Skills needs to reach the Last Mile

By Whitney Pailman, 19 December 2022

We interviewed outgoing Head of the Global Distributors Collective (GDC), Emma Colenbrander and Dennis Onono, Senior Consultant at the GDC, Practical Action to share their insights on the skills needs and trajectory of the last mile distribution sector.

The last mile distribution sector comprises several companies, social enterprises, NGOs and local entrepreneurs actively working to reach customers at the last mile, with off-grid energy access products, including stand-alone solar systems and cooking technologies. The GDC was founded to address a particular gap in the market for serving last mile customers and born out the need to support companies working in the space to create a platform for distributors and a collective voice. The GDC represents more than 150 last mile distributors with a presence in over 50 countries across Sub-Saharan Africa and South Asia. Reflecting on the impetus for the GDC, Emma explained:

“So, we wanted to create a platform that would allow these companies to come together to share insights and learnings and build partnerships and higher performing business models — and that would also raise the overall profile and visibility of last mile distributors”.

“Our focus really is on representing what has institutionally been a largely invisible segment of the SME market.” Emma Colenbrander

Within the context of Sustainable Energy for All and Leaving No-one Behind, serving customers at the last mile means reaching people with energy access technologies in the most remote and rural areas. These areas are often not served by the grid and where mini-grids may not necessarily be technically or economically viable. The high risk and high-cost environment in which distributors operate oftentimes makes it very challenging to scale or operate profitably.

“The context that last mile distributors operate in is incredibly challenging. They’re working with customers who have low incomes, unpredictable, often seasonal incomes, customers who mostly live in very rural, hard to reach areas. So, because of the customer base that distributors are working with, they’re deliberately targeting the most challenging markets.” Emma Colenbrander

While the context in which last mile distributors operate hasn’t changed, the GDC has been able to create more awareness about the role of distributors.

“So, what hasn’t changed is that context. Last mile distributors are still working within the most challenging markets. But I think what has shifted since we started the GDC, is a lot more recognition of the important role that distributors play in the energy access sector”. Emma Colenbrander

Another change is digitization of the sector and the way this has impacted the operations and processes of distributors.

“In terms of what has changed specifically for the last mile distributors, they’ve become more sophisticated and more efficient in how they operate with the recognition, they know that profitability and sustainability is important. So, they are employing more technology in how they distribute and how they sell, they’re more aware of data and how to use data to improve the efficiency within their processes and their unit economics”. Dennis Onono

Last mile distributors. Photo Credit, GDC, Practical Action

Furthermore, the sector is beginning to see fewer vertically integrated companies and more specialisation, as with other parts of the energy access sector.

“As the sector has become more unbundled, companies have become more and more specialised.  The unique position and advantages of distributors are more appreciated. They have this very close proximity with customers, build a lot of trust with customers and are product agnostic. So, they are really well placed to meet evolving needs of customers”. Emma Colenbrander

In addition, more financial support mechanisms are becoming available to address the particular needs of last mile distributors.

“We have seen a rise in financing mechanisms, for example, that exists purely to support distributors. So, like the SIMA Anganza Distributor Financing Fund and VentureBuilder. They are tailored financing mechanisms to support the very distinct capital needs distributors have. So, I think the context has stayed the same, but because the impact of distributors is increasingly recognized, there are more support mechanisms in place to enable their growth.” Emma Colenbrander

Skills needs in the sector

To effectively serve customers at the last mile, distributors require diverse and specialised skills sets ranging from customer sales and marketing and asset financing to after sales service and logistics. Sales and marketing are at the core of last mile distribution with customer relationship building being a key skillset needed to provide products within these markets. One of the key strengths of LMDs is their unique proximity to customers which enables them to build trust and know their customer segment.

“So, there are real skills on how you market, how you provide customer service, how you build customer relationships, and how you translate that into sales – and that is a very specialized skill set that takes a long time to build.” Emma Colenbrander

A further area identified is asset financing. The unique proximity and customer knowledge places distributors in a position to serve their customers.

“Last mile distributors do quite a lot. So yes, they’re doing sales and marketing. That’s the core of what distributors do, but the vast majority are also providing asset financing. So, it’s very important to have skills in- house around credit risk management.” Emma Colenbrander

“The fact that they are able to serve the financing needs of customers and be flexible when customers are financially struggling – I think all those advantages are being recognized.” Emma Colenbrander

Turning to logistics, important aspects include setting up and effectively managing last mile delivery services. Distributors work closely with manufacturing suppliers, and skills around relationship management with suppliers is essential. In addition, distributors also require some technical knowledge about the products being sold.

The above is all underpinned by the need to be abreast with the digital transformations happening in the LMD sector.

“Increasingly the last mile distribution sector is becoming digitized and all the functions that distributors engage with are being digitized. So, they do need tech savvy people in the organization.” Emma Colenbrander

Dennis further highlighted the rich data that distributors working at the ‘Last Mile’ have access to and the opportunity to harness these research insights.

“Because at that level of the last mile, you really get rich data and insights that are hardly ever shared across the sectors. So, you find while you have all these people meeting the last mile customer on a daily or weekly basis, that is the best place to really harness the first-hand research work, which most of the time is not really done.” Dennis Onono

Training needs and opportunities

With respect to training needs and opportunities for last mile distributors, Dennis explained:

“The knowledge or the information is not really readily available for most of these last mile distributors”. Dennis Onono

“And then there’s also the aspect of costs. So, I know within my experiences, you see there’s some skillset gaps within organization and within the sector. But given the nature of how the business is, it’s just something that most of them cannot really afford”. Dennis Onono

A further aspect to consider is the level of training required:

“Thinking about the skills gap, you have to also look at the organisation in terms of the level. So, you will have the senior level, they have different needs in terms of skills. You have operational managers who also need different types of skills, so it’s important while you’re thinking about the gaps to also have in mind who needs what, who has what gap and at what level”. Dennis Onono

Dennis further reflected on the importance of mentorship opportunities for career progression and having a clear vison of the career path.

“So, what I’ve seen in my experience that (mentorship) has been really useful and how people who’ve come in at an entry level job, progress to senior managers within the energy sector. So, the first level, training and mentorship is extremely important, but also having a very clear career path”. Dennis Onono

On the future and trajectory of the last mile sector

A key observation and positive trend in the LMD sector is the shift to selling productive use products, which is in line with the need to support higher tiers of energy services. This opens up opportunities for distribution and appliance financing of productive use equipment and products also needed in the mini-grid sector for example.

“I think like 10 years ago, all these last mile distribution companies were selling lanterns, but they are selling more and more complex products now. For example, just the increase in the number of companies selling productive use products has grown massively. So, I think that is a really positive signal – delivering higher levels of energy service for customers and demonstrating that trust has been built”. Emma Colenbrander

On opportunities for current and future TEA-LP students

Reflecting on opportunities for TEA-LP students in the LMD sector, Dennis concluded:

“It’s a chance to really put skills that someone has learned on a master’s level to test – the last mile is so dynamic, and challenges and opportunities are there. There’s almost an immediate impact or change that you can see — that’s why it’s really also beautiful because you know for sure these are life changing products. But the impact is real. It’s not something that you can make up”. Dennis Onono