Hapinoy Is An Open Source Model for Low-Income Markets
Hapinoy Is An Open Source Model for Low-Income Markets
reposted from NextBillion.net. Original article here
Editor’s Note: The following is the second of two posts on Hapinoy and its microfranchise/distribution model. The first can be found here.
As Hapinoy expands, it reaches more of the BoP market. Through its network of suki stores, the company is able to offer other products and services that do not currently reach the BoP.
The founders like to think of Hapinoy as analogous to the iPhone. In the same way that the Apple device is an open-source platform for apps created by outside programmers, Hapinoy is a distribution vehicle for products to the BoP developed by social entrepreneurs. For example, through its stores Hapinoy sells solar lanterns, mosquito nets to combat dengue fever, and, starting in April, eyeglasses.
A few years ago, it created a pharmacy program, selling low-cost over-the-counter medicines. Hapinoy stores also are mobile cash agents for Smart Money and act as a mail acceptance counter for Mail and More. In the future, it will focus on nutrition and water, health and wellness, technology, energy, and livelihood opportunities. Ruiz would like to incorporate local producers into its supply chain network. “One key pillar of the future is to open up the Hapinoy Distribution Platform for the products of community-based microenterprises as well. Product development exists to help microentrepreneurs create BoP products, but many have difficulty in marketing and sales.”
In terms of expansion opportunities, the sky seems to be the limit and the opportunity for scale is enormous. The Philippines offers a unique opportunity to build a strong microfranchise with virtually unlimited potential. Hapinoy builds on top of low-cost existing infrastructure and works with existing independent retailers. The 600,000+ individual sari-sari stores account for 30-40 percent of total retail sales in the Philippines. To date, it has 160 community stores serving 10,000 suki stores. In the future, it has the lofty, yet achievable goal of serving 100,000 stores. There is no doubt that Hapinoy can increase market penetration by adding new stores. As it grows, its role as a platform for delivering products and services to the BoP will expand.
One of reasons the model has been so successful is because it has been able to leverage the presence of a robust network of existing retail stores selling identical products. In this author’s opinion, the genius of Hapinoy is its mastery of supply chain logistics and ability to transform an unaffiliated network of stores into a distribution platform for the BoP. By managing its own supply chain and coordinating distribution of products to its franchisees, Hapinoy reduces the costs to both the store owners and the consumers, raising incomes across the board. Right now, for example, it is piloting a mobile phone-based ordering system with five of its stores. But it is through its role as a distribution channel for the BoP where it can create systemic transformation in the country.
As readers of this blog can attest, there are countless products designed for the BoP markets. The bottleneck is not in innovation, but rather in distribution. Getting the products from the factory to the BoP can be the biggest challenge faced by companies serving the BoP. Mobile money providers have to overcome the chicken-and-egg problem of simultaneously building a customer base and an agent network. Manufacturers of solar lanterns and cook stoves rely on independent agent networks, which are difficult and costly to manage; and MFIs, which are financial institutions, and not retailers. The problem is that very few global-scale companies (with the exception of Coca-Cola) serve the BoP market. Thanks to Hapinoy, the BoP market in the Philippines is open for business.
Read a transcript of the full interview at Develop Economies.
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Note : it’s funny how those familiar with Apple’s iOS has indeed rightfully pointed out that it’s not really an open-source system. Josh explains it in the blog post :
aahilario – thanks for correcting me on my analogy (I must confess, I am not up on the new technologies – I’ve been using the same Nokia non-camera phone for the last year). But you are actually right. Here is what Mark, the co-founder says:
“Apple manufactured the iPhone and got it into the hands of millions of people; And yet equally as important, Apple also developed the distribution mechanism to bring the Apps to the iPhone – the much-venerated iTunes Store.
But if you dig down to it, all the applications that you can buy and install on the iPhone – all of these were developed by independent third party software developers. Which then points to the fact that Apple didn’t have to invest in huge resources and manpower in order to develop all those applications from scratch; It just had to open itself up as a platform, and then relied on an ecosystem of these companies who then developed apps for their device.
The beauty is that it’s a win-win-win situation. iPhone users get more functionality, App developers gain sales from selling their Apps, and Apple derives revenue from every transaction.
And so, applying the same thinking to Hapinoy – in order for the Hapinoy Store to unleash the true potential of the network, then the ecosytem must be opened up as a platform to independent entrepreneurs who want to develop “applications” for sari-sari stores. And these apps can take so many various forms — whether it be new products for the BoP, new services even (such as the Hapinoy+ examples mentioned above), most especially new livelihood opportunities for the BoP.”
Here’s my lengthier explanation which I’m also attaching to my previous post on Why Hapinoy is Like the iPhone :
We initially started with the iPhone metaphor some time back- a bit before Android became a very widespread OS. We used it to explain the following :
1. Hapinoy has a distinct distribution and activation/implementation mechanism (a la iTunes);
2. Hapinoy wants to work with an ecosystem of “app developers” which in this case would be innovators and social entrepreneurs in the BoP space (thousands of developers with 300,000+ apps in the iOS ecosystem, as of last count, i think)
3. the Hapinoy Store Network is a Platform – not just for groceries but a slew of other things (in technology, healthcare, energy, water, nutrition, etc) much in the same way that iPhone reinvented was a Phone can do.
We also used the iPhone metaphor to clarify that “value” is capturable – e.g. revenue, which is important to make the whole thing sustainable. iTunes at the time opened up a lot of benefits to iPhone users, but also generated significant revenue for both Apple and more importantly, the Software Developers who before were contending with massive piracy and were looking for a way to distribute and market their creations.
For us, we essentially look at “apps” – essentially new businesses for Hapinoy Stores – with the following lens :
1. will this benefit the community?
2. will this benefit the Hapinoy Storeowners with increased revenues or differentiation?
3. will this generate revenue for MicroVentures (our social enterprise)?
and of course, 4. will this generate revenue for the “app developer” or social entrepreneur?
That being said, as a Social Enterprise primarily driven by the mission, we also like “free apps” that might not necessarily generate revenue but could very well support a certain cause or advocacy. For example, we’re working with Social Entrepreneurs now who have an environmental advocacy and want to eliminate sachets with refillable bottles. It’s not a revenue generator per se but we do feel it does solve environmental issues so we’re more than happy to open up Hapinoy as a testing ground for their initiative. We also have current pilots on human trafficking awareness and disaster response (relief goods distribution in case there are floods).
In fact, we believe in this Platform strategy so much that we recently just wrapped up our first Open Innovation / Crowdsourcing Grant Competition – the Hapinoy-Fisherman Breakthrough Innovation Grant
http://www.sevenfund.org/breakthrough-innovation-grant-competition/results.php
For “app developers”, we’re pretty open-source in the sense that we’re very open with sharing information with the social entrepreneur. Using the iTunes metaphor again – we’re working on our “SDK” (software development kit) which we’ll be posting for all possible collaborators, especially if it attracts people who can help us fulfill Hapinoy’s mission of bringing products, services, and opportunities to those who need them the most (the BoP).
Now back to the metaphor – the truth is we’ve now morphed and are probably now closer to Android than we are to iOS. Maybe we can just reposition Hapinoy is the Smartphone?
