

5,000-9,999 5%

10,000+ 9%

INTERVIEWEES BY BUSINESS

ACTIVITY

FINANCIAL INSTITUTIONS

23%

DISTRIBUTOR ONLY

46%

MANUFACTURERS32%

*Additional Survey responses received from a mix of manufacturers and distributors


Volumeofsaleshelpedguidethisstudy’sgeographicfocus.Weinterviewedmorethantwentymanufacturers,distributors and financial institutions globally, with supporting information received via survey responsesfromadditionalmanufacturersanddistributors.However,themajorityofourfindingscomefromIndiaandKenya. These mature stove markets provide the most striking examples of advanced stove sales at scale. Both countrieshavebeencreatingawarenessofstovesandfuelsforyearsandhavethelargestinvestmentsinlocalmanufacturingandassembly.Notallmarketswillbeabletoapplytheexperiencefromtheselocations,whichisalimitationofthestudy,butwebelievetherearehigh-levellessonsusefulforstovedistributionglobally.

Basedontheinterviewandsurveyresponsesfrommanufacturersanddistributors,wecategorizedresponsesinto fivemain distribution channels for advanced fuel-efficient biomass stoves. A distribution channel is,generally,themeansbywhichastovegetsfromthefactorytothecustomer’shome.Thisincludesorganizationsandindividualswhomanufacture,market,sell,finance,anddeliverthestovefrompointAtopointB.

Thestudyaimstoassess1)theextenttowhicheachchannelcanproducehigh-volumesales,2)thetypeofconsumerreached,3)benefitsandchallengesofeach,4)theconditionsunderwhicheachismostsuccessful,and5)trendsinhowchannelsareprioritized.

Thechannelsare:• direct sales to customers (business-to-consumer or B2C) • large retailers• microentrepreneurs• corporatesocialresponsibility(CSR)–employerpartnerships• financeandcreditproviders(banks,creditcooperatives,MFIs)

Allthestovecompanieswespokewithuseacombinationofthesechannels.Thereisahighdegreeoffluidityindistributionapproaches,withdiscardedchannelsoftenfindingnewlifemonthsoryearslater,becauseofnewproductsorbusinessstrategies.Changesinthemacroenvironmentaffectdistributionstrategies,suchasrecent tax changes in Kenya that seek to encourage greater uptake of cleaner cookstoves and fuels2,ortheIndiangovernment’srecentdemonetizationeffortsimpactingcashpurchases.

However, currently there is strong momentum behind the finance and credit provider channel, becausefinancingisseenbymostofthoseinterviewedascriticaltoincreasingsalesofadvancedstoves.Thischannelexpandsnetworksandpromotesbrandreputationandtrustthatleadtomoresales,evenforcash.Asmobileplatformsbecomemoreaccessibleandoffereasierpaymentoptionswithgreaterabilitytointeractdirectlywithcustomers,otherdistributionchannelsmaybestrengthened.

Otherchannelsareusedtosellstoves,butwelimitedthescopeofthisreporttothemost-oftentriedchannelsorthosewiththehighestsales.Thesechannelsarenottheonlyonesthatcanoffersalesvolume,andinsomecases,highvolumeshavenotbeenachieved.3Buttheyarethemajorityofthedistributionmethodsthoseweinterviewedhavetriedtodate.Online,pay-as-you-go,andremittancesareallchannelsthathavepromise.Thesechannelsareeitherbeingtriedbyonlyafewcompaniesorhavehadlimitedsuccessindeliveringasignificant number of stove sales todate, although they havebeenmore successful for other householdenergyproducts.Thereisn’tenoughmomentumbehindthesechannelsyettowarranttheirownsectioninthis report.

2 InKenyaatthepolicymakingleveltherehasbeenadeliberateincreaseingovernmentcommitmenttocleancookingthroughbudgetaryallocation,inclusion of clean cooking in plans and policies and support to the development of clean cooking standards. Some of the specific policies andframeworkssupportingadoptionofcleanercookstovesincludebiomassstovestandardsdevelopment,reductionofimportdutyonbiomassstoves,valueaddedtax(VAT)exemptiononLPG,excisedutywaiverondenaturedalcoholandincreasingtaxesonkerosene.

3Onelimitationofthisstudyisthatsomechannelsonlyhadoneortwosuccessstories,makingitdifficulttodrawconclusionsaboutwhyaparticularchannelworkedinsomeinstancesandnotothers.Wehavetriedtogeneralizewherewehadsufficientexamplesandtoprovidespecificdatapointswheregeneralizationwasn’tpossible.


ANALYSIS OF PRIMARY DISTRIBUTION CHANNELS FOR ADVANCED FUEL-EFFICIENT COOKSTOVESDIRECT BUSINESS-TO-CONSUMER (B2C) DISTRIBUTION CHANNELSTRENGTHS WEAKNESSES

More stable channel for the manufacturer—greater channelcontrolandprofitmargin retention

Costly to build and maintain

Direct product feedback from the consumer and after-sale service

Limitedreach(hardtoaggregate customers)

Highlytrained,motivatedsalesforcewithproductknowledgeandabilitytosell

Investment in brand recognitionrequired

Brand and community around the brand strengthened

Frequentstaffchurn

OVERVIEW. The B2C channel is composed of consumer-facing businesses that include cookstove manufacturers who sell directly to consumers andcookstove distributors with a network of shops orsales staff selling directly to consumers.

TheB2Cchannelisoneofthemostdesirablebecause,ifexecutedsuccessfully,itcanoffergreaterstabilitythan business-to-business channels, it providesdirect control over messaging and product demos and training, and it offers greater access to theconsumer.Consumeraccess, in turn, enablesdirectfeedbackontheproduct,whichhelpsmonitortrendsin consumer tastes and preferences for cookstoves orstovefeatures.Forthemanufacturer,italsomeansno margin sharing with third parties. However, itcan be one of the costliest cookstove distribution channels—the cost of opening and operating a B2C networkishigh,includingstaffsalariesandtraining,infrastructureandlogistics,marketing,branding,andafter-sale service.

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Becauseofthebenefits,severalcookstovemanufacturershavetriedtoestablishproprietaryB2Cchannels,althoughinmanycaseswithlimitedsuccess.BioLitehasexperiencedoneofthebestexamplesofthe trials and tribulations a manufacturer can go through in building a B2Cchannel.ItsetupanApple-styleflagshipstoreinIndia.4BioLitefound that, for a new brand, setting up direct B2C channels wasdifficult because it was hard to attract and aggregate customerstoaproductandabrandpeopleweren’tyetfamiliarwith.EnvirofitIndiatriedtobuilditsownB2Cchannelin2007–2008,“thinkingthatwhateveryoucandisplayandshowwillsellinthemarket,”saidRaviKumar, seniormanager at Envirofit India. The company eventuallyrealized it was difficult to attract large numbers of customers tostores. It did better targeting an existing aggregated customer group withproductdemonstrations(atcommunityorMFIgroupmeetings).

TheB2Cchannel requiresasubstantial investment inmarketing todevelopproductrecognitionandpromotesales.ManyBOPcustomerscannotpaycashforastoveupfront,which limits sales volume.Ultimately, BioLite and Envirofitmoved on to partnerwith FIs in their currentdistributionstrategies,asFIsalreadyhaveaggregatedcustomerbasesandconsumerfinancehelpsreducepurchasinghurdles.BioLitenowsells80%ofitsstovesthroughFIs.Formoreonthischannel,seetheFinanceandCreditProviderssection.

OnlyGreenwayAppliancesamongthecompanieswespokewithhashadlarge-scalesuccesssettingupaB2Csaleschannel.Roughly75%ofitssalesin2016wereledbystaffinteractingdirectlywithcustomers.Greenwayacknowledgedthischannelcomeswithhigherfixedandvariablecoststhanothers,butthecompanyfeelsthecostsareworthittomaintain“greatercontrolandpredictabilityinsales,”whichisespeciallyimportantformanufacturers,toinformproductionandmonitorstocklevels.ForGreenway,theB2Cchannelalsoworkstosupportandcomplementtheworkofitsotherchannelpartners,suchasMFIsorNGOsthatprovidelogisticsorconsumerfinancing.TheGreenwaysalesstaffworkalongsidethesepartnersandbringanincreasedlevelofknowledge,focus,motivation,andenthusiasmtothepartnerships,directlyengagingwithcustomersandconverting demos into sales.

ManycookstovemanufacturerscontinuetolookforwaystobuildtheirownB2Cdistributionchannelbecauseof this potential for greater customer engagement andpredictability, despite the expense anddifficulty.EnvirofitrecentlyinitiatedanewB2CpilotinNairobitolearnpatternsofcustomerbehaviorandgainmarketintelligencetosharewithitspartners.Othersseeon-linesalesastheirchancetobuildadirectlinkwiththecustomer.

Cookstovedistributors,typicallysellingmultiplemodelsofstovesandotherhouseholdproducts,havehadmoresuccesswiththischannel,keepingaleancoststructureandcreatinginnovativemodelsforgettingtheproductsdirectlytoBOPconsumers.However,initialcostscanbehighandlongleadtimesaretypical.LessonslearnedfromsuccessfulstovedistributioncompaniesthathavecreatedaB2Cchannelarebelow.

VOLUME iscritical inB2Cdistribution,asmarginsareoftensqueezedbetweenthemanufacturerandtheBOPconsumer.SomesuccessfulB2Cdistributorshavetargetedhigh-densityareastoincreasesalesvolume.SocialenterpriseLivelyHoodssellsmorethan500stovesamonththroughaB2Capproach(asof2017).Itssuccessliesinsettingupbranchesininformalsettlements(slums)thatserveashubs,adeliberatestrategythatprovides:a)accesstoalargevolumeofcustomersfromdenselypopulatedareas,andb)arecruitmentbaseforitsagents—unemployedyouth,whoknowtheircustomerswellandcanselltotheircommunities.LivelyHoodshadtoclosebrancheswherethepopulationwasn’tdenseenoughbecauseitwasdifficultfortheiragentstofindcustomers.

MOST OF OUR BRANCHES COVER THEIR OWN COSTS WITHIN A FEW MONTHS OF SETTING UP A BRANCH.

4 BioLite.What’sInStoreWhenThereIsNoStore,BioLiteBlog,7Sept.2016,www.bioliteenergy.com/blogs/lab/how-one-startup-developed-a-sales-model-that-works-in-emerging-markets.

LivelyHoods 112017 Winrock International | www.winrock.org

Ability to deliver volume is critical to a lean cost structure. It is oneway to negotiate down pricewithsuppliers.However,thevolumeneededforadistributortofullycoveroperatingcostsissubstantial.“Mostofourbranchescovertheirowncostswithinafewmonthsofsettingupabranch,”saidTaniaLaden,LivelyHoodsco-founder.However,itwouldtakeatriplinginsizetocoveralltheindirectcostsofheadquarters,logistics,oversight,andmanagingandsupportingthebranches.Toreachthatlevel,thecompanythinksitmustbreakintonewmarkets.

PRODUCT DIVERSIFICATION.MostoftheB2Cdistributorswesurveyedachievevolumebycross-sellingandofferingmultipleproducts.Customeracquisitioncostsrunhighinthischannel.Onewaytoamortizethemis throughrepeatedvisits to thesamecustomerwithnewproducts.For instance,BidhaaSasa inwesternKenya throws a Tupperware-stylepartywhen agroup completes a loan repayment, demonstratingotherproducts,likesolarandcookinggas.LivelyHoodscarriesawiderangeofwhatitcallslife-savinggoods,fromreadingglassestohouseholdappliances.India-basedPollinateEnergysellsarangeofsolarproductsaswellasstoves,mosquitonets,waterfilters,andmobilephones.Thisisakeyadvantageproductdistributorshaveover manufacturers in most cases.

Manufacturers often can’t offer diverse product lines as they are fully occupied manufacturing the bestqualitystoveattherightprice.Greenwaysaidaddingnewproductsandstovemodelstoserveitscustomersisonestrategy ithasbeenworkingonto increasesalesagents’productivityandreducehighfixedcosts.Thecompanyalsoseesthisstrategyasawaytoincreasesalesstaffincomesandimproveretention.Somemanufacturers,suchasBioLite,havetriedtopartnerwithexistingB2Cretailchannelstoselltheirstoveswithothercomplementaryproducts(e.g.,solarlights),butfoundtheystillneededtheirownagentstodemonstratethe stoves, and that stoves have their own logistical challenges (difficult to transport compared tootherproducts).

STAFFING COSTS AND INVESTMENT. OneofthelargestcostsforaB2Cdistributorisitsstaff.Staffturnovertendstobehigh,asemployeesoftenseekmorepermanentorbetterpayingsalesopportunitiesthanstovedistributorscanoffer.Distributorsarechallengedtocomeupwiththerightmixofbasesalaryandcommission,althoughmostintervieweeshaddeterminedthatsomebasesalaryisimportanttoretainsalesagents.Several


groupsfoundatieredstructureworksbest—newcomerstosalesstartoutwithaminimumbasesalary,thenastheirsellingacumengrows,commissionsbecomeimportant incentivesanda largerproportionoftake-homepay.PollinateEnergy’ssalesstaffincentivesystemincludespointsforcollectinginstallmentpaymentsforproductssoldthroughitsin-housecreditscheme.Tieredcommissionstructures,wherelargercommissionsarepaidforsellingaboveacertainthreshold,betterincentivizeasalesforcetomeetinternalsalestargets.Groupsthatpaycommissionsonlyhavefoundretentionachallenge.Toretainstaff,itisimportanttoofferopportunities to continually expand skillsets and advance up the corporate ladder. UpEnergy found thatcamaraderieiskeytoitslong-termstaffretention.Itscoregroupofsalesofficerscounteachotherasgoodfriends,notjustcolleagues,andhavestayedwiththecompanyforover6years.Evenwithincentivesandsupportstructures,allintervieweesmentionedretentionisanissue.

TrainingcostsintheB2Cchannelarealsosubstantial.“Ourbiggestsunkcostispeoplewhomwehavealreadytrainedbutwho leavebeforetheymakeasale,”saidLaden.AnagentneedstostaywithLivelyHoodsatleast3monthstorecouptrainingcosts.Thisiswhyadistributor’shiringstrategyiscritical.Acrosstheboard,distributorsfoundinterviewsandcoverlettersdonotworkwellinhiringfromtheBOP.DistributorsandB2C-focusedmanufacturersmustbecreativetohiretherightpeople.Greenwaysaid,“recruitmentischallengingonaccountofthedifficultylevelofthejobandalsobecauseoftensalesagentsdonotseeacareerpathforsuchroles.”Greenwayis,therefore,workingtoincreaseproductivityandincomelevelsforagentsbyofferingadditionalproductsandstovemodelstheycansell.Inrecruitingagents,LivelyHoodslooksforgrit,andputstheiragentsthroughaweekoffieldchallengesbeforetheygettheirfirstproduct.Othershavefoundprevioussalesexperience important.Manymentionedthe importanceofdrive in theirsalesstaff.PollinateEnergysaiditsmostsuccessfulsalesagentshavean“abilitytolookatthisasagreatopportunitytoalsoservethesecommunitieswithlife-changingproducts,acceptingchallengesandworkingwithoutsupervisionattimes,andaboveall,havingaverypositiveoutlooktowardslife.”Thatcomes,inpart,fromPollinate’sdeliberateandconcertedefforttofullyincorporateitssalesteamintothecompany’svisionandmission.

MARKETING COSTS are another critical component of a B2C channel. Some manufacturers found marketing costsinthischannelalmostmatchedstoveproductioncosts,makingtheoperationunprofitable.Theyfounditbettertosupportthechannelindirectlywithbrochuresandotherpublicityandtosplitmarketingcostswithdistributionpartnersdirectlyservicingthechannel.DistributorsusingaB2Capproachcanbenefitfromthesetypesofsharedmarketingarrangementswithmanufacturers.

Envirofit International


Fordistributors,thedistinctionbetweenastovebrandandadistributorbrandisimportanttomarketing.“Idon’tthinkconsumershaveretailerloyalty,theyhavebrandloyalty,”saidLaden.Thedistributor’spitchtothecustomertheniscenteredondeliveringthebestcustomerexperience—firstprovidingconsumereducationandbuildingawareness,thenaddinggoodafter-saleservice.Bothareimportanttocustomerloyalty,andkeepthedooropentosellthecustomeradditionalproducts.Inareaswherestovebrandsarenotyethouseholdnames,distributorservice,reliability,andreputationfordeliveringqualityproductsarekeyfeaturesforcustomers.

FINANCING. TheB2Cchannel requiresend-userfinancing, asmanyBOPclients lack the cash topay foradvancedbiomassstovesupfront.This isyetanothercostforthemanufacturerordistributor,because itrequiresin-housesystemsandstaffskilledatadministeringfinance.Withmobilepaymentplatformsandeaseoftrackingsystems,moreandmoredistributorsareoffering in-housefinance.DistributorssuchasBidhaaSasa incorporateddistributionandcreditaspartof itsbusinessmodel fromtheonset.Morethan95%ofBidhaaSasa’s salesaremadeoncredit togroupsofcustomers (primarilywomen’sgroupsorother socialnetworks)thatguaranteeeachotherandcangetcreditmakingmonthlypaymentsviaM-Pesa.Thecompanyincorporates the interest rate into its product price and relies on the sales representative to sell stoves and offercredit.Adown-paymentof15%servesascashcollateral,andgroupco-guaranteestructureensureswrite-offsarekeptat<2%ofrevenue.AcrossbothIndiaandEastAfrica,distributorsarebeginningtoofferlayawaysystems.PollinateEnergysellsmostofitsproductson3-,5-,and8-weekinstallmentplans.Salesstaffcollectpaymentsusingapoints-basedincentivesystem,trackedusingasalesforceapplication.Throughthissystem,Pollinateboastsa<2%defaultrate.OtherdistributorsandB2C-focusedmanufacturerspartnerwithlocalfinancialinstitutions,suchasSACCOsorMFIstoprovidefinancingtotheircustomers.Thesetypesofpartnershipshavetheirownchallenges(seeFinanceandCreditProviderssection).

Tosummarize,goodcustomerservice,qualitybrandedproducts at affordable prices, and access to financewhilekeepingcostslowandretaininghigh-qualitystaffusing appropriate motivation and incentives are among the attributes required to operate this challengingchannel successfully.

B2C WORKS BEST WHEN:• Productbrandawarenessisstrong• Target customers are aggregated or

locatedinhigh-densityareas,makinghigher sales volumes easier

• Companies can offer multiple products to the same group of customers

• Sufficientincentivesandopportunitiesfor advancement motivate high performingsalesstaff,complementedby on-going training

• Goodsystemsareinplacetotrackcustomer data and deliver strong after-sales services

• Consumerfinancingisavailable(in-houselayawayorcredit)


LARGE NATIONWIDE RETAIL COMPANIES AND SUPERMARKETSSTRENGTHS WEAKNESSES

Storeswithnationwidepresence,trusted name

Longwaittimeforsupermarketchains to pay (2-12 months) ties up workingcapital

Convenient and accessible for urban,peri-urbanmarket

No ability to demo products

Lowinvestmentinstaffcosts(recruitment,training)

Higher level of existing brand awarenessandhigher(above-the-line)marketingcostsrequired

Reportedtohavemorestable,consistent sales than other channels

Available primarily to middle orupperincomeconsumers,asconsumer credit is not offered

OVERVIEW. Large retail chains come with trusted brandrecognition that can strengthen consumer confidence ina stove as a quality product. They also have nationwide(sometimes regional) presence and distribution infrastructure in place. This can be very attractive to stove companies that want toget theirstovesonthemarket toa largecustomerbase,especiallyinurbanandperi-urbanareas.Theyprovideimportanteconomiesofscale for thestovecompany,whichpartners through a single retailer but is granted access to various stores with high consumer traffic. In Kenya, forexample,stoveshavebeensoldthrough largeretailerswithupwardsof50branches inandaround thecountry, suchasNakumatt,Tuskys,andUchumi.Comparedtootherchannels,working through supermarkets can be low-cost, at least intermsofstaffrecruitmentandtraining.Forthisreason,manystove manufacturers have at least tried this channel at some point,eveniftheylaterabandonedit.

Althoughmostofthecompanieswespoketofoundworkingthroughsupermarketsandlargeretailersmorechallengingthanitwasworth,therearesomenotableexceptions.Thekeydifferencesbetweenthosethathavebeenabletodevelopsuccessfulpartnershipsandthosethathaveabandonedthechannelare:1. commitmenttoalarge-scale,nationwidebrandawarenessandmarketingstrategy2. financialcapacitytotieupworkingcapitalformonthsatatime3. abilitytoguaranteeretailersaconsistentsupplyofwarranty-backed,market-testedproducts

Thesefirsttwofactorsrequirethestovecompanytomakealargecapitalinvestment,whichcanbedifficultfornascentorsmallercompanies.However,withahighenoughinjectionofcapitalthischannelhasprovenitcanproducesignificantsales—upwardsofseveralthousandstovespermonth.Onemanufacturerthathasdevelopedsuccessfulpartnershipswithlargeretailersnotedthatthischannelismorestableandconsistentthan some of the others they use.

Someoftheprimarylessonsfromworkingthroughlarge-scaleretailerscitedininterviewsanddatacollectionforthisstudyarebelow.

Andrea Albini


CREDIT TERMS AND PAYMENTS. Theflip sideofworkingwith large trusted retailerswithanationwidepresenceandhugeconsumerbaseisthattheyholdallthebargainingpowerwhennegotiatingpricingandcreditterms.Long,drawnoutpayables(amountowedbyretailerstosuppliers)thattieupworkingcapitalwasbyfarthemostcitedreasonforabandoningthisdistributionchannelaltogether,orminimizingthenumberofstovessoldthroughtheseretailers.Whilerepaymentagreementsof30–90dayscanbeestablishedwithretailchains,severalstovecompaniessaidretailerscantake6–12monthstopayforhundreds,sometimesthousands of stoves they have provided on extended payable terms. That can mean tens or hundreds of thousandsofdollarsinworkingcapitalaretiedupinstockattheretailer.Itcanalsonecessitateinvestinginastaffmemberwhospendssignificanttimeworkingtocollectpaymentsduefromretailers.

BRAND AND PRODUCT RECOGNITION. Anothermajorexpense,andthereforeachallenge,inmakingthischannelworkisinvestmentinmarketingandbrandawareness.Achievinghighstovesalesthroughthischannelrequiressignificantinvestmentinabove-the-line5 (mass) marketing to create brand recognition. Investment in marketingmaterialsatthepointsofsaleisimportant,butbrandawarenessisakeyfactorinmotivatingpeopletopurchasestovesatlargeretailers.Manycompaniesinterviewedfoundtheexpenseofmassmarketingwastoohighforwhattheycouldexpectinreturns.Onecompanysaidlargeretailersrequirelarge-scaleproductpublicitybeforetheywillevenagreetostockthestoves,andeventhen,thestovesmaynotgetthebestplacementinthestoreorenoughattentionfromcustomerstowarranttheinvestment.Oneupsidefromthisincreasedmassmarketingexpenditure is that thebenefitsextendbeyondthe largeretailerchannel. Thebrandawarenessgeneratedbythislevelofmarketingalsosupportsotherongoingdistributioneffortsandattractsnewdistributionpartners.

Severalofthoseinterviewedsaidtheneedforbrandrecognitionisn’ttheonlychallenge.Advancedbiomassstovesarenotaproductmosthouseholdsarefamiliarwithyet,andthatmeanstheyrequiremoredemonstrationand trainingonproperuse.Onecompanysaid this channelworksbest for fast-movingconsumergoods,whichdoesn’tyetincludestoves.Otherproducts,suchassolar,thatrequirelessconsumereducationthancookstoves, seemore success through this channel. Stoves require abehavior change component that isdifficulttoaddressthroughthesupermarketchannel,sincetherearetypicallynosalesagentspresentwhentheconsumerispurchasingtheproduct.Largeretailersusuallyhaveextensiveproductlinesandthereforedonotinvestheavilyintrainingtheirownsalesforcetosellstoves.Thatmeansstovecompaniesneedtorelyonproductappeal,brandandproductawareness,andshelfexposuretogeneratesales.

There are, however, opportunities for joint promotionalcampaignsbetweenstovecompaniesandlargeretailers.These include coupons, temporary discounts, in-storepromotions,andbetterproductplacement,whichareallpotentialstrategiesforgrowththroughthischannel.

REACHING THE TARGET CONSUMER MARKET. This channel reaches mainly urban or peri-urban, typicallymiddle- or upper-income consumers, although in somecases these purchases are made for family members in rural areas.Companieslookingtosellwoodstovesortargetingmore rural or lower-income customers find it difficult toreachtheirtargetmarketthroughlargeretailers.However,advanced charcoal stoves have sold well through thischannelinKenyaparticularly.Becausetheseretailersdon’ttypically offer credit (with the exceptionof credit cards,whichpotentialstovepurchasersmaynothaveaccessto),consumersneedtopayforthestovewithcashupfront,whichmayturnawaypotentialbuyers.

LARGE RETAIL CHANNEL WORKS BEST WHEN:• Thestovecompanyhassufficient

workingcapitaltoprovidecredittermstoretailers(often3–6months,sometimes10–12months)

• Productsarewellknown,orthereissomedegreeofbrandrecognition,orthecompanyinvestssignificantresources in high-level mass marketingandbrandawareness

• Target market is primarily urban or peri-urban

• Customershavesufficientcashanddon’tneedcredit

5 Widespreadmarketingtolargeaudiences,generallythroughradio,TVornewspaperadvertisement.


MICRO-ENTREPRENEURS AND SMALL RETAILERSSTRENGTHS WEAKNESSES

Reachesruralorlast-milecustomers;canmovetothemarketand meet demand

Difficulttovetmicro-entrepreneurswhooftenhavelowlevelsoffinancialmanagement.Manufacturercarriesriskifgoodsareprovided on credit or consignment

Creates income opportunities in rural or other underserved areas

Unpredictable and unstable sales

Entrepreneursunderstandtheirlocalcommunitiesandtheirmarket

Micro-entrepreneurshavelittleaccesstoworkingcapital

Stovescanbesoldbundledwithcomplementaryproducts Recruitment,trainingandsupportcanbeexpensive,especiallywithhighratesofturnover.Difficulttomakeaprofit.

OVERVIEW.Workingthroughmicro-entrepreneursisoneofthebestwaystoreachlast-milecustomers,asthey areoften already selling complementarygoods to target customers, or have tight connectionswiththecommunitieswheretheywork.Organizationswithasociallymotivatedmissioncanprovideadditionalsourcesofincomegenerationinoften-underservedareas.However,workingwithmicro-entrepreneurscanbecostly,astheyrequiresignificanttrainingandsupporttobesuccessful.Somecompaniesseekoutmicro-entrepreneursasalow-cost,low-investmentwayofreachingBOPmarkets,butthathasnotgenerallyheldtrue–atleastnotwithanysignificantsales,accordingtothoseinterviewed.Inanexperimentsellingthroughchaiwalas(individualentrepreneurteasellers)inIndia,BioLitefoundthateventhoughthechaiwalascouldusethestovetobrewtheirtea,theyweren’tabletoprovidethelevelofdemonstrationandknowledgeofstovebenefitsthatcustomersneedtomakeapurchase.

Becausewomenaretheprimaryusersofhouseholdenergyproducts,suchasstoves,theyalsohavethepo-tentialtocatalyzethestovemarketasmicro-entrepreneurs.Manycompanieshaveworkedtoincreasetheirengagementofwomenentrepreneursinstovedistribution.Womenentrepreneurs,however,requireaddition-al support in training,mentorship, andaccesstoresourcestosucceed,becausethey often have less access to financeand more demands on their time. In ad-dition,culturalhurdlesaffectagency-re-lated factors, such as self-confidence.Mobilitywasmentionedasakeydiffer-ence in high vs. low sellers. Women’smobility can be restricted by cultural or social norms, aswell as family obli-gations. The investment needed to fully support micro-entrepreneurs can make it difficult for profit-motivated organi-zations,asthetightmarginsonstovesalonecan’t fully recover thosecosts inthe numbers sold through this channel. However,someorganizationshavesuc-ceeded in nearing sustainability through this channel by also offering other prod-ucts thathavebetterprofitmarginsorsellinlargervolumesthanstoves.Grantand other philanthropic funding is still critical for this channel to succeed.

16



Someadditionallessonsfromthemicro-entrepreneurmodelcitedininterviewsanddatacollectionforthisstudyarebelow.

FINANCIAL MANAGEMENT AND BUSINESS SKILLS.Oneofthemainchallengescitedinworkingwithlast-mileentrepreneursisalackofbusinessskills,specificallyfinancialmanagement.Severalintervieweessaidthislackoffinancialmanagementskillswasadealbreakerintheirexploringthissaleschannel,orthattheyhaddroppedthischannelaftertheentrepreneurstheywereworkingwithshowedpoorfinancialmanagementcapacity.

Companies thathave tried toprovideonly short,product-specific training (i.e.,howtodemoandmarketcookstoves),ratherthanmorecomprehensivebusinesstrainingandmentorshipsupport,foundthischannelparticularlychallenging. In its2016reviewofcurrentevidenceonthe impactofbusinesstrainingonpoorwomenentrepreneurs,theCenterforGlobalDevelopmentfoundthat“trainingprogramsmustbehighquali-ty(intermsoftrainingmaterials,trainers,andduration)andaddresstheconstraints(timeandothercosts)thatwomenmicroentrepreneursfacetoattendandcompletethetraining”inordertoaffectbusinesspracticesand sales.6Becauseofthehighcostsofsuchtraining,thedecisiontoinvestintrainingmicro-entrepreneursisnoteasy.Somerecentevidencepointstosuccessinadvancingmicro-entrepreneurs’salesandincreasingtheirretentionbyprovidingbusinesstrainingcoupledwithagency-basedempowermentandleadershiptrainingspecificallyforlast-mileenergyentrepreneurs.7However,evenwiththepromiseofadditionalsalesandim-provedretention,manysmallerornewlyestablishedcompaniesfindthecostofthiscomprehensive,holistictrainingprohibitive,asmanyprioritiescompeteforlimitedresources.

Companieswithsuccessinsellingstovesthroughthischannelsaidthekeyisworkingwithmicro-entrepre-neurswhohaveestablishedsuccessfulbusinessessellingcomplementaryproducts,andthereforesomepre-viousbusinesstrainingandskills.Eventhen,additionaltrainingandmentorshipisneeded.

PROVIDING CREDIT TO LAST-MILE ENTREPRENEURSwasthenumberonechallengecitedinourinterviewswithmanufacturersanddistributioncompanies.Micro-entrepreneurs’accesstotraditionalorformalsourcesofcreditforworkingcapitaltobuystockisgenerallylow,sincetheyoftenliveinruralorunderservedareasandhavelittleornocredithistory.However,providingin-housecreditorproductsonconsignmentisrisky.Paymentdelinquenciesanddefaultsarecommonamongthisgroup.Morethanoneintervieweehadprovidedloanstolast-mileentrepreneursthroughapartnershipwiththemicrofinancecompany,Kiva,andendeduplosingmoneywhenentrepreneurscouldn’trepay.

Forothers,suchasSolarSister,providingstovesandotherproductsonconsignmentchangedthenatureofitsrelationshipwithitsentrepreneurs–fromsalessupportandtrainingprovidertodebtscollector.SolarSister also found that offering credit for a set of products up front changed the type of entrepreneur they at-tracted.Onceitswitchedtoacash-up-frontpaymentmodel,onlyseriousentrepreneurssignedup.Althoughinitialsaleswereslower,theentrepreneursitworkedwithbecamemorededicatedlonger-term.SolarSisteracknowledgesthatthisamountstoverysmallpurchasesperentrepreneurinitially,butthecompanyalsoin-vests in training entrepreneurs in reinvesting their sales money in larger amounts of stock in future purchases togrowtheirbusiness.

Some women micro-entrepreneurs have financed their business stock purchases through loans from ta-ble-bankingstylewomen’sgroups.Partneringwithlocal,smallerfinanciersorsavingsgroupscanrequiresig-nificanttimeinvestmentandotherchallengesofitsown(seesectionbelow),butitremovestheriskfromthestovecompany.AlphaRenewableEnergyhasapartnershipwithSelf-EmployedWomen’sAssociation(SEWA)toprovidefinancingtoitsmemberstopurchasestovestosellintheircommunities.About90%ofSEWAstove

6 BuvinicandO’Donnell.RevisitingWhatWorks:Women,EconomicEmpowermentandSmartDesign.November2016.https://www.cgdev.org/sites/default/files/CGD-Roadmap-Update-2016.pdf

7Shankar,A.Onyura,MandAlderman,A.Agency-basedempowermenttrainingenhancessalescapacityoffemalecookstoveentrepreneursinKenya.JournalofHealthCommunications2015;20Suppl1:67-75.http://www.tandfonline.com/doi/abs/10.1080/10810730.2014.1002959

https://www.cgdev.org/sites/default/files/CGD-Roadmap-Update-2016.pdf

http://www.tandfonline.com/doi/abs/10.1080/10810730.2014.1002959

BioLite 2017 Winrock International | www.winrock.org18

entrepreneursarefinancedwith thiscredit.Thisworksmuchthewaytablebankingdoes,inthatthewoman’ssocialreputationisatriskincaseofdefault,promotingbetter repayment rates.

AnotherstrategystovemanufacturerSCODE,(Sustain-able Community Development Services) mentioned is to providecredittomicro-entrepreneursonlyafterrequir-ing them to start selling through upfront cash payments. Oncetheyhaveestablishedthemselveswiththecompa-ny throughmultiple cashpurchasesof stockandwanttoincreasetheirstock,atthatpointSCODEofferscred-it. Even then, it foundmicro-entrepreneurs often takelongertorepaythantheagreed-uponschedule(e.g.,90daysinsteadof30),whichtiesupworkingcapital.

LOW OR UNPREDICTABLE SALES. Micro-entrepre-neurs’salescanbeunpredictablemonthtomonthandentrepreneur to entrepreneur. Most micro-entrepre-neursarenotdedicated100%tostovesales;theyhaveotherjobsorsidebusinesses.Theremaybeawidegapinsales;80-90%ofsalesmaycomefrom10-20%oftheentrepreneurs.Thismakesitdifficultforamanufacturertoworkdirectlywithmicro-entrepreneurs.However,in-termediarydistributioncompanies,suchasSolarSisterorSEWA,canaggregateentrepreneurstobuyinlargerorders andmaintain longer-standing relationshipswithsuppliers to get favorable pricing. They can also provide the training and mentorship needed for micro-entrepre-neurstobesuccessful.SCODEsetupaseparateNGOarmtosupportandtrainmicro-entrepreneurs.Decidinghowbestto investthosetrainingandsupportre-sourcescanbetricky,however,giventherangeofsalesfromdifferententrepreneurs.

THE MICRO-ENTREPRENEUR CHANNEL WORKS BEST WHEN:• The target market is rural• Entrepreneursaremobile• Anintermediaryorganizationcan

aggregate entrepreneurs and buy in bulk from suppliers

• Alocalsalesrepisnearbywhocanmaintainrelationships,identifyappropriateretailpoints,andserviceorders to get community buy-in

• Thestovecompanyhassufficientfunds for training and marketing materials to give small retailers or has donor funding for this

• Stove companies become partners withlocalFIsorothernetworkstoprovideworkingcapitaltomicro-entrepreneurs

• Governmentextensionservicesprovide complementary training or awarenesssupport


COMPANY PARTNERSHIPS AND CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVESSTRENGTHS WEAKNESSES

CookstovescheckalotofdifferentCSRboxes(environment,socialimpact,health)

Cantaketimetosetuppartnerships,difficulttogetfootinthedoorwithlargercorporations

Companycanprovideend-userfinancingthroughsubsidiesorpayrolldeductions;forlatter,employerknowsthecustomerand assumes repayment risk

Competitionwithotherproductsuppliers

Abletoreachruralorothertargetcookstoveconsumers,ofteninlarge,aggregatednumbers

Salesorpaymentscanbeseasonal,dependingontypeofpartner;CSRinitiativescanalsobeshort-term,makingsalesdifficulttopredict

Lowerstaffingneedsandcosts;cantapintoemployerhumanresources and operational support

Mayaskforstovesonconsignmentorcreditterms,whichtiesupworkingcapital

Company is trusted by employees or community Noone-size-fitsallapproach

OVERVIEW.Developingpartnershipswithlargerenterprisesorcooperatives,inparticularthosethatemploytargetconsumersforcookstovesorcompaniesthatseektooffsettheirowncarbonemissionsor improvehealthorsocialwelfareinnearbycommunities,canbealow-maintenance,highpay-offchannelforcookstovesales.EnvirofitIndiasaidcorporatepartnershipsarecurrentlythesecondlargestchannelforthem.Companiesmaybemotivatedbyemployeewelfare,ormaybelookingtomeetspecificenvironmentalorhealth-relatedCSRmandatesor improvecommunityrelations.Forstoves inparticular, thefollowingtypesofcompaniesmakegoodpartnersbecauseof1)theiremployeebaseand/or2)communityengagement:• teaestates,flowerfarms,orotheremployerswhereworkersandfamiliesarehousedingroupsinrural

areaswithhighbiomassuse• farmer cooperatives supplying milk or other agricultural products to large processing companies• factoriesinareaswherebiomassuse(woodorcharcoal)isprevalent• labor-intensiveorganizationswhereworkersdonothaveaccesstoLPG

Thesepartnerscanaggregatelargenumbersoftargetconsumersformarketingandprovidefinancingforstovepurchases.Theycansubsidizethestovepriceinsomecases(eitherforemployeesorforsurroundingcommunitymembers),especiallyforthosewithaCSRmandate,orprovidepayrolldeductionssoemployeescanpayoffthestoveovermultiplepaychecks.Inthelattercase,theemployerassumestherepaymentrisk,whichisahugebonusforthestovecompany.Fromanoperationsstandpoint,processingindividualcustomerpaymentsthroughtheenterprisepartner’sexistingpayrolldepartmenttakesadvantageofexistingresourcesand aggregates purchases so the stove company can make bulk sales.

Oneofthemaindifferencesbetweenthesetypesofpartnershipsandworkingwithotheraggregators,suchasSACCOsorMFIs,isthatmanyofthesecompanieshaveCSRmandatesorobjectives.InIndia,thegovern-mentrequires2%ofacompany’snetprofitoverthepastthreeyearsbedevotedtoCSRactivities,makingIndiaaprimelocationforthistypeofpartnership.EnvirofitIndiafoundthisapproachdidn’tworkaswellinSriLankaorNepalwherethereisn’tthesamegovernmentmandate.AnotherimportantcontextualdistinctionisthatIndiaishometomanylargecompaniescoupledwithahighnumberofbiomassusers,whichmakesCSRforstovesagoodprospectthere.CSR-drivenstovesaleswillnaturallybeconcentratedinmorecorporatizedcountries. In smaller countries,particularly inSub-SaharanAfrica, therearen’t the same large corporationheadquarters.


CookstovesareagoodcandidateforemployerswithCSRmandatesbecauseoftheenvironmentalbenefitsand,dependingonthestove,healthbenefits.TheymeetanumberofdifferentCSRandemployee-welfaregoals.AccordingtoUpEnergy,“manyinternationalteaplantationswithpresenceinthemarkethavesomesortof sustainabilitymandate.Theyknow theyalreadyhaveaprettybigbiomass footprint through theirdryingprocess,”whichmeanstheyareinterestedinoffsettingthatbysupportingbiomass-savingstoveinitia-tives.Othercompanieshavefoundcookstoves’socialbenefitsacompellingoffertocorporatepartners.Withtherightcorporatepartner,it’snotchallengingtofindananglewherecookstovescansupportthecompany’sexisting,insomecasesmandated,sustainabilityorothersocialwelfaregoals.However,there’snoone-size-fits-allapproachtoworkingwithemployersonCSRinitiatives.Eachmayrequireadifferentstrategy.

Someoftheprimarylessonsfromworkingthroughcorporatepartnershipcitedininterviewsanddatacollec-tionarebelow.

PARTNERSHIPS TAKE TIME; IT CAN BE DIFFICULT TO GET A FOOT IN THE DOOR.Partnershipswereeasiesttoestablishwhenastovecompanyhadadirectconnectionwithsomeoneworkinginthecompany.Companieswithidentifiablechampionsofcleancookstoveswithinseniormanagementhavegreaterpartner-shippotential.Withoutthat,thesepartnershipscanbedifficult,ortakealongtimetoestablish.Oneofthebenefitsofthischannelisthatemployeeshaveanaddedleveloftrustintheiremployers,whichcanredoundtothestovecompany. However,thiscreatesarisktotheemployer’sreputation.Companiesneedtovetproductsandstovecompaniesupfront,andthatmayaddtothetimeittakestodevelopthesepartnerships.

Wereceivedmixedfeedbackaboutthecompetitionforthesetypesofpartnerships.EnvirofitIndiasaidCSRdirectorsgetbombardedbyhundredsofrequestsforpartnership.Itisimportanttolookfortherightcom-pany,wheretheemployeesorsurroundingcommunityhaveaclearneedforthestoves,anddosomedemosfirsttoshowthecompanythereisdemandfortheproduct.Otherswespoketo,suchasUpEnergy,believestove companies have a comparative advantage over other product suppliers in developing these corporate partnershipssince,ratherthanbeingmotivatedbytheprofitmarginontheproduct,manycorporatepartnersaremotivatedbytheproduct’sabilitytomeettheirCSRobjectives.IftheCSRmissionisenvironment-related,thereislesscompetitionfromhigher-valueproductslikemotorbikes,TVs,orcomputers,whichcanbelargecompetitorsforSACCOorMFIbusiness.

In somecases, the companymaywant toworkwithapartnerthatcanofferarangeofproducts,notonlystovesoronebrandofstove,tominimizethenumberofpartnerstheyworkwith.Inthiscase,stovedistrib-utors that can market themselves as a one-stop shop for household energy and other products may have an easier time getting in.

DELAYED OR SEASONAL PAYMENTS. Especiallyforcompanieswhoseworkforceispaidfollowinganagri-culturalcalendar,salescanbeseasonal,whichrequiresadditionalplanningandcouldbedifficult if itwereastove company’s only or primary sales channel. Thiscan also be challenging if, as many corporate part-nersdo,theyrequirecredittermsthattieupthestovecompany’s working capital. With sufficient planningandanunderstandingof these factors,however, thischallengecanbeminimized.Stovedistributorsoperat-inginthischannelcanevenoutcashflowsbycarefullyplanning sales across several agricultural value chains (e.g.,tea,coffee,tobacco).

COMPANY PARTNERSHIPS WORK BEST WHEN:• The company has a CSR mission or

social responsibility goals• The company has strong operational

functions and can provide regular payroll deductions and act as a guarantee against non-payment

• The company has employees in the targetconsumersegment(e.g.,teaorflowerfarms,factories,agriculturalcooperatives,otherlabor-intensiveenterprises),orisworkinginanareaofhigh biomass use


FINANCE AND CREDIT PROVIDERSSTRENGTHS WEAKNESSES

Increasedstovesalesthroughaccesstofinance;abilitytopurchase stove on the spot at demos

LengthyprocesstoestablishapartnershipwithanMFI;requiresatailoredapproachtoeachfinanceprovider

Abilitytotargetruralclientsthroughagent,branch,ortablebankingnetworks

Requiresownsalesforceinparallelwithloansalesrepsandalot of training

Appropriate setting to provide stove demos (branches or credit meetingsinthefield)

MFIsoftenunwillingtoholdontostock,requiringadditionalinfrastructure (distribution and storage points) for stoves

Volume of sales possible through access to critical mass of peoplealreadyorganizedingroups

After-saleservicecanbeachallengewithcertainMFIsreluctanttoprovidecustomerdataforproductfollowups

Moreprofitableduetotheopportunitytoleverageexistinginfrastructureandfavorableworkingcapitalterms

Cookstoves loans constitute a relatively small percentage oftheFI’sloanportfolioandoftendon’treceiveadequatemanagement attention

OVERVIEW. Financial institutions bring several advantages to the table. They have a large, establishedcustomerbasewithatrackrecord.Thatcustomerbasecanbetappedforstovedemosandaccesstofinance.Whilemostgroupswe spoke to see a need for financing for advancedbiomass stoves, in some cases itwasn’tthefinancingthatwasthemostattractiveaspectofworkingwithFIs.Inmanycases,itisaccesstotheirnetworks that ismostvaluable. In thecaseofGreenwayAppliances,50%of its salescomethroughMFIchannels,eventhoughitsdirectsalesforceisstillresponsiblefordemostocustomersbeforehandingleadsover toanMFI.Ruralbankingnetworksprovideanopportunity for stovedemos in thefield,whileurbanbankbranchescandisplaystovesfortheirwalk-incustomersandprovidequickcreditdisbursement.Existinginfrastructure,suchasphysicalbranchesandnetworks,andhumanresources(loansalesreps)allowthedistributortoshareresourcesandthusrequirelesscashupfrontonthepartofthedistributortoservetheFInetwork.FIstendtopaybackfaster(10to40days)withnoorlimitedcreditrisk.Thisimprovesthesuppliers’operatingcapitalefficiency.



Despitetheseclearadvantages,thereisnoone-size-fits-allsolution.TheprocessofestablishingaworkingpartnershipwithanMFIcanbe lengthy—from months to several years. For instance, it tookonemanufacturerthreeyearstocementapartnershipwithanMFIinKenya.However,thecompany’spatienceultimatelypaidoffwithahighvolumeofsales.EthanKay,managingdirectorofemergingmarketsforBioLite,confirmedthistrendandsaid,“MFIperformancevariesheavilybypartner.”Forinstance,BioLitehaspartnershipswithtwosimilarlysizedMFIs.Oneisaveryeffectivepartnerthat“totallygetshowtodoproductloansforstoves,”andanothertookawhiletoeditits15-pageloanapprovaldocumentdowntoafewpages,andpushing sales through them remains a challenge.

Each finance provider requires a tailored approach, from loandocumentationtotraining,andacleardemarcationofrolesplayedby the distributors and the FI staff. For cookstove lending to be

sustainablelong-termforanFI,however,seniorechelonsmustbuyintothecookstoveloanproduct.Withoutthatseniormanagementsupport,theabilityandeffortsofeventhemostdedicatedstaffdowntheladderwillnotbeenoughtosecuretheFI’slong-termcommitmenttocookstovelending.

InestablishingpartnershipswiththeFIs,wefoundseveralcommonchallengesandwaystoaddressthemamongmanufacturersanddistributors,whicharedetailedbelow.

“TOO MANY PEOPLE KNOCKING AT THE DOOR.” Several cookstove manufacturers and distributors cited thedifficultyofgettingthroughtoanFI,withtoomanypartiescompetingfortheirattention.Thisdynamicextendsleadtimesinestablishingpartnershipsandreducestheirefficiency.

BIGGER IS NOT NECESSARILY BETTER. There is some debate among manufacturers and distributors over therightsizeofFIstoapproach.Intheory,biggerFIs,suchasnationalorregional-levelcommercialbanks,havelargerbranchnetworksacrossthecountry,whichallowsforvolumeandeconomiesofscale.Inpractice,however,biggerbankscanbemoredifficulttoworkwith.Theycanbehighlybureaucraticandhavea lotof conflictingpriorities.Competition for their channels canbehigh. “Onecommonmisconception is that800-poundgorillasarethebestpartners.Whilethereareexceptions,thesemassiveorganizationssometimesstruggletodeliverontheirpotentialtogeneratelarge-scalesales,”saidEthanKayofBioLite.Thisholdstrueonthedemandsideaswell.Someconsumerswillusebiggerbanksforloansforsuchbig-ticketitemsasautosormortgages,butnotsmalleritemslike$40cookstoves.Fromaprofitabilitystandpoint,WisdomInnovationsfoundMFIstakebiggermargins,comparedtosmallerfinancingstructures,suchastable-bankinggroups.MFIfieldofficersalsotendtolikegroupsthatareclosetoeachothertominimizelogisticsandservicingcosts,whichforcedthecompanytogoperi-urbanratherthanruralwheremostofWisdom’sstovecustomerslive.

TheCEOofKenyandistributorSolaYetu(recentlyacquiredbyPamojaLife),FarukKarim,thinkstheSACCOchannelisthemostorganizedinKenyabecauseSACCOsmustregisterofficiallywiththegovernment,provideauditedfinancialstatements,electofficials,andrunannualgeneralmeetings.MuchlikelargerbanksandMFIs,thechanneldependsontrust.Thatmakesitdifficulttogainaccess.Oftenanintroductionisrequired.Oncein,however, thechannelgivesendusersvariousfinancingoptionsfortheirstovepurchases, fromsavingsandpayrolldeductionstocredit.KUSCCO,alobbyingbodyandumbrellaorganizationforKenyanSACCOs,providedthatintroductionforSolaYetu.Withoutthissortofformalpartnershipandassistance,itcanbehardfordistributorstodevelopaleveloftrustwithSACCOs.ManufacturerSCODEalsofoundSACCOstobeamorestablechannel.AccordingtoCEOJohnMaina,“SomeSACCOsfaceliquidityconstraintsofon-lendingtomembers.However,ifaSACCOhasthecashavailabletoon-lend,itisabletodistributetheproducttocustomersefficiently,reducingourlogisticscosts.”SCODEcansaveonlogisticsbydeliveringtothemainSACCOoffices.SACCOsthentakeresponsibilityfordistributingthestovestotheendusers.

ONE COMMON MISCONCEPTION IS THAT 800-POUND GORILLAS ARE THE BEST PARTNERS.


SMALL LOAN SIZE. Cookstoves cost from$30–$70.Servicing a consumer loan that small is challenging. Operating costs are high compared to the interestgenerated.Stoveloanscompetewithlargerloansthatgenerate higher interest for FIs for the same amount ofadministrativecosts.Therefore,manyFIsfindsuchlendinguneconomical.Onewaytodecreaseoperationalcosts is to bundle stoveswith other complementarygoods to spread unit costs across a larger loan. For instance, KUSCCO bundled its stove loanwith solarhome systemsand lanterns to increase the loan sizeofferingtoitsSACCOs.Pay-as-you-gosolarprovidersalso bundle cookstove loans into on-going solar home system loans. FIs that see a CSR component in their stove loans aremorewilling to look for cross-sellingopportunities with other products to improve theirloan economics.

LIMITED ABILITY TO HOLD PHYSICAL STOCK. A stove purchase prompts a value-added tax (VAT). FIs typically cannot charge for this tax. Many cannot post physicalstockontheirbooks,either.Thismeansthereneeds to be an intermediary legally registered to do so, such as a stockist, retailer, or distributor, whichadds costs to developing the channel. Several FIs in India andKenyauseda coupon scheme to resolve this. Theway itworks is theFIgives the consumeracouponrepresentingaloanagainstastovepurchase.Theconsumertakesittoastoveretailer,usuallynearalocalFIbranch.TheretailerexchangesthecouponforastoveandgetsreimbursedbytheFI.EquityBankinKenya,however,foundthistoocumbersome,andin2017rolledoutitsEcoMoto(stove/solar)loanaspartofitsmobileplatform,Equitel.Thisallowscustomerstotakealoanusingtheirmobilephoneappattheretaillocation,ratherthanusingthecouponsystem.

SOLA YETU – KUSCCO PARTNERSHIPSola Yetu created an approach to the FInetwork that can catalyze stove sales andtransform distribution. The company began asasmalldistributorwiththreesalesstaffinNairobi.When it joinedKUSCCO’s JikoSafi loanprogram in2015,SolaYetusalesgrew to an average 1,200 cookstoves aquarter. This growth led to its purchaseby Pamoja Life, a UK-based Climate Carecompany. Now the sales team exceeds100.SolaYetu’s success isdue, toa largeextent,toitscommitmenttotheKUSCCOnetwork, itsguaranteetodeliverproductsanywhere in the country within 48 hours,and its assigning a dedicated sales force to workwiththeKUSCCOmarketers,aswellas its timely payment of incentives.



PROVISION OF AFTER-SALE SERVICE. Many FIs do not give out customer details to third parties, partly because of customeracquisitionprivacylaws.WisdomInnovationsinKenyafoundithadaverydifficulttimegettingconsumerfeedbackonitsstovesbecauseit couldn’t followupwith theMFI’s stove customers.Wisdomsawthattheuptakeofstovesinthosemarketswaspoor,soitdecidedtodiscontinuetheMFImodelandfocusontablebanking.EnvirofitIndiaprovidescustomerserviceforitsMFIpartnerclients,butonlyaftertheMFImakestheinitialrequest.Theafter-saleservicerequestoriginates with the loan officer, who specifies only the customerphone number and location. The manufacturer then has a limited timetoaddresstheissuedirectlywiththecustomer.Afterserviceisprovided,theloanofficerconfirmstheissuehasbeenresolvedwiththe customer before marking it complete.

NEED FOR A DEDICATED SALES FORCE. An FI loan marketing sales force is not alwaysgeared to sellingphysicalproducts, sinceloanofficersaretrainedtohonetheirskillssellingcredit.EcoZoomlearned that it is not efficient to use loan officers tomarket theirstoves,because“theloanmarketer’spriorityistounderwriteloansandcompletethepaperwork;theyoftenhavelessthanfiveminutesto demo the product.” That means manufacturers or distributors oftenhavetobuildasales force inparallel totheFI’s loanrepstoservicetheFIchannel.GreenwayApplianceshasitssalesagentsdemoproducts to MFI customers before handing over leads to the MFI for

financing.BothGreenwayandBioLitefoundtheFIsalesforcehadadifficulttimeshiftingtoproductsales.Loanofficers’overalljobresponsibilitiesdon’taffordthemthesamesalesdemoabilityandenthusiasm,andkeyperformanceindicatorsareverydifferentforloansvs.stoves.ManyFIshaveloansalestargets,rewardingtheirstaffforonboardingandmanagingavolumeofloansinstead.Incertaincases,whenstovedistributorstriedtoassignoneortwopart-timesalesstafftoserviceMFIsorSACCOs,theyfounditdifficulttogetmuchtraction.MostintervieweesfoundacommittedsalesforceinparalleltotheFIisthemosteffectivewaytosellthroughthischannel,althoughitcanbecostlytoestablish.ThechallengeforthestovemanufactureranddistributorishowtobestleverageFI’sexistinginfrastructuretoopenthedoortocustomersandfinance.Itthenreliesonitsowndistributioninfrastructure.

THE RIGHT INCENTIVES. In the absence of an economic need for a stand-alone cookstove loan and reluctancetoputFIstaff time intomarketingstoves,incentivesbecomecritical.EnvirofitIndiaprovidedanexample of an incentive structure it uses to motivate oneofitsMFIpartners’loanofficerstomarketstovessuccessfully.TheloanofficerssellstovesandthenbillEnvirofit,basedonthenumbersold.Envirofitthenpaysthe MFI a marketing fee. Ravi Kumar agrees this is a “veryfocusedmarketingstrategyinthatthemarketingmoneyspentisdirectlyrelatedtosales.”KUSCCOhasalso been successful in motivating its loan sales force to jumpstart a cookstove lendingprogramandopendoorstoSACCOswitharegularlypaid,properlyalignedincentive structure. Its distribution partners offered a tieredincentivestructuretoKUSCCOloanmarketers,withahighercommissionperstoveformonthlysales

RESULTS-BASED FINANCINGInrecognitionofaccesstofinanceasakeymarket barrier for the uptake of advanced biomass cookstoves, Endev, a programimplemented in Kenya by GIZ and SNV,is providing incentives to eligible FIs whoare lending for cookstoves. The incentive does not directly subsidize the loan, butcan be used by the FI for loan product development, loan officer motivation orpromotional activities.

THE LOAN MARKETER’S PRIORITY IS TO UNDERWRITE LOANS AND COMPLETE THE PAPERWORK; THEY OFTEN HAVE LESS THAN FIVE MINUTES TO DEMO THE PRODUCT.


abovecertainthresholds.KUSCCOmarketersreceivedcommissionsforallsalesmadethroughKUSCCO’snetwork,notonlyforstovessoldonloan.Thispromptedhighersales,evenwithaninitiallylowloanuptake.Receivingacommissionpersale,financedornot,encouragedmarketerstocontinuemakingintroductionstoSACCOsfordistributorsandofferingtheloaneveniftheyweren’tyetmeetingtheirofficialloantargets.

PARTNERSHIPS WITH CREDIT OR FINANCE PROVIDERS WORKS BEST WHEN:• Thedistributor(ormanufacturer)iswillingandabletoinvestinitsownsalesforcealongsideFI

loanrepresentativesandbuildaworkingpartnershipbetweenthetwo• Thedistributoriswillingtopaysufficientincentivesontime• Thedistributorhasavailableproducts,agoodlogisticsnetwork,andatrackrecordofdelivering

stoves on time• The FI loan sales force is trained to understand and sell the stove technology• Top-levelFIleadersbuyintothebenefitsofprovidingstoveloans• FI sees stoves as a strong contributor to its CSR mission or social responsibility goals • FIisopentocreatinganimblecreditproductthatdoesn’trequiremuchpaperworkorstringent

conditionsforborrowers,commensuratewiththesmallloansizeforastove• Stovescanbebundledwithcomplementarygoods,creatinglargerortop-uploans• Patienceandsufficienttimeisspentupfrontselectingpartnersanddevelopingpartnershipswith

clear lines of communication and clear expectations

BioLite


CONCLUSIONS / LOOKING TO THE FUTUREAfteranalyzingthesevariousdistributionchannels,severallessonsemerged.Thereisahighdegreeoffluidityinstrategyandchannelusageamongcookstovedistributorsandmanufacturers.However,threestrategiesforsuccessfuldistributionstoodoutacrossvariouschannels.Theyare:

1. Aggregatingcustomersthroughpartnerships(eitherwithfinancialinstitutions,corporatepartners,NGOsorothers)allowsforgreatervolumeofsales,loweringcost(economiesofscalefromlargevolumes)andresultinginamoreefficientdistribution.Aggregationcanbeevenmoreofadrawtopartnershipthanfinancingorotherservicesprovided.Thesepartnershipscantakesignificanttimeandenergytoestablish,andatailoredapproachisoftenrequiredforeach.Often,theystillrequireaparallelsalesforceonthepartofthestovemanufacturer/distributortoprovideproduct-specificknowledge to these aggregated consumer networks. Consensus among those interviewed,however,wasthatthebenefitsinsalesvolumesoffsettheseextracosts.

2. Consumerfinancingis importantforadvancedbiomassstovesales.Allmanufacturersandmostdistributors we spoke to offer financing through third party partnerships with FIs (sometimesaccountingforasmuchas50-80%oftheirtotalsales),employerpayrolldeductions,CSRsubsidies,tablebankingorother community savingsgroups,or in-house layaway systems that aremadeeasierthroughpartnershipswithtechnologyprovidersandmobilebankingsystems.

3. Cross-sellingorbundlingiskey.Becauseattractingnewcustomersiscostly,especiallywhensellingtoruralorlast-milecustomers,cross-selling–sellingmultipleproductstothesamecustomer–isacriticalstrategyformostofthegroupswespoketo,andisseenaneffectivewaytogainefficienciesin distribution and improve income and productivity of sales staff or micro-entrepreneurs. In some cases, this includesmultiple stovemodels, and inothersproviding an arrayof complementaryproductofferings.Similarly,fortheFIs,bundlingstoveswithothercomplementarygoodsincreasestheamountoftheloansizeofferedtotheconsumer,andlowersthecostofservicingthatloan,makingthestoveloanproductmoreprofitablefortheFI.

Inadditiontothesethreestrategies,weidentifiedtrustasakeyelementtoeffectivestovedistribution.Attheconsumer level, this includespositiveword-of-mouththroughproductqualityandexcellentafter-salesservice.Local institutions,suchastrustedretailers,financial institutionsandemployers/trustedcompanies,playakeyrolelegitimizingproductsaswell.

Therearestillimportantchallengesthatremain,includingreachingunbankedpopulationswithoutaccesstocreditoptions,andreducingcostsassociatedwithsupplyingrural,dispersedareas.Theinterplaybetweentechnology advancements, presence of local manufacturing, more consistent product supply and higherdemandhaveledtoariseinnewentrantstothecookstovedistributionspace(suchasfinancialinstitutionsandthirdpartydistributors)whoareworkingtoovercomethesechallenges.Lookingtothefuture,althoughintheearlystages,onlineadvertisingandsalesthroughsocialmediaorweb-saleschannels,suchasmanufacturerwebsites, is growing, especially for stoves aimed atmiddle-incomebiomass users. EcoZoom sells stovesthroughitssocialmediachannelsatahigherprice,withfreedeliveryofferedanywhereinKenya,althoughitonlyaccountsforafractionofsalessofar.Othermanufacturershavesoldstovesthroughthird-partyonlineproviders,suchasAmazon.Stovedistributorswillcontinuetoinnovateanddevelopcreativewaystoaggregatecustomersandprovidefinancingsolutionstomakeadvancedbiomassstovesaffordableandaccessibletoallthosewhoneedandwanttousethem.


WINROCK’S MISSION IS TO EMPOWER THE DISADVANTAGED, INCREASE ECONOMIC OPPORTUNITY AND SUSTAIN NATURAL RESOURCES ACROSS THE GLOBE.

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ADVANCED BIOMASS COOKSTOVE DISTRIBUTION · 2020. 10. 21. · its fintechplatform, Equitel, that allows qualifiedEquity Bank customers to get instant approval and take an EcoMoto loan