The Traditional Trade market in Africa is huge and cannot be overlooked (see Reaching Africa’s Traditional Trade). It does, however, come with its own nuances and these need to be understood and managed (see Characteristics Of Traditional Trade That Require Special Consideration).
Andreas Maritz, Strategic Growth Executive at VSC says, “In the fast-moving consumer goods (FMCG) sector an efficient Route To Market strategy is essential and your Traditional Trade approach requires specific attention”
Two primary distribution methods employed by FMCG companies are Van Sales and Pre-sell systems. Both approaches have their advantages and disadvantages.
“A company will adopt the strategy that allows them to stay competitive, minimize costs and maintain a good relationship with customers,” adds Andreas.
Van Sales often work well in the Traditional Trade where there is a high density of retail outlets and the size of outlets is small. However, with the right strategy and tools a Pre-sell system may work well too.
Van Sales and a Route To Market Strategy
Van Sales involve the direct selling of products to customers through a mobile sales unit, typically a van or truck. This method is characterized by immediate transactions, as the role of the sales representative and the delivery team is combined. In other words, the van driver also acts as a sales representative.
Van Sales have a quick turnaround time and are ideal for companies that prioritize delivery tocustomers with a low stock holding capacity.
“One of the key factors in an effective Van Sales strategy is that a company’s delivery vehicle is the first to deliver to a customer in the delivery cycle. Traditional Trade outlets have limited cash and will spend what they have with the first delivery of the day, so they readily convert their purchase into sales,” says Andreas.
The biggest advantage of Van Sales in the Traditional Trade environment is that the small sales transactions are quick and uncomplicated.
However, the overall cost of servicing Traditional Trade via Van Sales can be expensive given the high frequency of service. Oftentimes principles will want to call on customers daily but when looking at past purchase patterns of a customer it might be found that they are not buying with each call.
VSC makes use of an App on the mobile phone of the van driver that tracks and geolocates transactions. This key data source is used to determine customer buying patterns in Traditional Trade. Without this information principles are often running blind and all they know is that the driver checked out with a number of units and returned with a different number.
Pre-sell System – Is It Viable in Traditional Trade?
A Pre-sell system involves customers placing orders in advance for products they wish to purchase.
The Pre-sell System works extremely well when dealing with large wholesale or retail outlets who can carry substantial stock and have a large turnover.
With a known quantity for pre-sell, you can right size your delivery resources, which results in better cost-optimization and a lower cost to serve.
“A Route To Market Strategy for a Pre-sell System is, in many ways, far simpler than that of Traditional Trade as historic data provides insights into customer demand, allowing companies to plan inventory levels more accurately,” says Andreas.
However, due to many factors, the FMCG industry in Africa is very different to that of other regions (see Africa –A Breeding Ground For Complex Logistical Systems) and the Pre-sell Route To Market software may be adapted to Traditional Trade too.
With sufficient data it is possible to convert some loyal Traditional Traders from Van Sales to Pre-sell, especially when incorporating incentives in terms of sales margins.
Choosing the Right Distribution Strategy
Considering that most of the major markets in Africa have a mix of Traditional Trade and large retail outlets it is often necessary to make use of both Van Sales and Pre-selling.
“In addition to applying both strategies to a single customer, we can also look at a hybrid for van sales, where we predict or agree on a quantity that should be loaded and is likely to be bought by a Van Sales customer, i.e. a standing order, Pre-sell orders can then be-coloaded with these standing orders on a right-sized fleet to replicate the efficiencies typically gained from a full Pre-sell model,” says Andreas.
With the use of mobile App data, advanced software and fit for purpose algorithms and optimization tools a number of “What If” scenarios can be played out to determine best the distribution method to use.
VSC Solutions has developed market leading Route To Market software that is specifically designed to produce the optimum delivery strategy for the African environment.
Andreas says, “Our Route To Market system caters for all the idiosyncrasies of Traditional Trade and ensures that optimum delivery routes are utilized, vans are tracked and routed in real time, stock and cash are managed effectively and the driver is given the opportunity to maintain a great relationship with the customer.”
If you would like more information or a demonstration of what VSC has to offer please contact Andreas Maritz, Strategic Growth Executive, on 072 049 5824 or andreas.maritz@vscsolutions.co.za