Selling to the Poor

The floodplains of Soc Trang province in Vietnam's Mekong Delta are a maze of rivers and canals dotted with villages so impoverished that local farmers earn less than $1 a day. It is not an obvious place to seek a fortune, but capitalism finds a way. Steering his ramshackle boat along the Ke Sat River, Nguyen Van Hon operates a floating sundries distributorship.

The wooden hold of his boat is heavy with boxes containing small bars of Lifebuoy soap and single-use sachets of Sunsilk shampoo, which he sells to riverside shopkeepers for as little as 2.5¢ each. Hon's first stop of the day is Xa Nhon village, where he ties up and makes deliveries to half a dozen small shops. The local farmers may be poor, but they have the same needs and desires as middle-class urbanites, and Hon's business is growing. He sells hundreds of thousands of soap and shampoo packets a month, enough to earn about $125 — five times his previous monthly salary as a junior Communist Party official. "It's still a hard life, but it's getting better," Hon says. "Now I have enough to pay my daughter's school fees. Soon I'll have saved enough to buy a bigger boat, so I can sell to more villages."

Hon's customers may not know it, but they and billions of their counterparts in the world's shantytowns and slums represent the next big marketing opportunity for multinational companies. With sales growth harder to come by in a competitive world, enterprising companies are seeking expansion among the long-ignored lower classes. And it's about time, says C.K. Prahalad, a consultant and economist at the University of Michigan, who says these "aspirational poor" — people earning less than $2 a day who make up three-quarters of the world's population — could contribute an additional $13 trillion in annual sales to the global economy, if only companies would drill deep enough to reach them. "Nearly 4 billion people have been under the radar of large companies up until now," says Prahalad, author of the book The Fortune at the Bottom of the Pyramid. "The moment you create the opportunity for them to consume, you create the world's largest markets."

That's a message that until recently only a few companies had received. The Anglo-Dutch firm Unilever, for example, has been successfully selling household products in developing countries for more than a decade. Unilever's Vietnam subsidiary alone saw sales rise 23% last year to more than $300 million because of aggressive efforts to reach remote parts of the country through an extensive network of more than 100,000 independent sales representatives such as Hon. "People want to look good, whether they're rich or poor," explains Arijit Ghose, marketing manager for Unilever Vietnam. "I've been to tiny villages where there is no electricity and no running water indoors, and yet there's Sunsilk and Omo."

When rising Third World incomes meet the shrinking cost of technology, multinationals are betting that markets will bloom. In October, Silicon Valley's Advanced Micro Devices introduced a $185 Personal Internet Communicator — a basic computer — for developing countries, while Taiwan-based VIA Technologies plans to launch a similar device costing just $100. Motorola recently unveiled a no-frills cell phone priced at $40; the cell-phone manufacturer says it expects to sell 6 million cell phones in six months in markets including China, India and Turkey. "You've got nearly 2 billion people who will be buying a phone — need a phone — over the next five to 10 years," says Allen Burnes, Motorola vice president of high-growth markets. "This is the huge growth opportunity."

High-tech companies are pushing into previously unexplored markets because most people who can easily afford computers and cell phones already own them. "The biggest problem facing global companies is the capacity for organic growth," he says. "At the same time, there are 4 billion people in the world saying, 'We would like to be part of globalization too.'"