In our previous article we identified the size and importance of Traditional Trade and that many of these outlets have been geo-mapped. Geo-mapping is essential for planning accurately, understanding impact of delivery changes, building sales rep routes and measuring planned vs. actual routes.
Knowing where an outlet is located is essential to distribution but what also needs to be considered is that Traditional Trade has many unique characteristics that require specialised systems and management. The risks associated with delivery are significantly higher than in the Formal Sector and they too need to be mitigated through careful planning and management.
Typical Characteristics of Traditional Trade
In the Formal Trade Sector where shoppers will travel by car or public transport to their retailer of choice, the outlets are dispersed over a wide area and are relatively large.
In the informal sector, or Traditional Trade, customers will travel mostly on foot and so the level of density of retail outlets is very high and the size of outlets is much smaller. Delivery vehicles will make many more stops per kilometre travelled and, in some instances, multiple outlets will be serviced from just one stop.
Of course finding retailers on a map may also be more difficult particularly in rural areas and informal settlements as a registered physical address may not exist. However, once an outlet has been geolocated it can be accurately placed on a delivery route.
As the retailers operate from small premises, sometimes just a table top or a hole-in-the-wall outlet, shelf space is limited and the orders are small too. The revenue per stop is thus low and deliveries need to be as efficient as possible to make a delivery route economically viable.
This being Traditional Trade, almost all transactions are conducted in cash and financial records are very limited, although there is a growing trend to convert to cashless transactions. Orders, invoices, delivery notes and receipts are seldom generated and much trust is placed on the efficiency and ability of the delivery team who act as salesmen and administrators. These van sales, as this type of delivery is known, requires an altogether different management style to that found in the Formal Sector.
Another difference with the Formal Sector is the use of company sales representatives who add significant value to the supply chain in large retail outlets but are often of limited use in the Traditional Trade where preselling is non-existent.
With limited use of Sale Representatives, maintaining a good customer relationship with a retail outlet requires special considerations in Traditional Trade where the frequency and timing of delivery is extremely important.
The timing, in particular, of a delivery is vital as a retailer has limited cash available and if a competing delivery team is first to visit the retailer that cash will be spent with the competitor’s delivery team.
Higher Risk Associated with Traditional Trade
The risks associated with Traditional Trade are significantly higher and include strike action and protests, poor road conditions, high accident rates, limited vehicle repair and maintenance facilities, and robbery and high jacking hotspots.
The fact that a high proportion of the business is conducted in cash significantly increases the chance of robbery.
Unlocking the Opportunities found in Traditional Trade
Andreas Maritz, Strategic Growth Executive at VSC, says that they have a highly experienced team of consultants that understand the complexities of traditional trade and they have formulated proven methodologies and market-leading modelling tools to improve distribution and sales networks to the Traditional Trade.
“Depending on the business strategy and objectives, the benefits of VSC’s distribution modules include a reduction in kilometres travelled per stop, increase resource utilization, a reduction in overtime or an improvement in driver earnings, as well as more time at outlets, improved customer service and greater opportunity for growth, says Andreas.
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