We’re at a turning point in the history of distribution—think advances like sci-fi-esque drone delivery. Getting to this point took not only great infrastructure, but also some pretty big technological advances. Plus, it took us a while to get here in the first place.
In a previous article, we explored what the future of distribution has to offer. However, the future of distribution for us, in developed nations, is different than that of emerging markets.
While the major cities of developing countries generally have sufficient (and sometimes equivalent) infrastructure, electrification, distribution networks, retail outlets, and supply chains, the rural areas don’t. So the question our friends at Red Stag Fulfilment got us thinking about was: How will the future of distribution for emerging markets look as a whole?
In this article, we’ll explore the future of distribution in emerging markets, and how it just might surpass our own here in the first world.
How are emerging markets different?
Any effective and efficient distribution system allows customers to buy what they want when they want it, without unreasonable markups. However, when it comes to emerging markets, this may prove difficult given the lack of infrastructure. The quick change of pace, though, is an advantage.
First you have to look at modern cities in developing countries. Surprising to some, these newly built cities often rival our own transportation, communication, and financial systems. Here, modern-day distribution activities chug along and will surely advance as ours do.
However, in rural and remote regions of emerging markets, these systems are far less advanced and sometimes nonexistent. In some places, there’s no internet access, no banks, and no roads. So, how are these people going to become buyers in the market? And how are businesses supposed to reach them? Currently, it’s difficult and sometimes impossible. However, we may see them “leapfrog,” as Red Stag puts it, into the future.
Before any assessments on the future, though, it’s important to examine the position emerging markets are currently in.
3 challenges facing distribution in emerging markets
In developing countries, there often isn’t enough modern distribution for a wide variety of products. The big cities might rival those in developed nations—and even surpass it in some ways—but the rural regions often have poor roads, not enough delivery trucks and no local wholesalers.
Even if the local distribution system is scraping by, it’s probably increasing the cost for the customer because everything takes more time and effort. To reach modern standards, emerging markets need to invest in not only roads, but airports and delivery point too.
- Marketing and communications
Launching a product in a developed nation is based on a formula of research. To find out the best way to market your product, you simply, and methodically, examine the people—i.e. by age, earnings, education, work history, interest, etc. In a developing nation, this is problematic, mainly because this information often doesn’t exist.
In emerging markets, statistical data is often incomplete, inaccessible, or has just never been done. So, companies who want to break into a market have to start from the ground up.
Computer and mobile payments rely on debit and credit cards, but the people out in rural areas of developing countries often don’t have access to banks. That means that even if people are given internet access or a mobile device, if they don’t have a bank account or credit card, integrated and internet sales are impossible.
Today, our modern distribution network is all about filling ordersand fast. The fastest way to do so is by electronic payments, so if that’s not an option, fulfillment will be slow.
3 advantages emerging markets have in the future of distribution
- Rapid change
Emerging markets are doing just that: emerging and unfolding before us. Thanks to modern technology, the building up of their cities and infrastructure is taking a lot less time than it did for us in the developed world.
On that note…
- They have the chance to establish efficient, high-tech distribution networks
Because there was no previous infrastructure in these new cities and rural areas before, establishing efficient distribution networks is actually simpler in some ways. If the new technologies of today prove to be workable, they can quickly grow, spread, and be implemented across developing nations. Emerging markets won’t have to displace, replace, or disrupt modern distribution technologies that are currently in place in developed nations.
- They’re mobile-connected
While developed countries tinkered away at landlines, the developing world often couldn’t scrape together the time, effort, and funds that it took to get that infrastructure in place. So, instead of cutting the cord and moving to mobile like we did in developed nations, emerging markets simply skipped that advancement all together and went straight to cell phones. In fact, today it’s emerging markets that are dominating mobile growth and even cell phone internet usage.
The future of distribution in emerging markets
To get insight into how distribution in emerging markets will adapt to the latest technology, we can actually look to the event above when many developing countries skipped landlines and went straight to cellphones.
This “leapfrog” event proved to be beneficial for the developing world. In the modern American home, the landline is almost obsolete, and increasingly people are shopping on their mobile devices instead of their computers. So as the developed world adapts to mobility, the developing world just builds upon it.
Essentially, this leapfrog effect could play out in distribution systems too, giving emerging markets the upper hand. For example, it might not matter that rural areas don’t have roads to be accessed by trucks. If drone delivery really pans out, these packages can be delivered regardless, since they travel by air.
In fact, it could even be better. Long distance drone deliveries would cut back on the time needed to fly, warehouse and ship out to customers, like the existing, modern infrastructures in place now.
Red Stag looks at this leapfrog effect and the major payment issue to come up with a colorful example of what an order, fulfilment, and delivery could look like in a future emerging market.
“A doctor in a small village looks at his old mobile phone and realizes that he needs a new one. He goes to the distributor website and examines the various models. He decides on a sedate black model, but with the highest amount of memory, and places his order. A window opens with instructions for an encrypted text message transferring the money for the purchase. Immediately after he sends the text, he receives a confirmation text message, and the website confirms the order and a scheduled delivery date the next day at 2:00 pm by drone.
In the warehouse, the order is received and converted to a specific black phone with the required memory. The corresponding phone RFID tag is assigned to the order, and an automated process picks the correct phone from the shelves and brings it to the loading dock. A drone arrives back from a delivery and picks up the item and the corresponding delivery address. It loads the phone and several other items and leaves.
At the scheduled time, the doctor is at the hospital, but on the way home he drops by the local store to pick up his package which the drone dropped off there. He is pleased with his purchase and visits the distributor website to give a good rating and a positive review. Despite being in a developing country, he has received his delivery more quickly than his rural counterpart in a developed country and he has paid lower transaction fees than the 3% to 5% common for online purchases with credit cards.”
In the end, the future of distribution for developing countries is promising, as long as the future technologies we’re talking about actually prove to work. Even if one of these countries is facing tough infrastructure challenges and development issues, the technology we predict for the future can surpass them.