In the league of African telecom operators, Kenya’s Safaricom is peerless in innovation. It pioneered mobile money transfer through MPESA. It is profitable with one of the finest marketing strategies when it comes to telecoms in Africa. When you walk through the streets of Nairobi, you will feel connected with Safaricom with its local language promotions. Kenyans love Safaricom as they continue to rate it one of the top brands in the nation.
Yet, Safaricom is part of the telecommunication institutions which are going through redesigns due to over-the-top services like WhatsApp and Skype which make it possible for people to communicate more efficiently and cheaply, even when depriving the telcos extra revenue. The telcos do make money, at least for the users to be online, but they lose money when the people send SMS on WhatsApp and do video calls on Skype, without directly paying the telcos, for those extras. Indeed, you can load N700 (about $2) data in Nigeria and send 1,000 messengers on WhatsApp. Without WhatsApp, that could have cost you at least N40,000 in the hands of telcos. You have saved, but value has been destroyed for the telcos. Oh yes, you can argue that no value was destroyed until you start building telecom infrastructures. Telcos do believe that the N700 you have paid is not enough to cover the N40,000 worth of activities which went through their systems.
So, Safaricom is looking for growth and planning a future where data and voice may not take care of the margins. It has launched an e-commerce operation, named Masoko.
Safaricom has officially announced the launch of its e-commerce portal, Masoko. Masoko (Swahili for ‘markets’) aims to leverage the mobile phone to provide local merchants with unlimited potential to sell their products and services via an online platform.
Users of the platform will be able to access items ranging from groceries to books to auto parts.
Masoko will accept all mobile money payments as well as Visa and MasterCard payments and will have dedicated delivery fulfillment partners such as Wells Fargo and Sendy to provide a seamless customer experience that is versatile, fast and secure.
“By leveraging the strength and reach of our network, our customer base, and a number of partnerships with vendors, we hope to create a solution that can power the next phase of growth for the Kenyan economy. We hope to create a universal platform that will connect the smallest of vendors in Kenya to a nationwide market,” said Mr. Ogutu.
Why This Is Unique
Unlike most ecommerce operators in Africa, Safaricom could find success easily. If you read clearly, Safaricom is looking for the best way to expand the Kenyan economy because that is where its “currency”, MPESA, is very dominant. If that “next phase of growth for the Kenyan economy” happens, through its contribution in this new venture, Safaricom’s MPESA will benefit. It wants to build an integrated market that will unlock more values in the Kenyan economy, including the informal sector. Here are the core strategies this company is deploying:
One Oasis Strategy: Safaricom is launching this ecommerce to help in the growth of MPESA, its very best product: “Masoko will accept all mobile money payments …” The more Safaricom can move more Kenyan commerce to MPESA, the more it benefits because MPESA is in its ecosystem. So, technically, even if it does not make money through ecommerce, Safaricom will make money through more activities in MPESA. Ecommerce is generally hard to make money, but there are many ways of making money in it. You play parallel, using it to grow another product.
Double Play Strategy: Safaricom is going to run the typical double play which is used by leading global ecommerce businesses. These companies always have complementary services to ecommerce. Safaricom has one in MPESA and that will help its positioning in the market
In baseball, double play is a defensive play where two players are put out. It turns out that the leading ecommerce companies like Amazon and Alibaba have such strategies in their businesses. Amazon runs an ecommerce operation, which largely loses money, but makes money via cloud computing services. In the world of Amazon, if it can destroy many brick and mortar retailers and force them to go online, it will have cloud services to sell to them. For Alibaba, its double play comes from its asset-light marketplace and the Ant Financial which processes payments across its ecosystems. Besides the commission for selling on Alibaba, Alibaba takes another cut for handling the payment. When you examine these companies, one thing is obvious: no one makes good money by running just an ecommerce operation; you need a double play to supplement it.
I am expecting Safaricom to move into other sectors like insurance after this ecommerce venture has been executed. The fact remains that no one understands the buying habits of Kenyans more than MPESA. By looking at MPESA, you can get a good picture on how Kenyans are spending. This means that you can create products and services around those patterns. No other company in Kenya can do this better than Safaricom in Kenya.
It can use data from MPESA to have a very good feel on what is trending in Kenya and then make sure it is prepared for it. If people are buying insurance from one of the merchants that sell so, Safaricom could see that as the next big thing. (Data policy in Africa is weak, we will continue to debate what companies can see and not see. But today, no one is policing them.) This ecommerce operation is largely a marketplace where it is mainly bringing buyers and vendors together, without necessarily carrying inventory. Yet, it is possible that Safaricom can see from MPESA the wares which are selling well and could decide to stock and sell them directly.
The best business Safaricom will have in coming years will be data business. MPESA makes that possible because you are using real data on actual purchases. It will be hard for anyone to beat any operator with that level of insights about any economy and the broad consumers.
Yes, the data Safaricom has about Kenya is unprecedented and this company can use it to build new businesses. The ecommerce business it is running is not the risky type: this is a marketplace where the risk stays with the vendors. The main goal of this new venture is helping MPESA to remain the dominant mobile money despite whatever the banks are planning in Kenya.
I do not see a highly successful ecommerce operation that will defeat Jumia in marketplace sub-sector, but I see an operation that will seed more markets and opportunities for MPESA. That is One Oasis Strategy fused with Double Play which has been used by leading ecommerce giants around the world. When those are executed in sync, with the data Safaricom has on Kenyan commerce, through MPESA, great things happen. That is the brilliance of Safaricom.