When Less Equals More: Entrepreneurs Find Success In Small Batches

· @katherrun ·

Entrepreneurs in the developing world are thinking small — and finding success. By flipping the conventional “think big” wisdom on its head, enterprising individuals are reaching a largely untapped and potentially lucrative market: low-income populations. Their big idea? Sell in smaller quantities.

In East Africa, you can buy a single cigarette, a single serving of peanuts, and one load’s worth of washing powder.

This buy-what-you-need, when-you-need-it practice is known as the “sachet economy”, referring to the small sachets that single-use goods are often sold in.

Mainstream companies are getting on board.

While this practice of buying just enough for just as long as it’s needed may have begun in the informal marketplace, it’s spreading. Mainstream companies are piggybacking on the model to make products affordable for millions in the developing world.

Telecom companies sell airtime worth just a few minutes. In Kenya, the world leader in mobile money, M-Pesa users can pay for their “sachet goods” with micro-transfers as small as Ksh10 (US$0.12).

A Kenyan startup finds success by sachetizing.

Kenyan startup Kytabu is applying the sachet economy model to education through a digital, pay-as-you-use textbook subscription application.

By flipping the conventional “think big” wisdom on its head, enterprising individuals are reaching a largely untapped and potentially lucrative market: low-income populations. Their big idea? Sell in smaller quantities.

Founder Tonee Ndungu built Kytabu as a way to make educational materials more interactive, enjoyable, and accessible to the vast majority of Kenyans. Providing students with pre-programmed, solar-powered tablets and allowing them to lease pages or chapters of core-curriculum textbooks by the hour, day, week, or month, Ndungu has found a way to lower the cost of textbooks by 72%.

The Kytabu application includes textbook content plus videos, animations, and audio features — all without the Internet. Kytabu is also localized to mobile payment platforms, allowing Kenyans to purchase their textbook leases through mobile money accounts.

With textbook prices prohibitively high, informal actors had already begun to “sachetize” the sector by buying the school’s core-curriculum books and selling photocopied pages to those families who could not afford them. Kytabu is not only formalizing and digitizing this process, but also adding value by including interactive and engaging educational materials on the tablets.

The downsides.

However, critics contend that while sachet economies offer low-income communities access to more goods and services, these same populations then miss out on the savings from buying in bulk. In the end, they will pay more for goods than wealthier populations who can afford to buy in large quantities. Purchasing 12 individually packaged sachets of laundry detergent will, in the end, cost more than buying one large bag of laundry detergent.

Kytabu, by utilizing the affordability of digital publishing and getting multiple stakeholders on board, has managed to overcome this challenge. At the same time, publishers are happy to receive a steady cash flow and to minimize copyright infringement from the informal sector.

The upshot.

The combination of sachet-sized mobile money transfers and the increasing range of access to digital services has limitless possibilities. For many entrepreneurs, the key is to think small, not big.

Want to learn more?

If you’re curious about the sachet economy, check out this quick read on successful sachet marketing. Still interested? For a deeper dive, read management expert CK Prahalad’s book, “The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits.” Look around for companies doing similar work in your country. Apply to those that interest you, or experiment by starting your own sachet business.

Tell us what you think in the comments!