Like the conversation Holden had with Technoserve last month (http://groups.yahoo.com/group/givewell/message/79), we recently spoke with a representative from VisionSpring, a potential fit for our economic empowerment area. A paraprahsed transcript of our conversation is below. The representative has signed off on this transcript.
I'd like to start by seeing if I have the right basic understanding of what your organization does. The basic model is to provide entrepreneurs in the developing world with the "business in a bag," which is eyeglasses along with training to help them sell effectively. Is that right?
That is the basic business model. We actually have 3 channels of distribution. What you just described is what we call our Direct channel – we have about 150 entrepreneurs in India and El Salvador (total) that we train, manage and support ourselves, meaning that we have staff on the ground actually doing that work.
But throughout the rest of the world, we partner with local organizations – our Franchise Partner channel. So we'll work with a microfinance organization or health institution, typically it's an organization that has local men or women that they're already working with, and we teach that organization how to implement our "business in a bag" model, and we do a feasibility study and once that phase is over, the NGO is in charge of the business model and then it's fully their own, and we provide support.
The third channel is Wholesale: we supply our glasses to retail organizations that are targeting poorer consumers.
Are you giving glasses to NGOs and entrepreneurs free of charge or are you selling them?
Selling. Our model is fully market-based. The goal is to build markets for eyeglasses in the developing world.
I'll give you a quick background because it does kind of highlight what we're doing. Our founder is an optometrist and he spent many years in the developing world and he saw that people generally bring used reading glasses with them to give away, and he thought it was very inefficient to have an eye doctor giving away glasses that go for under $10 in a US drugstore, and he thought we could create employment for local people if we created a fully sustainable supply chain for entrepreneurs.
This way, if somebody misses the distribution campaign or their glasses break, or they need another pair, they have the ability to purchase those glasses on an ongoing basis. The mission-based distribution model doesn't provide that aspect and it's not scalable, and it's impossible to really match the need of the problem, which is 400 million people who need low-cost eyeglasses. We do charge a price for the glasses – in our network we give the glasses to the entrepreneurs on consignment, and once they sell the glasses they pay us back for the cost. As for the partner organizations, we sell them the glasses and they do that consignment model with their entrepreneurs. The other important benefit to a market-based model is that it creates jobs and builds the local economy.
Why are donor subsidies needed for your organization?
The answer, to me, is that we're creating markets in communities where there is no way to get a pair of glasses on a sustainable basis to people. There are no pharmacies, the nearest optical shop tends to be several bus rides away, and the shop's glasses might cost $40-100 plus the travel time getting there the exam fee. Our model actually brings the glasses out to the rural communities and at the same time creates jobs. That sort of job creation is expensive at the moment. As we expand and we get more and more glasses, the costs get driven down.
You might be interested to read our prospectus, which is available on our website. It gives some of the information you're talking about. For example, in 2007, when we first created this prospectus document, it cost us about $17 to deliver a pair of glasses in the developing world. Already, the cost per pair of glasses is down to $11. As we continue to scale, it is our intention that the revenues that we bring in from the sale of the glasses will fully cover the costs of the organization. And so additional donor investment will eventually go to expanding to new areas. We're pretty far from that right now – we're at about 20% costs covered – so there is a large role for donations at this point.
Are those numbers, the $17 and the $11, are those just total VisionSpring expenses divided by total eyeglasses sold, is that how that number is reached?
Yes, we could do a channel breakdown but I don't have it right now.
Do you have a sense of whether donor subsidies are going more to some of your three channels than others?
There is a good amount of donor subsidization of the first channel, the Direct channel. We look at it as sort of our innovation or R&D channel. We do a lot of testing in that channel. For example, with the support of USAID, we're doing a test to provide glasses to children. We can only serve adults right now, but we'd like to be able to expand our services to other communities and other market segments. We're investigating whether we can have our vision entrepreneurs screen children and provide them with low-cost glasses. We're testing glasses that get dark in the sun and if they're successful then we'll be able to provide them to our partners around the world.
The Wholesale channel is the lowest-cost channel right now. Population Services International is a customer through that channel, they have a network of retail pharmacy chains throughout sub-Saharan Africa, and we're selling our glasses to them.
The other channel, the Franchise Partner channel – it is the most efficient channel in terms of expenses, but it's a big source of revenue. Our partners actually pay us for the feasibility study. And of course the ongoing sales bring us revenue as well.
When you talk about a feasibility study, what does feasibility mean and how are you assessing it?
On our website we have a section called Build a Franchise, which includes a few documents that describe that. Our biggest criterion is that the partner has an existing network. It's very difficult and expensive to build a network of entrepreneurs from nothing, and we're trying to make this happen as quickly and efficiently as possible. To do that, we're trying to find networks that are large and organized and that have rural reach.
The best example of this is BRAC in Bangladesh. They have a network of 70,000 community health workers. They have microfinance borrowers who've also been trained to diagnose and treat the 10 most common diseases and on top of that they sell basic products like oral rehydration salts. We taught 50 of these women to sell eyeglasses to start, and then scaled up to 500 women. These pilots were so successful that we’ve recently signed an agreement with BRAC to scale up to all 70,000 of these women. BRAC is a great partner because they're highly organized, they have a great reputation, and they have a lot of infrastructure to be able to roll out a program like this. They're sort of top of the line in terms of partners – but there's really only one BRAC. Our goal is to find organizations that are as much like them as possible. For example, a microfinance institution that has 10,000-20,000 borrowers, with an infrastructure in which someone from the organization might go out to the village to meet with borrowers once a week or once a month. We can tap into that infrastructure to add our Business in a Bag model pretty easily.
Overall, we look for networks, we look for rural reach because we try to work mostly in rural areas, and we look for organizations with similar missions to our own.
How do you measure your impact?
The biggest measure of impact is the number of glasses sold. This is because each pair of glasses improves the productivity and quality of life of the person who wears glasses. We estimate that each pair of glasses generates over $100 in additional income to the wearer. We try to choose partners that can eventually ramp up to selling a certain number of glasses per year. For example, right now we're looking for partners that have the potential to sell 10,000 glasses per year. So we look at whether an organization is holding up their end of the bargain and whether we're holding up our end of the bargain.
We also look at the income of our vision entrepreneurs. They need to be earning not necessarily a full income, but enough of a supplemental income that they are motivated to stay in the program and continue to sell glasses. It becomes inefficient to manage hundreds of vision entrepreneurs selling a small number of glasses each month.
Would you be able to provide us with the source/analysis for the $100 in additional income estimate?Do you track the different numbers of glasses sold by channel and by region?
A page from our prospectus explains that impact calculation in more detail. [See Pg 13, online at http://visionspring.org/downloads/docs/VisionSpring_Prospectus.pdf] The Aravind Eye Hospital study that we refer to on this page is titled the “Impact of Uncorrected Vision - A Health Economics Perspective,” and was presented at the 8th General Assembly of the International Agency for the Prevention of Blindness. This study found a 10% increase in productivity thanks to reading glasses (which we strongly believe to be a conservative number), which we based our impact calculation on. Before publishing our prospectus, we had this calculation vetted by Prof. Greg Dees at Duke University and Prof. Ted London at the University of Michigan, who is leading the impact assessment we discussed.
For our direct channels, we do track by region, and also by type. We mostly sell reading glasses and sunglasses. We sell sunglasses partly because it helps to boost the entrepreneurs' incomes, and there is a health benefit to sunglasses – they help to prevent cataracts. However, most of our sales are reading glasses – I don't have the exact breakdown but I think it's less than 25% sunglasses.
For partners, by-region breakdowns could get a little complicated. Some of our partners send updates on how many glasses they've sold and how many of their entrepreneurs are still in the program, but we can't ask them to give us super detailed information.
Could you share a by-partner breakdown of sales?
Do you have written reports on how partners are progressing?
We do written reports on progress with partners in terms of sales of glasses. Eventually we'll make a decision of whether or not to keep going with a partner. As for sharing that information, I'm not sure it's fair to report on partners in the middle of the process.
Might you be able to share the initial reports on feasibility that you do for partners?
Do you have data available on the incomes and standards of living for entrepreneurs?
We don't have very specific information about who's earning what. We do have data on average sales. We generally work in low-income areas. In India, for example, we're working in the rural or semi-rural areas where the average income is going to be about a dollar a day.
There have been a couple of case studies on us that have information on entrepreneur income. They're a little older – the University of Michigan one came out last fall. We've been working with the business school at the University of Michigan over the last few years to do an impact study and we're in the second year of the impact study. Last summer we did the baseline survey, looking at both entrepreneurs and customers. In the summer we're going to be collecting the followup surveys. The full impact study should be available this fall, and we will be happy to share it at that time. That will provide a robust picture of our entrepreneurs and customers, at least within our Direct channel in India.
Under "Make an impact" on our website, there's a section called "Learn," and the two case studies can be downloaded there.
Do you have data available on the professions of your entrepreneurs and/or customers?
We do track professions of a lot of our customers. Again, we don’t require that level of detailed information from our partners, but I can share information on the areas in which we work directly, such as India.
Would you share the information on standards of living?
It's not necessarily easily accessible. We have a very small team so it’s tough for us to do that level of research at this stage in our organizations’ life. When I send you information on glasses sold by partners, I can tell you who those partners are and what areas they're in. One could then research the standards of living in those areas.
But the professions of customers would be easily accessible?
We do collect that data in India, which I believe would be easy for me to send. I think when you see the impact study as soon as that's done in October, that's going to be a really robust picture of who the people are that we're serving. Generally jewelers, mechanics, goldsmiths, those sort of professions.
How do reading glasses help farmers increase their income?
With farmers it's not as direct an impact as you'd see with a tailor. Speaking anecdotally – we've seen some interesting stories of farmers, such as one who prior to getting glasses had trouble seeing his seeds, so he would just plant all the seeds and once the plants grew he'd be able to pick out the ones he actually wanted.
How do you determine the price that you choose to sell the glasses for?
The price is set around 10% of the average monthly income for the region.
That's the price for the entrepreneur or for the customer?
For the customer.
How do you determine the margin for the entrepreneur?
The easiest case to talk about is India. We sell glasses for $3-4 and the entrepreneur makes $1-1.50 per pair. The remaining margin helps us cover our costs. It's important for the entrepreneur to make at least $1 per pair in India. If an entrepreneur could sell 30 per month, that's another $1 per day for them. That's a number that in our experience is high enough to keep the entrepreneur in the program.
How do you monitor that the entrepreneur is selling for the price that you determined?
We try to ensure that as best as we can. For example, all the marketing materials that we have say the prices on them, so if an entrepreneur wanted to sell for a higher price they'd have to change the materials. We also have supervisors going out into the field and checking up on them. We have set the price for each region so people generally know that that's what they cost. Also, as part of their training they learn some of the reasons behind why the price is set, and they learn to follow that protocol. We also find that many of our entrepreneurs do the work from partially a social motivation – they believe in our mission to provide low-cost glasses that are affordable to the poor.
Going back a little – you said that USAID is funding you to determine whether you can be successful in selling glasses to children. What is the definition of success you're looking for?
When we applied for the grant with them, we set a variety of benchmarks for success. They are very strict in their reporting requirements. I'd be happy to share those benchmarks with you – they are mostly about the number of children who were screened, referred for comprehensive care, and who receive distance glasses.