Living Goods

Empowering Micro-Entrepreneurs to Deliver Life-Changing Products to the Doorsteps of the Poor

Sunday 2 June 2013, by Andrea Spadafora

2 inspired

A. The main facts about the activities of the company.

Living Goods is a double bottom line company operating in Uganda and Kenya. Founded by a very successful entrepreneur, MBA’s graduate from Yale in 2007, the firm is currently to increase shelter good’s accessibility for these people’s communities. Its goal is to facilitate the economic and social development of underdeveloped areas through a model based on financial self-sustainability and selling products that radically improve the well-being of poor households. Living Goods supplies products like medicines and fortified foods and this type of products are necessary as basics for the survival of people, which found it really difficult and costly to acquire them. They also sell consumer goods and pro-poor innovations like solar lamps or water purifiers that eliminate bacteria. Generally, poor people are unable to buy basic goods because they are expensive and most of them do not even get to them since there are no efficient distribution channels. Therefore, Living Goods has developed a distribution network based on the “Micro-franchise model”. It works like the well-known “AvonLady” door-to-door model. The salespeople, known as micro-entrepreneurs, explain the benefits of the products in a user-friendly way and also take care that the consumers are using the product properly after being sold. Micro-entrepreneurs are usually women who want to run their own business. Through a franchising system, they have high incentives to do their best since they obtain 20% margin on average on every product they sell. LGs provides a below-market inventory loan, an ongoing training in health and promotion techniques (this training develops the skills and talent of the sellers), and a constant support. Most interestingly, Living Goods sells at below market prices.

B. The Ethical challenges this company is addressing.

Living Goods is addressing a good deal of different ethical challenges. We can categorize them in four main groups:
Micro-Entrepreneurs: Living Goods empowers networks of micro-entrepreneurs who go door-to-door teaching families how to improve their health and wealth while selling life-changing products like simple treatments for malaria and diarrhoea. As they transform the lives of their customers, Living Goods agents also significantly improve their own incomes, confidence, and leadership in their communities. They leverage Living Goods’ brand, buying power, expert training, and marketing tools to deliver vital products at accessible prices to the people who need them most. They offer low start-up costs supported by single low-cost financing. And they now give women and men a way to earn an income on schedule and in their own communities.
Health Systems: The Uganda’s health care system is not able to cover all the health problems of its population. Some of the reasons why this institution cannot provide solutions to the health necessities are the lack of medicines to prevent the malaria and cure simple high-frequency diseases, and the long distances between the hospitals and the rural villages that difficult the mobility of people to have a treatment of their diseases. Living Goods offers medicines at a below-market price and their sellers receive training in health to give advice to the families about the medicines that they have to buy. Furthermore, the model of going door-to-door allows the distribution of medicines and treatments among the rural villages whose inhabitants cannot access to hospitals since they do not have the means to travel long distances.
Pro-poor innovators: There are many clever inventors in the western world that have designed products that can radically enhance the life standards of a whole household but that have never been commercialized. Living Goods is able to take these innovative products and selling them to the people they are aimed for. Therefore, creating and producing for the poor should no longer be a dead end as far as there are double bottom line firms that are able to buy.
Other firms: Through its Advisory Services department, Living Goods tries to export its ethical business model to other companies

C. What makes you believe this company is really ethical and why you trust it?

Living Goods is working to make a reinvention of distribution channel toward the Developing World. The mission of firm inspires us since we think that aiming at reaching such community’s areas can be considered an element for equality. We feel very connected to the way they act and we think that the company is very trustworthy by how the whole business idea they are developing is centered on a long-term ethical project to help unfortunate populations.
One of the most interesting characteristics of the company’s strategy is the network of micro-entrepreneurs that go door-to-door, teaching families how to improve their health and wealth, while selling life-changing treatments for malaria and diarrhea. The agents deliver a wide range of low-cost products that save money lives of those who did not have access to them before. The product portfolio is perfectly in line with all the ethical standards for health security and quality. Living Goods collaborates closely with the Uganda Ministry of Health and has built strong partnerships at all levels of the Ministry. In addition, the company is to be trusted since they convey a very transparent image. To support their objectives, they provide quantitative figures in their website and show many images and videos on how they operate.
Moreover, Living Goods makes a significant contribution to the social enterprises that aim to grow quickly to national scale and readily replicate across many countries. All projects undertaken by the company have inspired us and we believe that the whole business has ethics as priority number one.

D.The possible challenges facing the company in the future and how you think this company may improve.

Although Living Goods has received much praise since its early creation in 2007, it has still a very important challenge to overcome: financial sustainability. The aim of Living Goods is to become independent from donations at some point in time in time, as they have set this as an enterprise objective. The company does not look proactively for donations, although a very small group of highly contributing businesspeople mainly funds them.
Living Goods already has an action plan to achieve financial sustainability. It consists of three main steps, the first of which is micro-entrepreneur sustainability. This means they want to ensure the “franchisee” is able to make enough money for its own living, given the hours worked. The entrepreneurs are making a 20% margin on products sold and earn an average of $750 per year compared to a GDP per capita of $1200 (2009 data). It is important to note that women working at Living Goods take the job part-time so that they can also take care of their own families. Therefore, given the relatively low amount of hours worked, we can say Living Goods is already sustainable in the Micro-entrepreneur level.
However, LGs still fails to be sustainable in the next two steps. First, they want to break even, at least, in the branch level by covering the direct costs. Secondly, in six or seven years Living Goods wants to achieve full sustainability at the country level. As they state it, “realizing enough contribution margin from the wholesaling of commodities to our agents to cover the network level costs of core administration, finance, training, and marketing”.
We think Living Goods business model has the potential to end up being a double bottom line firm given the great market opportunity and the lack of competition they have. In order to achieve sustainability Living Goods needs to grow in terms of sales so that economies of scale can be fully absorbed. Scale economies would allow LGs to reduce costs and, if prices are kept constant, margins at the branch level increased. If LGs grows, it should be able to keep focusing in the most important money generator they have: the franchisees. Living Goods needs to establish a good performance evaluation system that is able both to motivate them and create synergies through cooperation and coordination between micro-entrepreneurs. In addition, it is also important to streamline all the processes from initial merchandise purchasing to the final sale and payment of their products.

Bibliography

http://livinggoods.org/
http://en.wikipedia.org/wiki/Living_Goods

Location: The Presidio, San Francisco (California, United States of America)

Sector: Human health and social work activities

Official website: http://livinggoods.org/

Nbr. visits: 159

Nbr. inspires: 2