Brainstorm feature: Next-gen commerce
As seen on Brainstorm Magazine by ItWeb: http://www.brainstormmag.co.za/business/14866-next-gen-commerce-2
A new generation of e-commerce companies is targeting physical retailers.
Most discussions around e-commerce in Africa revolve around major B2C players like Takealot and Jumia – in short, those companies trying to replicate the Amazon model on the continent.
Platforms like this are tackling a huge opportunity, trying to sell products online to a growing African consumer base. But they also face major challenges. Whereas Amazon grew into a global giant in markets where internet penetration was high, paying for things online was common, and delivery networks were established, none of that is the case in Africa.
Thus, for all the millions of dollars of investment that has gone into these companies, scale and profitability remain elusive. In South Africa, Takealot and Kalahari were forced to merge to secure a big enough customer base to survive. Nigerian e-commerce has been much-vaunted, but tangible success stories are few. Jumia went public last year, but its share price has fallen and it’s still losing money. Konga, also losing money, was acquired for a pittance. DealDey closed.
As a result of the challenges and long time-frames for success associated with the Amazon model, the next generation of African e-commerce companies are taking a different tack. They are working with existing brick-and- mortar retailers to help them make sales, order products, track inventory, and offer loyalty solutions. The scale of the opportunity is no smaller, but the approach is notably different.
The opportunity is so big because these companies are applying tech in areas where it has thus far not been applied, and are doing so with a huge impact that is driving adoption.
Stephen Goldberg is CEO of South Africa’s Selpal, which works in informal markets and has developed a ‘virtual distribution platform’ that integrates the whole FMCG supply chain. He says many of the retailers his company deals with have no business technology at all.
“Not even an ‘old-school’ cash register. So in this regard, they are quite behind the times,” says Goldberg.
Tesh Mbaabu is co-founder and CEO of MarketForce, a Kenyan company that has built a sales and distribution automation platform. The MarketForce solution allows remote agents to electronically collect data and record activities using handheld devices, providing retailers with real-time order- and lead-capturing information. He says over 90% of retail transactions in Africa occur through informal channels.
“The majority of African consumers access essential goods through kiosks. There’s a significant opportunity in ensuring retailers are able to access goods efficiently and, as a result, consumers, especially in areas that are geographically isolated, being able to gain access to the goods and services they need,” Mbaabu says.
The challenges facing physical merchants in Africa, then, are real, and the technological solutions to these challenges have been built. But are retailers willing to change and adopt these new ways of working? According to Goldberg, the answer is ‘yes’.
“They overwhelmingly understand that technology is both an opportunity and a threat to their business. They’re on the lookout for business technologies that address their immediate problems and needs and will help them make more money,” he says.
“They are smart and entrepreneurial, and as long as you give them sensible training and support, they can easily adopt new technologies.”
Mbaabu agrees, saying retailers are happy to try new solutions that can save them inconvenience, time and money.
“Retailers face frequent stock-outs because supply processes aren’t optimised, and hence lose out on potential sales. They also have no access to working capital loans because of poor or no record keeping,” he says.
A leader in the West African retail-tech space is KudiGO, which has launched a mobile-based retail, payments, accounting and analytics engine for the Nigerian and Ghanaian consumer retail industries. The company’s co-founder Kingsley Abrokwah says converting retailers only becomes difficult when companies go in with unrealistic expectations or without understanding their customer.
“They overwhelmingly understand that technology is both an opportunity and a threat to their business. They are on the lookout for business technologies that address their immediate problems and needs and will help them make more money.”Stephen Goldberg, Selpal
“The benefits arise when you tailor the sales pitch and the solution to a specific pain point they have. A typical example is a consumer retail store. The biggest problem there is expiring goods; as such, if they have a system that solves that problem holistically, they won’t depart from it,” he says.
“The good thing is that when you start operating in this space and you win the trust of the retailers, word of mouth spreads like wildfire and you will be on a roll.”
Such is the size of Africa’s formal and informal retail industry that Goldberg believes it’s a ‘multibillion-dollar opportunity’ for the companies that can crack the space. There is great scope for geographic expansion.
“Most emerging economies have an unseen element. This is true across many African countries and Southeast Asia. The models that work in the unseen part of any emerging market will generally be applicable in other markets, albeit with tweaks and localisations required,” he says.
Companies with solutions in this sector can also bolt on other services once they have secured an existing customer base. Mbaabu says MarketForce’s plan once it has digitised retailer ordering and provided informal shops with access to a credit score is to offer them access to working capital loans and other financial products. Abrokwah says the opportunities are ‘endless’.
“Unlike e-commerce, the on-the-ground retail industry has endless scale because it controls the stock, without which there is no e-commerce,” he says. “The convenience that e-commerce offers is an added value that retail commerce easily has access to.”