“Building trust is essential when you set up a BoP business”

Bertil van Vugt
By on November 20, 2014

The young entrepreneur Suraj Gudka (photo above) was one of the first members of the Inclusive Business Accelerator. He is setting up SokoText, a company that serves small shop owners in the slums of Nairobi, Kenya. We contacted Suraj to hear more about what he is doing and learn from his experiences.

Please introduce yourself and your venture?

SokoText“My name is Suraj Gudka, the co-Founder of SokoText. I was born and brought up in Kenya. I have a BSc in Accounting and Finance from the London School of Economics. SokoText is a social enterprise that provides an SMS based pre-ordering service for groceries stores based in the slums of Nairobi. These are micro-enterprises owned by women and we supply them fresh fruits and vegetables on a daily basis. By using our service these businesses save more than 2 hours per day and 20% of their revenue because they no longer have to travel to far away markets.”

Why did you start the company and what phase are you currently in?

“While doing research about food security in slums, our team found out that the micro-entrepreneurs are the major source of supply to the households, however they faced major obstacles in sourcing their inventory. When we studied the problem further we came up with the solution of grouping the demand. We are currently 6 months into our beta pilot.

The current phase is all about operational viability. We are testing if we can offer the value proposition effectively. Are we able to procure the full range of fresh produce by 9am the next morning when customers order in the evening the previous days? This involves testing how we will organize logistics, how we will work with farmers, how we will work with our employees and how we will price our products.”

How do your customers benefit from your services?

“The women shop owners benefit because they no longer have to wake up at 4am every morning to go to city markets to buy the fresh produce, they no longer have to spend more than $1 on transport. And they get higher quality fresh produce with a longer shelf life, which lowers their losses in case of sales fluctuations.

One of our customers says that after she started using SokoText, she has time to do house chores in the morning and prepare her child for school. And since she does not have to wake up so early, she can work longer and hence sell more.”

SokoText

One of the SokoText customers.

What are your main achievements so far?

“We are currently serving 55 customers daily with total revenues of $15K till date. These are ladies from the Nairobi slums of Mathare who are between 25-45 years old. In their kiosks they have daily sales of between $12-17.

On the operations side we also employ seven people from the slum we work in. They help out in the different areas such as procurement, sorting and sales. We are currently creating a training program for them so that they can be the core team, who will lead a team in the future. Two of the employees are already mid-level managers who hold major responsibilities for procurement and sales in our organization.”

What are your main challenges of operating in the market where you are active?

“Customers need to do things differently and that is a challenge. For example, they have to place orders every evening using SMS. For some this more formalized way of buying is difficult and working with a new organization they do not trust.

In addition, due to low levels of literacy it has been hard for us to acquire some of the older customers because they are resistant to use SMS to order. We are therefore experimenting on how our marketing employees will help them place orders.

On a higher level, we face a challenge on how we operate keeping in mind the social and political dynamics of the community we work in. For example, we have to make sure we have diverse ethnicities in both our employee group and customers or else there’s a chance that misperceptions will be formed.

The social and political dynamic in the slums are hard to understand and need a lot of studying. With regards to employees, we find it hard to get people with the right skills and motivation. This is mainly because of low literacy levels, however our training has been very helpful to get them to a good level.”

How do you see the IBA community playing a role to support you?

“We want to work together with the other members from the IBA community and collaborate to solve the challenges as mentioned earlier. We believe that we can all share experiences about how we hire and train employees from the bottom of the pyramid and how to make sure we can understand all the dynamics in play in slum areas. We feel that the IBA community can also highlight mistakes we all make and the lessons they learnt while implementing solutions, this will be very helpful for young teams like ours. We also look forward to collaborate with the IBA community to provide more services to people in slums.”

Suraj is pitching his idea at the NaiLab in Nairobi. SokoText took part in their incubator early 2014.

Suraj is pitching his idea at the Nailab in Nairobi. SokoText took part in their incubator earlier this year.

What is the main lesson you can share with the IBA community about doing business with the Base of the Pyramid?

“The biggest lesson we have learnt so far is that the first value proposition to customers in the BOP is trust. Even if you have an amazing product or service, you will not be able to get traction without getting the community to trust you.

We have found out that the best way to get the people to trust you is by having high levels of participation of the community in coming up with your solution. We were on the site everyday for about two months while doing research, and that’s why we were able to make many friends and learn about how the community works. As time goes by, if the community sees you there everyday you become part of it and are no longer foreign to them.

Secondly it is important to work with local NGOs in the community, as they have a lot of social capital and good knowledge. This makes it easier to make the initial steps. Lastly, try and employ at least a few people from the community you work with, job creation is a big plus and makes the community appreciate your organization’s work. If you keep your initial customers happy, they will be the pioneers in the community and help you get the credibility you need to go viral.

What are your plans for the future? Do you think this model is replicable elsewhere?

“We do feel that the model is replicable, however we are testing areas of our business model to make it work elsewhere. We are testing on what kind of processes we need to create within the organization. We want to make sure that we can have everything in place to make it very easy for our employees to run an outlet. This means having guidance on how to do every little job from record keeping to customer service.

Our plans for the future are to add new product ranges and expand our operations geographically. We are going to first scale in the surrounding slums then move to the other slums in the city of Nairobi, including low-income neighbourhoods with similar characteristics. We will then start in Mombasa and look into the East African Region. We are having some conversations with potential partners however for now we are working hard on getting all the processes in place.”

Visit the IBA venture profile of SokoText.