Centering informal micro-retailer needs in product design

Photo courtesy of Novek

The following is a guest post written by Zahid Mitha from Novek, a company that builds Internet of Things technology for dispensers and vending machines for micro-retailers.

In many emerging markets such as Kenya, the majority of small businesses are informal. According to a study conducted by the Central Bank of Kenya, only 9% of employment in Kenya is in the formal sector. As much as 70% of businesses in the retail sector are part of the informal economy.

Within this sector, manufacturers and retailers are forced to sell household products in small packaging quantities (as little as 50 grams) to account for the realities of consumer needs: people sometimes can only afford what they can use for the day and will repurchase the same good multiple times in a week or month when they have the funds. This model, however, is bad for consumers and the environment alike. Consumers pay more due to higher costs, and a massive amount of single-use plastic waste is generated.

Novek has been working on technology solutions that involve eliminating single-use packaging with Internet of Things (IOT) technology for several years. As part of our partnership with Strive Community, we are focusing on developing a vending machine for a household good whose packaging comes at a huge financial and environmental cost: washing powder. Washing powder is a multibillion-dollar market globally — worth US$5.5 billion in India and US$3.6 billion in Indonesia. We believe that designing dispensing technology for Kenya could help boost micro-retailer sales globally. Our research shows this product is widely sold by micro-retailers, who face demand for different quantities depending on customer needs.

Designing a solution to this problem is no simple feat — it involves building physical dispensers that sit within stores, are easy to use and maintain, and fit the everyday realities of informal retail.

What does the informal retail sector in Kenya look like?

To better understand the informal retail sector where we plan to test our technology, we spoke to informal micro-retailers across Nairobi, Kenya, to learn more about who they are, the retail spaces in which they operate, the challenges they face in their businesses, and the customers they serve. This ensures we design and build technology that is suitable to their businesses and daily operations.

Our data shows the majority of retailers are owner-operated or employ at most one or two casual workers. Micro-retailers tend to be very constrained on space and operate in busy commuter areas where average incomes are less than US$5 per day. They sell basic, fast-moving goods (e.g., detergents, sugar, flour, cooking oil, and milk) and “everyday luxuries” (e.g., soda, penny sweets, and mandazi (sweetened bread)) to a regular, loyal customer base.

Based on these realities, the following challenges tend to arise when designing a product for this type of micro-business.

1. Micro-retailers do not have consistent data on their own sales, including which products tend to sell the most. Many do not have formal record books that detail their financial health.
2. They are sometimes unwilling to share information with people they perceive as strangers.
3. They lack time; many of the more successful stores are inundated with customers making small purchases throughout the day, so they cannot spare more than 5 to 10 minutes to have a conversation.
4. There may sometimes be a language barrier when understanding the challenges they face or explaining potential solutions.
5. Their stores lack space for anything large and physical that could be placed in store.

Top tips for understanding the needs and realities of informal micro-retailers

Each of the above challenges is unique to its operating context. In designing physical tech-based solutions for this group, we used the following methods to help us understand the needs and challenges faced by informal retailers:

• Build trust: Given how time-poor and (understandably) untrusting some retailers are, we spend time to build relationships, including coming via a warm referral (such as someone from their neighborhood, a customer, or another retailer), buying a product to help them feel that we aren’t wasting their time, and speaking in local languages. Sometimes when speaking with retailers we get as little as 15 minutes, so building rapport and trust is key.
• Reframe questions around their benefit: We help retailers understand that sharing information with us will result in them trying a product before other retailers get to use it, and that using it will directly benefit their business. Some retailers may be uncomfortable sharing information about their existing finances, so we reframe our questions to understand what and how much they currently sell. For example, instead of asking about sales revenue, we may ask “How many boxes of this item do you sell?” and then calculate backwards.
• Build for what there is, not what we hope there to be: In addition to spending time talking to retailers, we also take detailed notes about the reality on the ground, including the availability of power, the technological literacy of users, and the availability of space (with a tape measure if need be) to understand exactly what physical and technical constraints might arise when designing a solution.

Following this research process, our next step is to design a prototype that factors in technological literacy, the availability of space, refilling requirements, and retailer time constraints. Stay tuned as we go through our process and we share results from deploying units in live locations later this year.