What Konga And Jumia Could Learn from Amazon Stores in U.S.

What Konga And Jumia Could Learn from Amazon Stores in U.S.

I visited an Amazon local store in U.S. You can call it a pickup location. Interestingly, that is the very reason that makes it a brilliant idea. Amazon is trying to flip the logistics burden: instead of going to your house to deliver, it offers you the choice to come to its store and pick up your purchased items. In that store, you cannot buy anything physically. Largely, people come there to pick up items.

It offers deep convenience as it solves the problem of delivering items when people are at work, and away from homes. It also reduces costs for the shopper since you do not have to pay shipping cost. Generally, Amazon will save money doing this. It plans to have many of them across American cities. The implication is that Amazon will increase its real estate or rent expenses. Sure, the stores are very small, and rent cost will not be that significant, when compared with the savings for not sending people to homes to deliver items.

Leaving work at 5pm, place the order at 1pm and on your way home, you can pick up the items at Amazon Store. This is one way Amazon is showing that the “e” in commerce is all but gone. We are in the age of hybrid-commerce because winning this will involve winning on atoms besides conquering all the competitors in bits and bytes. I have written extensively on the marginal cost element of ecommerce and how the logistics component dominates that. So, Amazon is doing all necessary to reduce that cost with these pickup stores.

[Updated this section Nov 20th with news of this Alibaba deal] Alibaba is also betting big on brick-and-mortar retail. The Chinese e-commerce giant paid $2.9 billion for a 36% stake in Sun Art, the largest operator of Walmart-style stores in China.  These firms are pushing into offline shopping.

Alibaba Group Holding Ltd.’s $2.9 billion deal to buy a slice of China’s largest hypermart chain pits it against Wal-Mart Stores Inc. in the world’s largest retail arena.

China’s biggest e-commerce company agreed to acquire 36 percent of Sun Art Retail Group Ltd., which operates about 400 hypermarkets under the Auchan and RT-Mart banners. As part of the deal, France’s Auchan Retail SA will raise its stake in the Hong Kong-listed company to a similar level, and form an alliance with the internet giant to tackle the same Chinese food retail sector Wal-Mart’s targeting.

The physical world is where the money is: “The U.S. online grocery market is estimated to generate sales worth of about 14.2 billion U.S. dollars in 2017, with sales forecast to reach 29.7 billion U.S. dollars by 2021.” But “in 2016, U.S. grocery store sales amounted to about 626.98 billion U.S. dollars” . Simply, to win in grocery, you need a physical element.

I predict that within the next few years Amazon may offer coffee and tea in these local stores with devices where people can order things while they drink!

Nigerian local entrepreneurs should consider how the market is changing and adjust. It may be time for them to start striking partnerships with local stores. Amazon bought a local Indian supermarket primarily to have pickup locations to reduce delivery cost. That also helps it to mount more pressure on the physical competitors. Alibaba has been operating supermarkets for three years now, and opening new ones. If U.S. and Chinese markets are not easy to deliver great value via pure ecommerce, Nigerian market should not be expected to be different. Konga and Jumia should study these elements, even as they roll out their own pickup stores, to explore if they need to move into the physical commerce with more vigor.

 

 


---Visit our Store for my books, cases, frameworks and more. Now, enjoy our consolidated subscription for all contents (past, present and future).
-- We offer Advisory Services (tech, strategy & Africa).

Share this post

6 thoughts on “What Konga And Jumia Could Learn from Amazon Stores in U.S.

  1. Again this is a wonderful piece. The “hybrid-commerce is the way to go go.
    However like I said in an earlier post. What a good business venture needs to be able to make profit and create employment and also pay tax is a conducive environment created by the government. Our government in Nigeria needs to provide this enabling environment for businesses to develop. Electricity, good internet, railway network connecting 744 local government areas, good road network, sound economic policy that with restore trust and confidence of local and international investors etc are some of the things I refer to as conducive environment.
    Once the government plays her part, the private sector will flourish. Most investors are not willing to invest and go all the way within the Nigerian economy because of lack of clear direction and political manipulation of the economy by government.

    Reply
    1. Barr, we agree that government must do more to accelerate economic development. As you noted that “Our government in Nigeria needs to provide this enabling environment for businesses to develop..”. Our weakest link is our lack of development across our industrial sectors. That remains the reason we struggle with jobs. We desperately need a redesign of the economy.

      Reply
  2. Integration of retail stores and e-commerce businesses is the new phase of global retail business. This model would enhance better marginal profit and expand customer base.

    Reply

Post Comment