Question: You seem not to like the typical B2C ecommerce business model in Africa, could you tell me which one you like?
My response: the Amazon-based ecommerce business model in Africa is a waste of time. It is very unlikely that any company will make money doing it in Nigeria or broad sub-Saharan Africa (excluding South Africa). Jumia loses close to $200 million yearly on its business model: “For one, the company has recorded back-to-back losses every quarter since it went public in 2019; it finished 2022 with $207 million in adjusted EBITDA losses, a 5.3% rise from the $196 million it recorded the year before”. I have excluded South Africa because it has a fairly decent postal service.
Since my seminal paper on Africa’s ecommerce in Harvard, I still maintain that the B2C ecommerce model must evolve to be profitable in the continent. Yet, as I have written in the past, one company invented a great business model that is working. What does it do?
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“Copia’s model is hinged on a 5,000-strong agent network comprising mainly of local, small shopkeepers who earn commissions by serving as “points of aggregation of orders and delivery distribution.” Essentially, rather than make purchases online via a website or consumer-facing mobile app, Copia customers walk into stores of partnered agents who place orders on their behalf, take payments and serve as delivery points.”
Simply, this is human-based logistics and that solves the marginal cost paralysis which makes B2C ecommerce unprofitable in Africa. Of course, that it is working in Kenya does not mean it will work in your community where people refuse to be fairly decent and honourable. Indeed, they can pick those items and refuse to deliver them. But for Copia which has raised at least $103 million, the agents are delivering.
But if your country suddenly has a working postal service, the Amazon model will become amazing. But until then, it would be a tough model to deliver profit.
Comment: “Pretty strong conclusion.” My Response: Yes. I think I have data to make that call. From Kalahari to Mocality to OLX to old Konga to the next, no startup has executed the Amazon model successfully in sub-Saharan Africa. But if we have a postal service tomorrow, this game will change. Yes, businesses can reach EVERYONE in a country, over focusing in few cities due to logistics issues
For e-commerce to work at scale in Nigeria, it must satisfy two conditions: affordability and convenience. There are open markets everywhere across the land, so for you to mount a serious challenge, it means you must sell cheaper than what buyers can get from open markets. For now that maths is not mathing.