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Taking the 'Avon' Way to Reach 'The Last Mile'

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LIVING GOODS
Living Goods

2011-10-31-livinggoods.jpgThere has been a lot of talk lately about tackling the "last mile" of health care delivery in the developing world. Getting quality health products and services to the billions of impoverished people living in rural villages and sprawling urban slums remains a key challenge in our fight against poverty and disease. Too many products that can save and change lives are not reaching the people who need them most. Products like malaria treatments, clean-burning cook stoves, fortified foods, sanitary pads, and solar lamps can dramatically improve the health and wealth of people who survive on just a few dollars a day. But these products do little good if they don't reach the people who need them most. As it stands today, roughly 270 million people in Africa still lack access to life's most essential products. Now more than ever, we need an efficient, scalable, and sustainable system to deliver these life-saving and life-changing products to the world's poor.

The "last mile" is a distribution problem of the developing world. While it's most frequently invoked when discussing challenges of the public sector, it's also an obstacle for global consumer companies. Such companies recognize the enormous growth potential of these underserved regions but have yet to crack the profit code of these comparatively chaotic markets. Distribution systems in the developing world are highly fragmented and lack the economies of scale that drive down prices and improve margins. Consequently, all but a handful of major brands are actively competing in these markets.

In the public sector, where drugs are ostensibly free, health systems are under-funded, under-staffed, and chronically under-stocked. The private sector, on the other hand, is plagued by a remarkably inefficient landscape of a million mom-and-pop shops served by complex layers of re-sellers. The result? Retail prices reach 350 percent of manufacturing cost, counterfeits abound, and poorly trained, poorly monitored sellers are the norm.

Both the public sector and the private sector are failing to reach the "last mile" of consumers living at the socio-economic Base of the Pyramid (BoP). But in their shared challenge, there is an enormous opportunity to build a distribution platform that can fight poverty with profitability. Living Goods, the social enterprise I launched three years ago, is doing just that.

After selling my company, TravelSmith, in 2004, I volunteered as president of a franchise system of clinics in Kenya. While leading this program's turnaround I witnessed the limits of storefront models. I began to wonder if Avon's model of direct door-to-door selling could be harnessed to create a sustainable distribution system for life-saving and life-changing products. I went back to California, ordered a starter kit, and tried my hand as an "Avon lady." While my lipstick sales were lacking, I learned a great deal about the power of direct selling. Inspired by Avon's model and the millions of Avon ladies in over 100 countries, I launched Living Goods.

Living Goods supports networks of "Avon-like" women entrepreneurs who make a modest income going to door to door teaching families how to improve their health and wealth while selling low-cost, high-impact products like treatments for malaria and diarrhea, fortified foods, water filters, clean cook stoves, and solar lights. We leverage the buying power of thousands of franchisees and cut out multiple layers of resellers to deliver better margins for our agents and lower prices for customers. Like many successful franchises, Living Goods methodically screens agents, provides expert training, enforces strict quality monitoring, and maintains uniform branding, products, and pricing. Our model dramatically scales access to essential health products and services including antenatal care, family planning, and treatments for the biggest killers of young children. And we save clients money in the process. Not only are Living Goods prices 20 to 40 percent below prevailing retail, but we also save consumers the cost of transport, which can easily eclipse the price of the product alone. As our agents like to say, "Living Goods is cheaper than free."

I still believe that aid is vital; it is simply not enough. To defeat global challenges we must also harness truly sustainable, globally scalable business models. The double-bottom line business we are building taps the purchasing power of value-conscious consumers to create a sustainable distribution system that is already saving and changing the lives of over a half a million poor Ugandans. By creating thousands of jobs for enterprising African women, we are delivering vital health products and services to thousands of poor communities. In effect, we are building a thriving consumer market in severely underserved communities. And while our entire enterprise has yet to achieve full sustainability, it's fair to say our revenues already look rosier than many Silicon Valley start-ups.

Living Goods' model is entirely open-source. We encourage visionary consumer businesses, ambitious social entrepreneurs, and forward-thinking NGOs to learn from us and adopt our approach to open up more BoP markets and deliver vital products and services to the billions of people living in poverty. Living Goods provides powerful proof of C.K. Prahalad's assertion that "if we stop thinking of the poor as victims and start recognizing them as resilient entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up."

Follow Chuck Slaughter and Living Goods on Twitter: www.twitter.com/living_goods.