A lot of questions on Temu. I have already written enough. But let me summarize with this Harvard Business Review article I wrote in 2015, and this is the key section: “Logistics: Amazon.com and eBay are great companies that depend on the U.S. postal system to serve their customers. I sell my own books online in the U.S.; once a buyer makes payment, I drop the book off at the post office to close the transaction. In Africa, it’s more complicated with nonfunctioning postal systems.”
Good People, Temu will do adverts and actually get you to buy, but at the end of the day, the items must be delivered. The marginal cost positioning for Temu as it does that will determine if it would pack up and leave in three years. From the time of Kalahari (first major ecommerce in Africa funded by Naspers, just months Amazon was launched) to Mocality to Konga to OLX to (fill the space), it comes down to logistics, and that is shaped by marginal cost.
Ecommerce marginal cost has two components and they are transaction and distribution costs. For ecommerce in Nigeria, distribution cost does not scale, it grows, and that is the issue without a functioning postal service. So, you need to watch if Temu builds a “postal service” in Nigeria! If it does not, it will arrive at the same conclusion: companies thrive on public platforms and most of those platforms do not need to be profitable, but are designed to power private businesses which are then taxed by the public.
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For more than 50 years, the US Amtrak system has never made a profit, and the US has not shut down the rail system. The US postal system has been losing money for 20 years and America is fine with the losses. China does not even keep records because it loses $billions to subsidize logistics. In Nigeria, that is not the case, and that is the big equation Temu must solve. What OA Lawal wrote in his economics textbook has not expired: I have a plot to help here.
During Digital Transformation of Consumer Business, Understanding “Marginal Cost” is Important
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