Ajaita Shah is a social activist and the founder and CEO of Frontier Markets, which has sold over 1 million products to customers across India’s last mile. As Ms. Shah describes it, “Frontier is going to be the Amazon of the last mile,” and in this episode, we explore what led to the founding of Frontier Markets, the initial fears, and how the model as evolved over time. Hope you enjoy my conversation with Ms. Ajaita Shah!
In case interested - transcript link here:
Topics covered in this podcast:
[1:48] What was the biggest fear or impediment for Ms. Shah prior to launching?
[5:49] What were the motivations behind launching Frontier Markets?
[11:58] How was the Solar Saheli model developed?
[13:08] What are the five biggest changes that Frontier has implemented from 2015 to today? ________________________________________________________ Anjali Bailakrishna (chief of staff from June 2019 - September 2020)
[13:40] The role of technology in Frontier's operations
[14:21] How does the e-commerce model work in reality?
[17:05] How are payments processed, are they credit or cash based? _________________________________________________________
[22:10] The Frontier financing model and Ms. Shah's perspective on the rural financing landscape moving forward
[23:35] What does Frontier's distribution chain look like
[24:38] What are the most rewarding aspects of engaging as a social entrepreneur?
[27:04] As a leading mentor to young women entrepreneurs, what are some of the patterns that Ms. Shah sees across this group, and what common advice does Ms. Shah offer them?
00:06 Karan Takhar
Hello everyone. This is Karan Takhar, and welcome to the Zenergy Podcast. Over the past decade, India has done an impressive job of integrating renewable energy into its energy mix. For this Fulbright Podcast series, I sought to investigate the enabling factors and potential of India's global leadership in renewable energy, with the focus on solar. This Fulbright series is broken down into Four Seasons. In this season, through conversations with ten leading social entrepreneurs and development experts, we will illustrate how renewable energy in India has taken off at the rural level. Not only will the series provide insight into their fascinating entrepreneurial journey but also how they've been able to overcome the financing, consumer awareness, and distribution challenges associated with rural solar energy deployment at a large scale.
In this episode, I will be speaking with Ajaita Shah, the founder and CEO of Frontier Markets, which has sold over 1 million products to customers across India last mile. Ajaita is very high energy and wicked smart, and the model that frontier employs, which we will explore in this episode, has incredible potential. As the Ajaita describes it, frontier is going to be the Amazon of the last mile, and with their current positioning, I fully believe this. Hope you enjoy this conversation with Ajaita Shah.
So, when you were about to launch, were you fearful? What was the biggest impediment preventing you from wanting to start this company and actually executing on it? Were there any?
02:00 Ajaita Shah
So in my earlier career, like everything was a risk, right? So you just kind of did everything slowly, so the key was to start small, do a pilot. If the pilot works, that moves the next step, then move to the next step, and then it's in the next step, but I don't think I ever kind of came in going on to become an entrepreneur. I'm in India to set up a company. I think it all kind of happened naturally and accidentally. I just kind of let my experiences around me really started inspiring me, and I think that even with frontier markets, the money that I spend with the total risk, and I was like, OK, I'll start small, I'll first take $10,000 and I'll be a pilot. If the pilot works, I clearly have something, then I'll do a little bit more. So it was very step-by-step, and I think that I gave myself a window of seven or nine months and then got in an actual investor if I wouldn't have gotten an investor, and trust me, it was very hard. It was really crazy, like, probably like $2000.00 left in my bank account when I met C fund, and I was like, alright, listen, and I remember telling Paula he's still my advisor. I was like, you know what? I'm, like, so tired. Seriously, I will pay for your flight to Jaipur. I'll have you stay in a five-star hotel.
03:04 Karan Takhar
Ha ha ha.
03:10 Ajaita Shah
My relatives are jewelers. I'll get you a 30% discount on jewelry, just come and see the field. Just spend a day with me in the field to see what I'm actually trying to crack here, and if you're still not convinced, don't give me money, but at least we'll get like a nice weekend out of it right, and like say we have nothing to lose. Like, come on. Like, this is like the best offer anyone will ever give you? So she was fascinated by that she was like, you know what? Screw it. Let's go. She looks. I'll pay for my flight. I'm coming, but you will introduce me to your cousins, I think, right? So I took her into the field, and I think after that she was kind of like, you know, I don't know if this is going to succeed. Last-mile access companies historically have never succeeded. The energy sector is so raw and new you will most likely lose my money. Most likely. However, I think you're a very interesting entrepreneur, and honestly, just getting to know you will be interesting enough to give you money. So let's just give you money with this understanding that either you're gonna lose my money, or you're gonna make me really rich. That was her statement. So when seed fund came in, I think things then started really unfolding, and I think that was the key, right, so like have good investors early on and really like work with them to really build in a lot of the things that you don't know I mean, let's be clear. Like I didn't know how to set up a company. I did not know Indian compliance at all. I definitely got duped 100 times, and there's all these struggles that you like go through early on. You know you make the wrong product choice. You hire the wrong people, so you go through all these different elements of the journey. I think the thing that kept me going was that I was really passionate about wanting to try to track this. I was resilient in letting every mistake not filling me down, but actually, just kind of converted it into like a lesson or learning. I think getting ecosystem partners like IFC is important. I also have mentors from my microfinance days, so I think there was like a nice ecosystem of people that I at least knew from my earlier days of work that I could turn to when I was feeling like I'm totally messing this up, right? I think that was really important, especially because honestly, as a woman entrepreneur back then, let alone so being a startup social enterprise and that too then based out of Jaipur, there was no incubator. There was no, like, ecosystem, like, you know, traditional ecosystem that would have helped you, and there's definitely no folks going. Oh, cheers! Like $100,000 of grant funding 'cause you have a cool idea, so everything was a battle.
05:44 Karan Takhar
Yeah, that makes sense. Thank you. That's wow. What a story.
05:49 Ajaita Shah
But I think. Frontier markets was created because we fundamentally felt that there was no company out there that was truly representing the voice of the rural consumer. We need a company that would be product-agnostic, brand agnostic, and customer-centric. So like, where was the company that was going to go, I'm going to be obsessed with the rural customer to figure out what they want, why they need it, how they do what's available and what's not, and then I will create my entire distribution model around convenience for that, So how do I locally deliver it to their doorstep? How do I make sure that whatever products I'm giving to them, they have all the information they need about it, and so they feel like they're making an educated decision? How do I also make sure that once I deliver the product, it actually does do what I'm saying it does So how do I ensure that it's relevant and then, and if for any reason, if Something goes wrong, for whatever reason the product breaks down, how do I make sure that I'm there to deliver after-sales service so that they don't feel like they're getting cheated by listening to me, right? Because they're not exposed, they don't have access to all the information in the world. People aren't delivering products in their doorsteps right now, and frankly, this was like the gap that we're trying to figure out. So Frontier markets started with that mission. The mission was that we felt that rural households are fundamentally the king of the world, but they deserve to be treated like dignified customers and that ultimately we want to make sure that we're spending all of our time getting to know them and then do that creating a market or distribution or an access company that can always be delivering what they want when they want it at the best quality at their doorstep and with being there if Something like and that was the idea.
07:36 Karan Takhar
That makes sense.
07:39 Ajaita Shah
So, when we started, we started with energy. Going back to the point that I was making earlier is because we felt that the energy crisis back in 2012-13 was massive, and really rural households, if you don't have access to regular, reliable electricity, it's very difficult for you to get out of the property, so I could buy a sewing machine. Right? But if I don't have electricity to power it, what am I creating, and How many money? And so fundamentally, we also felt that if you bring in good quality energy solutions to rural households and you're actually following through with its purpose, its design, its outcome, etc., they'll trust you more because here I am, I can tell you that this medicine is the best medicine and you should totally use it but if that medicine doesn't kill you, why would you ever believe me? Right? So similarly, when you're giving someone access to reliable lighting, and they never had access to lighting before, there's an instant satisfaction that comes in, which creates like a platform of trust, so that's why we started with clean energy. We started in Rajasthan. I mean, my family is originally from Rajasthan, but that's never been the reason why I started in Rajasthan is actually because Rajasthan really was one of the poorest states, worse electricity access possible, and frankly, it's one of the places where there weren't a lot of people operating yet, so starting in Rajasthan for very long time we spent probably the 1st 2-3 years just literally trying to figure out what would be the best delivery model. So, we knew we were going to focus on after-sales service. We knew we needed physical service centers locally situated so that people could really believe that we're not here to run away 'cause, like a lot of customers would always go, how do I know that you're not going to leave once you sell this to me, where's your service center, Where's your Office, whatever, and having that super local was the key because people would go, OK, like we are legit, they look physically here. We invested in a call center to like proactively reach out to households once they've bought products, so we just re-educate them on how to use the product so that we could always remind them that we were very serious about after-sales service. We partnered early on with a lot of the ISO-certified companies, so do like we have planet and others that were always already focusing on quality products. So, we're the first to say that you shouldn't be introducing lead-acid solutions will be Lithium-ion is the way to go. So, and the difference was that, you know, even if you're bringing in quality products, if you don't have last-mile access, how do you ensure that if the product does fail, you replace it? That's where that loop became really important. We were delivering our solutions from retailers, so we had partnered with a lot of these local farmer retail shops. In the areas that we were operating in, and they were literally the ones that we like investing in to stalk our products, and then we would mark it around their areas and then sell it to their customers. That's the model that we will primarily focus on for until probably 2015, and we had partnered with IFC by 2013. So, we were the first distribution partner that IFC had in India. This is we strongly felt that IFC initiative could not just be about product companies, but there are a lot of access organizations that are actually doing the work on the ground in the front line to really get these products into the hands of rural households.
11:00 Karan Takhar
Then how did you get from like that initial model to this Solar Saheili?
11:03 Ajaita Shah
Yeah. So, 2015, when we had done that exercise in Ernst and Young, so by then, we had probably 100,000 customers, and we learned that 70% of our customers were the actual users, so not the people that bought the product, but the people that are actually using the product, the women, they're all women, and we were like really confused in this notion that like why is it that women are using the product but the customers are all men, and we realized it was because we were selling the products from retail points where women weren't coming, and that was like the big gap, so in 2015 with IFC, with Tata Trusts and the global lines for clean cook stoves, we decided to take some grant funding to see whether we could actually then turn this into an opportunity, So we partnered with some goes in Rajasthan, and we said we would love to like meet the women that are actually using our products and see Whether there be an opportunity to link them, become our actual sales force, and try to figure out how this would work, and having spent a lot of time again in access, I knew I didn't want to create an agent model agent models don't work right like give someone a product, and go, oh, go out and sell and make money. It doesn't work because selling solar is really hard, and having done it myself, but I know how hard it is, so I needed to figure out a better way to understand how to crack a partnership with a nonprofit. What kind of woman do we want to work with? What is the value of these women in terms of not just, oh, they can sell? It's like, what did it bring to the table that's unique, and what we learned very quickly was what they're bringing to the table that's unique is that they have trust in their community. They can enter into anybody's health, so they know how to communicate in a very different way, and they fundamentally are also able to market and create behavior change in a different way 'cause they're very good at storytelling, so that's how kind of the saving program started in 2015 and then it took off from there, so from 2015. So today, what are the five things that have changed? One is, so it's 100% gender lens, but the second is now it's 100% on tech, so we designed our eCommerce platform. We designed a tech solution. We got cell phones into the hands of all of our women. We got them access to the Internet and data because in 2017, when demonetization happened, Jio also created 4G telecom towers in every village, right? So, so you were like really, yeah, so you're really reacting, so you constantly adapting and reacting to like the changing nature of the ecosystem, that's around you, It wasn't that we were becoming a tech, you know, becoming this tech company. It was that we were leveraging technology to make our core model and to make our core value of creating access to essential goods and services for a household to make that process better, and so for social enterprises thinking about, you know, how to incorporate tech and the key there is saying how can tax become a tool to accelerate the work you're already doing as opposed to saying how do we turn our company into a tech company and the slight nuances, but it's an important one to make sure that the companies are holding on to their core value proposition and seeing how technology fits into it as opposed to saying, well, everybody is using text. So, let's try and figure out, How to take our model and just turn it into a tech solution.
14:19 Karan Takhar
I see I see. So, can you talk a little bit about how exactly, Like, this e-commerce model works in reality in terms of, yeah?
14:29 Ajaita Shah
Absolutely, so given that and given the commitment to our core model and to women being at the center of the value chain, we also wanted to make sure that this product's tech stack really worked well for our rural women, so the version that we have right now is a facilitated e-commerce platform which means it's actually the rural woman entrepreneur, the one who's making the sales is the one who the app is designed for, so we actually went through a pretty involved design process where we actually had Saheli, you know, help with the design process. Say, you know, these are the flows that we think are important for our work that we'd like to see on the app. You know, we showed the wireframes and prototypes to make sure that they were really constantly involved in the feedback process and making sure that the app is really going to work for them and then needs, and I think this in terms of process, that's been a really important part of how we built this It's been in terms of how it works. We've built sort of a multipart tech universe as opposed to one single product, which makes a lot of sense, kind of given this type of product. So, you have the consumer-facing side, which is really what this Saheli is using. So, for her, she has a catalog on her phone. Obviously, there actually there are a couple of things. So if she meets a new interesting customer, she can get all their data and information, and so this has been a really important part of this for us is that we're able to learn a lot more quickly and a lot more efficiently about what customers are asking for, even if they're not currently selling that product or getting a lot of data about customer demand and the types of services that they're looking for and products they look before they can capture that information, then they have a catalog, they can show the customer all the different product options customers can place orders to the Saheli, at least they will say great, we want torch, add it to my cart, and then within 48 hours, so as soon as this Saheli hits you know, submit and place the order that pings to our back end. So in the back end, we have a robust CRM that we built alongside the front. Yeah, and that CRM will say, great, Daviji placed an order for a torch with this customer Ramesh. So, we're going to call Ramesh and confirm that this order is actually what you want in the place. He says yes, then our back-end staff in our head office confirms the order and sends it forward to our branch offices. Our branch offices actually have their own version of the app and Operations app where they can say great, Ramesh needs this torch. They scan the product in the warehouse using the app, and then it's kind of like, you know, like an Amazon, or any other type of app or delivery app where we can actually track the progress of the product is they get to the final destination, they get a signature or close the loop that way, and all this happens within about 48 hours. So right now, the rural economy is basically all cash-run. There are a lot of reasons for this, and I think there's a lot of infrastructural reasons they're doing infrastructural reasons, and then there's also like trust and comfort reasons. So, after demonetization, rural customers at a pretty large scale got bank accounts. They're not really using them to make digital transactions, and so the infrastructural reason is that there isn't a good last mile infrastructure for cash in cash out points for point-of-sale transactions that leverage digital cash as opposed to actual cash money, and so as a result, what ends up happening is that rural customers will travel 5 to 50 kilometers away to the nearest town, if they have money that goes in their bank account, will basically withdraw all of it and keep it, you know, under their pillow kind of thing we've interviewed a number of rural households and so that's kind of the other piece right there isn't in the underground infrastructure to make it easy, and then because of that or kind of reinforcing that there's kind of a mindset of you know, if you can't see my money at how do I know, but it's there, right? There's kind of a lack of trust in the digital financial system, and the challenging thing is in the post-demonetization, India like that can't be the mindset in that like their government and the system is moving in a position where they're trying to really digitize, make India really a cashless economy, and so I say, let's say right now our customers make purchases primarily in cash and really exclusively in cash, but we're working really hard to start kind of being those last trial banking solutions as well and so having our Saheli become thinking correspondence and starting to kind of facilitate digital finance in the last mile and trying to both because a big part of our value proposition to the rural communities is that, you know, there's two parts, right? We can actually be there at your doorstep, so that solves for a lot of the infrastructure gap. In terms of actually being able to physically go get the products and services they need, there is another thing that we saw for is the trust question. So you know these rural customers, and they have a limited amount of money to spend on things, want to make their purchases wisely, and they need to be able to trust the source that that's coming from, and so when the sales agent is there a woman in their communities that they trust, and they know and can explain and educate just as much as they're so I think it makes it a lot easier for real customers to be able to say yes and to start accepting different types of solutions and so I think as it relates to digital money that I think is a big benefit that our model can provide is that they can actually convince or rather get rural customers to find digital cash to be an acceptable thing as opposed to Something that's scary and also, and provide the infrastructure to make that happen so short answer your question everything.
19:30 Karan Takhar
No, thank you. That's really nice. Yeah.
19:30 Ajaita Shah
Is tax right now, but so this is kind of where we're moving.
But the other things that happened was on the energy side. We realized that you know, some of these products, like the delight products and the being that products like they weren't necessarily still perfectly designed for our rural customers. So, we started getting insights from all of our women, from all of our Sahelies, and we ended up designing our own products, working with Indian manufacturers, and so today, our core product, a basket of torches, home lighting systems, etc., are all frontier markets branded made in India, designed by our loyal customers and our torch. Our solar torch is the first IFC certified made in India product ever in the global market, and then the other major change that happened in 2018 was that we realized electrification was happening in India. So suddenly, people weren't needing basic lighting. They were getting access to 12 to 18 hours of electricity, albeit not reliable and not constant, but it created a need to pivot again, so people wanted what they were like. You're not a solar company. You're supposed to be an easy life company. Why aren't you giving us access to everything that we need? So we started introducing things in 2018. We brought in new investors, we brought in ONG, we brought in TPG Rise Fund, and we brought in a gender tech investor called Teja Ventures. It was a million and a half dollars, and that money was basically used to invest in our tech to diversify our product basket. So we started introducing smartphones, Internet connectivity, Agri tools, pots and pans and mixers, and blenders and grinders and irons, washing machines, TV, refrigerators to, even bringing in cattle feed, feminine hygiene products, diapers, 'cause to detect and through our Saheli network we were able to like really start understanding the pulse that real customer fast, real-time, and then, through e-commerce, we were able to build it in as a marketing tool, and we had an entire CRM system that could allow us to capture all of our customer's information about who they are, what they want, what they need, what they're buying, what they're selling. So suddenly, we started doing cross-sell, upsell, and resale in a very different way, and we also been expanded beyond Rajasthan, so we took six years to bring in tech, we took six years to diversify our product basket, and then we took seven years to expand, and a lot of people criticized us that they were like, why aren't you moving faster or are you just a single state company what's your deal with not wanting to scale this more aggressively? And I came from microfinance, so I know what happens when you scale the wrong model too fast, right? So, for me, it was about perfecting the tools, and perfecting the process is affecting the value proposition affecting the model. So we've been profitable for the last three and a half, four years, but ultimately for me, it was about unit economics, profitability as well. And in 2018, that happened in a very smart way, and tech was going to be the way that we would be able to then replicate it. So we, through IFC and through other partners, we then expanded operations into UP, Bihar, and Orissa. So today, we've enforced states we have 3500 women entrepreneurs. We have a million thoughts tool households as customers. We've sold over 1 1/2 million products with energy still being the core, but all these other products mix as well, and then all on a tech platform, you know, before the COVID crisis we were actually going to then add against the thing, so do fintech. So join the Party Innovation Fund, which is a beach foundation-funded initiative to like help add digital financial services into the last mile, and so things kind of took a crazy turn, which I started off the conversation with, but what's exciting is that we clearly see an opportunity to like scale or accelerate our work and the nice thing is that in this period of time, we've gotten a lot of great funding partners, great mentors, a great ecosystem, people that have really helped us in this process to kind of get to where we are today.
23:28 Karan Takhar
I see. I see so. Can you just talk a little bit about like what the chain looks like? So you field staff then use solar, Sahelies you?
23:36 Ajaita Shah
Yeah. So, we have branches. These branches are covering about 150 villages, which is essentially covering 90,000 rural customers each village used to have one sailing, but now we're actually adding five cities in each village, so our number of 3500. Good in the next two months will be 15,000, so each city has its own territory. She's responsible for a set of customers. She is basically marketing to them, showcasing the tech. She's placing orders on their behalf. That information goes to our branch. Our branch has been working with suppliers, and those suppliers send the product to our branches. Our delivery guys then deliver those solutions and collect the cash, and we close the loop. So, we work with about 15 manufacturers now, and so the chain is very straightforward. It's like the manufacturer Frontier Markets Branch, Frontier Markets branch. It goes to the Saheli, and Sahelies delivers the customers.
24:32 Karan Takhar
I see. So just from a personal standpoint, in terms of your journey as an entrepreneur, what are some of the more rewarding aspects of that?
24:42 Ajaita Shah
I think what we've achieved to date is definitely really rewarding. I mean, this was a crazy idea, and I never thought that I'd succeed at it. I mean, I wouldn't call us 100% successful, but I think we're getting there, and I think that that's been very rewarding. I think the fact that we've been able to create so many jobs for so many different people is a massive legal holding. We have over 140 staff today, and they're all coming from like small towns in small areas and really being able to give them an opportunity to earn real money, but then I would also be able to give back to the country. It's huge.
25:13 Karan Takhar
And hit 3,500 Sahelies
25:14 Ajaita Shah
Think so, yeah. I mean 3500 Sahelies, but the fact that the gender lens piece is huge, right? Like, I think that I connect with little women a lot because, you know, I came from a conservative family and probably also fundamentally believed that women aren't meant to be earning money. They're meant to be sitting at home, and I think that, you know, being able to drive economic empowerment to be absolutely vulnerable when these are women that were married at the age of 14, you know, they had five kids by 10, at 30 they were uneducated, but they were hungry to create. In fact, I think that that has been really rewarding to see the impact that we've been able to create in their lives, right? They've helped their daughters not get married at the age of 14. They've been able to invest in private education for their children, and there's a big level of hopes and dreams and aspiration that you've been able to accelerate in the last mile, I think even change, and then I think the respect that I've gotten in the ecosystem, I would never have thought that I would become quote unquote an expert of the last mile or have people like the UN or the World Bank or others like wanted to hear my opinions they want me to contribute to a larger global Impact and I think that's definitely been Something that's very hard healing and quite exciting, and you know, it's still the beginning, right? I mean, I'm only 35, so that has a long way to go in terms of what's to come. But I think it's really exciting to see that it can actually happen. I mentor a lot of younger entrepreneurs. I mentor a lot of women entrepreneurs. I'm on a bunch of boards to kind of really drive. Like women in the center of business and access and therapy, and it's quite exciting to hopefully help others achieve their goals and their impact faster than what even I did, and so I think that's where you kind of start thinking through exponential impact as an individual.
27:00 Karan Takhar
When you're mentoring these younger women entrepreneurs, do you see any patterns of things they struggle with?
27:05 Ajaita Shah
Yeah, I think women tend to underestimate their own capacity. We always think pragmatically versus optimistically. I think that's always been a big hinder and our ability to compete with our male counterparts. I think that's definitely been one thing that I've been trying to encourage women to like to own their assets versus only owning their challenges. I think the other one has been about starting small. Don't feel the pressure to go big from day one. 3rd is focused. I think it's so easy to get distracted in this social enterprise space because there are conferences, there are papers, there's research, there are all these things, but at the end of the day, what you will be recognized for is the work that you do on the ground, not how many awards you get, and that's really been, Something that I've been trying to really reinforce 'cause I've gone through that own distraction, myself and I feel like at this stage I finally got it. Like I finally stopped, and I'm like, you know, so whenever we these awards come in, everyone goes like, oh like you're so cute, you're so known, and I'm like, listen, I don't chase these awards, I don't chase these repetitions. I don't care about them, but ultimately, it's about patterns, and I think the fourth thing that I would say is that partnerships are key. Humility is key to being as transparent and straightforward as possible. Learning from your peers, like competition, is stupid. It's not real, right? Like there's an over a billion person problem, there's a 3 billion person problem right on a global lens perspective, and we need to start recognizing that we're not going to solve this on our own, and it does require shared value impact and a true sense of partnership to really make this thing work, so you're not trying to do everything on your own and recognizing that there's a space for everyone to be in to make this thing happen.
28:50 Karan Takhar
Thank you. Thank you for your time. Honestly, really appreciate this.
28:52 Ajaita Shah
Yeah. No, absolutely. No, no. Thanks so much for like reaching out.
28:57 Karan Takhar
I hope you enjoyed that episode and do check out the show notes For more information on my guest. See you next time.