Bidhaa Sasa, a last-mile distribution venture specialised in the delivery of household goods, was recently selected by the Unreasonable Institute as one of its nine East African startups to watch in 2016. We caught up with Rocio Perez-Ochoa, Co-founder and Director at Bidhaa Sasa UK Ltd, for an update since participating in the ‘Pitch your Inclusive Business’ bootcamp and winning a personal coaching session.
“As we sell products on credit, the quality of these must be high. We risk too much by selling lower quality products because clients would stop paying if the product failed (and they would definitively not recommend us to anyone!). We only sell products that have a warranty of one or two years and if we know that the warranty will be honoured by the supplier/manufacturer. All our suppliers comply with this requirement and have performed well with warranty claims so far. We would not hesitate to drop one if their service is poor.
Sometimes a supplier requires large volumes to start a relationship, but if they are good they accommodate or offer a viable alternative. Also, as we are small we only buy from local suppliers, we cannot yet justify importing containers from China even if that meant an improvement of our gross margin.
Being openly product neutral helps because suppliers know they are in competition and that can only be good. Another more complicated aspect is how to choose the right product for our target market. For this, we always set up experiments, letting a few families use a range of products (say three different devices to filter water) for a period of time. We ask them lots of questions and then decide on what product to try commercially. Sometimes the conclusion is none of them, and that is fine. Despite the hype on cool technologies targeting this market we still see large gaps in DC appliances for small solar systems, cooking and water purification.”
You have recently posted several updates on your venture profile. Can you tell us about an important development and how will it affect your work in the coming months?
“This May, we celebrated our first anniversary since making our first sales in Webuye, Bungoma, Kenya. It is just a symbolic occasion we have used to make a pause and reflect on where we are and where we want to be in the near future.
As I mentioned in the posts we are happy with the validation of two of the three main hypotheses we set out at inception. Firstly, we are more confident claiming that there is enough demand to justify a for-profit business – at least with good quality solar and cooking products in rural areas in Bungoma. Secondly, our clients do pay on time despite their lack of credit and bank histories and the fact that we do not sell products with PAYG technology. The third hypothesis which relates to our distribution model is still work in progress and we feel we need more data to validate our current model. This is our main focus for 2016.”
“Yes, there are risks to selling on credit but the only way to narrow them down is by first erasing all our prejudices from our brains and then starting experiments with real clients who pay real prices for good products and services. It may seem obvious but it is not. Some people are still surprised when we disclose our (very high) repayment rates. For some reason, the assumption is that lending to the bottom of the pyramid is riskier. It may be risky but not necessarily riskier. The better question is how one can identify and mitigate those risks. The way we do it is by experimenting. We have listened to our clients and tried to tailor a service that suits them and us, and then we have validated this solution with real transactions in real conditions.
The benefits to buying on credit are quite obvious but one that is often forgotten is that it mitigates the technology risk. Not only can the customers spread their purchase over time for an expensive investment but also they try out a product or technology that is new to them and may not have ever experienced firsthand. “If this new gadget does not work after a few days I have only lost my first payment”, that is what is behind most people’s minds. We don’t have a recognisable brand and neither do the products we sell (sorry supply partners, you are not yet Coca Cola!) so clients are really taking a risk.”
Building a market for basic needs products cannot be without difficulties. What are some challenges you’ve faced in adjusting market demands and how have you overcome them?
“The challenge question! I love this one. As we operate in a rural area we suffer from recurrent power cuts, water cuts, occasional flooding, attempts of fraud and many more “it is tough out there” problems. But none of this is very original. The one that keeps us awake at night is human resources. We still do not have enough experience in recruiting, training and retaining talent but we already know that it will be complicated.
To start with, the pool of talent in rural areas may be more limited than in cities. Then there is the eternal “how to grow” question: do we grow our people by investing a lot in training and retaining or do we hire more expensive and hard-to-find experienced people from outside? Is there even a choice? All I can say is that we will make some experiments to learn a bit more and decide on a model as we grow.”
What message do you have for other entrepreneurs operating in the sale and marketing of BoP Products?
“Risking repeating myself I would say first delete all the “desk based” facts you have acquired about the BOP market. More often than not these facts are wrong. Consumers, rich or poor, have more in common than they do have differences, so why treat the BOP segment differently from the way you would try to sell a new app in Google Play? Put yourself in the place of your customers, try to live, feel, think like them and then guess how they would make decisions.
Set up a few hypotheses (they may be biased, wild, silly, gut-instinct inspired, it is not important), set up some really good experiments and try to validate or reject those hypotheses with real clients with real prices in real conditions. And then repeat until you find a scalable business model. All I am saying here comes from the Lean Startup and Customer Development theories; so really, I would just strongly recommend any entrepreneur to use them.”