Big market on doorstep

‘Look at bottom of pyramid for sales’

NELSON Mandela Bay businesses have the bottom of the pyramid right on their doorstep, but do not take full advantage of this untapped market. EH Walton Packaging marketing director Ludwe Sityoshwana discussed the value of the lower Living Standards Measure (LSM) market and how this can revolutionise the way industry does business during a regional seminar of the Institute of Packaging South Africa in Port Elizabeth yesterday.

Doing research on “The value at the base of the pyramid” as part of his MBA studies at Rhodes University, Sityoshwana said he found the bulk of the market was in the lowest LSM (1 to 4).

Some scholars referred to this LSM as the fortune at the bottom of the pyramid because there was a lot of wealth in low-income communities, he said.

Some examples of companies which had tapped into this market successfully were the soft drink company Twizza and Capitec bank, which produced cheaper products for the market with big financial rewards for the companies.

“We need to expand our imagination when it comes to doing bottom of the pyramid business. Motherwell is the third largest township in the country and the Eastern Cape is the second largest geographic area —it is right at our doorstep. This market has always been economically active; we just need to tap into it,” Sityoshwana said.

“It is important to know to whom and where the product is sold — the supply chain does not end at the wholesaler. If you understand the route to the market, especially into rural Transkei, then you can do business anywhere in Africa because you will experience the same challenges.”

In designing products for the lower LSM markets, these should be kept functional, to be used for secondary and unintended uses — for example the municipal “wheelie” rubbish bins that were also used as wheelbarrows, Sityoshwana said.

Nelson Mandela Bay Business Chamber chief executive Kevin Hustler said although Africa was the next big global growth area, businesses needed to operate from a position of realism in order to be sustainable in Africa.

“If as investors we ignore the largest emerging markets such as burgeoning emerging markets, we do so at our own peril. Africa is the second most attractive continent to do business in after Asia.”

Hustler said many South African companies were doing business in the rest of Africa, tapping into the growing urban middle class, in the financial, automotive, logistics, retail and manufacturing sectors.

However, he said some big brands had failed to enter the African market because they did not partner with a local company. It was also important to be aware of factors such as political unrest, corruption, high taxes and poverty in Africa.

“Understand the region, the local market and arm yourself with knowledge and preparation before doing business in the rest of Africa. The realities Africa face are huge,” said Hustler, who headed up the linkage programmes at Rift Valley Railways in Kenya in 2007 and 2008.

By Cindy Preller

Photo: Ludwe Sityoshwana

Source: The Herald