Deploying Internet-of-Things dispensers in informal retail: What have we learned?
The following guest post is by Zahid Mitha from Novek, a company that builds Internet of Things technology for dispensers and vending machines for micro-retailers.
Over the past year, Novek has been developing a dispensing system for washing powder in Kenya. This project is part of a partnership with Mastercard Strive to address the high financial and environmental costs associated with the packaging of this regularly consumed household product. This post covers what we’ve done, what we’ve learned, and where we’re going next.
Why build dispensing systems?
We believe that small single-serve packaging is dying. Years ago, it was an economically viable way to deliver branded products to people in the lowest income bracket. Consumers could verify what they were getting (quantity and quality) and buy what they needed for the week or even day.
Today, a combination of high inflation, increasing input prices, and shrinkflation’s squeeze on product sizes has made this model untenable. Novek was formed with the mission that re-use technology, like our dispensing systems, can offer low-income consumers and small retailers a better alternative.
In previous posts, we shared our journey in building this novel technology and our initial learnings when putting units on the ground. Now, a year in and a half-dozen prototypes later, I’ll be giving a retrospective on the project and where we go from here.
What did we learn, and what did or didn’t go well?
On the whole, our project yielded five key learnings:
- Build regular touchpoints to keep micro-retailers interested in and using your solution.
We found micro-retailers were willing to accept and use our washing powder technology initially — after all, it was at no cost to them directly, and it made their lives easier. However, we found that after the initial novelty wore off, only 60% of micro-retailers kept using the technology. We discovered this was because of the need to offer repeat training and a lack of regular supply of the detergent being sold. We solved these issues by offering refresher training at regular intervals to both the owners of the micro-retailers and their key staff, and by partnering with a global detergent supplier (more below).
2. Tailor timelines for ramp-up and pilot assessments to customer buying patterns.
Unlike other products we have built this technology for (such as cooking oils), detergent purchases at informal micro-retailers aren’t predictable. Some customers buy fortnightly, while others might purchase every few days when they have enough income. Given this unpredictability, we found it harder to assess the success of a small store over a short period of time during our pilot phase. We solved this by setting longer (three-month) periods for ramp-up and assessment for each location.
3. Branding matters to foster customer trust and understanding.
Initially we deployed machines as you see below:
Our machines were plain and didn’t immediately identify the detergent brand in a visible way for consumers. We soon found that consumers, while curious, didn’t understand or trust the technology. The solution we found was to use strong branding and to partner with a company that has a well-known brand in the market. After we did this and rebranded the machines, and immediately saw an uptick in sales and demand from retailers for units.
4. Meaningfully solve customer problems to attract the right kind of attention.
People have been trying to build dispensing technology that replaces single-serve packaging for a while, but most fail because they don’t concentrate on the core problem of product traceability or verifiability. These two aspects are incredibly important to consumers. They want to know they’re buying what it says on the tin. We focused on these two aspects, which resulted in a significant partnership with a global multinational that now distributes products to retailer kiosks using our machines. This was the biggest outcome of our project with Strive.
5. Return on investment is our next big challenge.
We spent the first six to seven months after deploying our machines in retail shop locations trying to stabilize the technology: dealing with parts breaking or issues with refilling detergent. At this point, we have realized the primary factor that determines our ability to scale is cost. We have to make the economics work with a low-cost unit so we can scale. Going forward, this is our next big challenge.
What happens next?
Our project with Mastercard Strive enabled us to successfully build and test a working prototype for dispensing washing powder. Now that we have a working prototype, our next goals are to:
- Iterate for a more stable version that can scale with minimum maintenance (for example, redesigning parts that tend to experience wear and tear, or reducing the complexity of the higher-cost components);
- Work towards clear return on investment goals for our partners with an aim of financial sustainability; and
- Establish existing and grow new partnerships with large, fast-moving consumer goods players that can grow our dispenser footprint in Kenya and beyond.
Working with Mastercard Strive was amazing — we could not have gained all the learnings we did or reached these key milestones without the program. Now, we’re on track to scale our technology to deliver impact to thousands of retailers worldwide. Watch this space.
