Limits of Facebook Ecommerce Operators; Small Business Owners, Not Entrepreneurs

Limits of Facebook Ecommerce Operators; Small Business Owners, Not Entrepreneurs

The last few days have brought redesigns in our broad ecommerce sector. Konga was swallowed by Zinox, the firm behind Yudala, another ecommerce firm. OLX, a classified ecommerce firm, gave up on its operations in Nigeria. They join Efritin, Ady and other entities that have struggled.

But while these entities are struggling, Facebook (Instagram, WhatsApp) ecommerce operations are emerging. Facebook is now the second largest ecommerce platform, behind Jumia, in Africa. Unfortunately, even those Facebook ones would struggle. People that do them are purely Small Business Owners, and they would never evolve to become Entrepreneurs. They would not have the scalability because they are bounded by the same factors that have crippled the capacities of the mainstream ecommerce businesses to thrive.

They could sell 200 t-shirts but they would never sell 2,000 in a day. The reason is by the time they get to 500 t-shirts, the offline challenges of logistics would affect their growth trajectories. Yes, the offline-based marginal cost will make it harder for them to grow. The implication is that the Instagram vendors would be fine as small business ecommerce operators, but none would be entrepreneurs. They would not employ hundreds as Konga did. They would not pay good taxes as Konga did. They would not even have to rent an office as Konga did. People would not make careers in them. Simply, they would be informal ecommerce operators except they would have bank accounts. This was how I put it in a recent comment on LinkedIn.

Partly as I noted in a recent Tekedia piece that Facebook is now the second largest ecommerce platform behind Jumia in Africa. Yet, even the Facebook vendors will struggle. They would be fine as small businesses but not entrepreneurs with any scalable advantage. Yes, you can sell 20 T-shirts in a day. But you cannot sell thousands. The logistics problem will bound their capacities to grow because that is a marginal cost that is totally offline.

Entrepreneurs build organizations with unbounded elasticity for growth. They run startups which are organic systems that keep growing and expanding. A startup is a company designed to scale very quickly. They pursue growth unconstrained by geography which differentiates startups from small businesses. Selling in Facebook removes the commissions you pay Konga or Jumia in their marketplaces, but that does not remove the very fact that you must sell the items to be price-competitive, to someone who lives near an open market, a supermarket, or a small (gate man) shop in another city.

Simply, even Facebook vendors would not win this market; the experimentation must continue because the future of commerce includes digital (and online).


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