Here is a fact: Informal economies are the rule, not the exception.
Have a look at these two graphs — they show total transactions by retail channels per country (Sub-Saharan Africa only). The first one shows transactions across all retail sectors (blue — modern retail, red — traditional retail. above green line — informal/ below green line — formal):
Looks like the vast majority of transactions happen outside the traditional sector. And here is how the food retail looks like:
You read some of those stories about how global retail leaders are fighting for turf (and struggling) in Africa? Well, they are fighting over 2–10% of the market. The majority of trade — by value — in these markets happens in improvised or mobile stores and usually outside a regulated framework. The consumer experience here is not compatible with the modern retail. Business is exclusively cash-based and is characterized by high-frequency purchase (people buy small quantities of commodities very often). Available commodities are limited, highly price-sensitive and supplied by informal, inefficient supply chains. Some of the impact commodities in this sector are clandestinely extracted from public distribution networks.
Overwhelmingly, markets dynamic have been unchanged for centuries: cash-based, with small quantities that move at a high-frequency. Whatever credit you find here is informal and based on social capital alone. Because of that, the products that are consistently stocked are part of 7–10 categories:
It is not that there is no demand for anything else. It’s just that cash is VERY scarce. And that means that every category competes with every other category. If you have a coin in your pocket and you spend that coin on rice, you will not be able to spend it on getting a health check-up. It’s as simple as that.
Meanwhile, retailers on these markets have no access to systems that leverage the power of a wider network, provide access to efficient supply chains, credit, etc. All stock is always purchased before it is sold, which means that anything slow-moving threatens cash-flow.
And here is the great opportunity: these informal, fragmented channels are the closest entities to the consumers on those markets. They are also closest to the people and communities that the Aid sector is trying to reach. This makes these retailers ideal partners for delivering subsidies as well as impact commodities and services — which currently everyone laments that they aren’t reaching target populations efficiently.
Unfortunately, most impact commodities (water purification, condoms, efficient stoves, micro-nutrients, medicines) are slow-moving. Not to mention, shops that attempt to stock these commodities can also find themselves in situations where the same products are distributed for free by aid organizations, making them regret the initial investment. That’s why, to everyone’s indignation, Coca Cola reaches places that medicines don’t.
That is also why, on these markets, as far as the trade is concerned, everything competes with Coke and the other few categories above. Because all stock competes for the same, very limited, available cash. This is a competition that impact commodities will never win.
At Triggerise we know for a fact that, unless we acknowledge and bypass these fundamental economic realities, there is very little that anyone can do to reach these communities at scale with truly sustainable solutions. Our solution is to build a fungible reward platform to incentivise positive behaviour but also as a as a way to bypass the dependency on hard cash when stocking and trading slower moving but impactful products. In order to get these impact products stocked in informal stores, Tiko provides an alternate, virtual currency while increasing the turnover speed of these commodities through increasing demand (through voucher distribution for free product distribution).
Fundamentally, Tiko is designed to allow free, unlimited high-frequency/ low value transactions within a network of partners. This means that products and services are purchased, distributed, and sold with accounts settled virtually and instantly. Commissions are paid, vouchers are redeemed and money is transferred cash-free. This reduces the burden on the cash-flow need described above, and allows modern micro-financial operations at the bottom of the pyramid to take place: credits, deposits, and guarantees all possible without access to a bank. Moreover, healthy behaviors can be linked to Tiko rewards that can be redeemed within the network. This also increases demand for impact commodities and services, which in turn, strengthens supply chains.
The behavioral change component embedded in Tiko also allows desired project activities to be pushed directly to beneficiaries via incentives: people can receive instant Tiko rewards for exercising healthy behaviors (going to a clinic, vaccinating children, sending children to school, attending courses, etc.). These rewards can then be redeemed not only for impact commodities, but also for other products and services within a large network of shops and local providers, creating further incentives across the whole eco-system and injecting real value into these economies.
A solution designed for cash-starved, informal markets.