The right model for ecommerce in Africa is emerging. If you check in the last few months, companies like Trade Depot, Mint, Suplias, Omnibiz and a few others are providing a new model for ecommerce in the continent. They look formidable and certainly have better business models than the ecommerce pioneered by Amazon and adapted by Alibaba, within the African context. These new species of ecommerce firms in Africa have promises ahead, by looking at their growth drivers, leverageable factors and how fast they have raised money.
Notice: they are fixing the marginal cost paralysis by going only B2B (business -to-business) in concentrated clusters. So, with that model, they will not suffer the African ecommerce problem of degrading unit economics with scale.
People, a new business model is in town and I think African innovators have invented a working model of ecommerce. This is homegrown and it looks really great.
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The New Playbook
The new playbook focuses on merchants including informal retailers in mainly open markets which are everywhere in the continent. So, instead of dealing with end customers, these companies sell to store owners (businesses) in a business-to-business model. By doing that, they eliminate the need of building huge logistics structures to serve many customers. That has been the challenge of the traditional ecommerce which go real retail by delivering to everyone.
The new startups have an app which lists all the items they can supply. The merchant goes there, and buys in bulk whatever it needs. The startups now send those items which had already been bought from the manufacturers like Unilever, Flour Mills, etc, to the merchant.
Many good things happen here: the merchants are sure of high quality and genuine supplies since the startups are buying direct from the manufacturers, and the merchants do not need to leave their shops to queue and pursue supply chain systems since the startups deliver to them. Everyone benefits – startups get a volume margin while merchants save time dealing with supply chain processes. Even the manufacturers benefit as they now deal with a small number of bigger players since the startups buy in bulk and stock their warehouses.
This just-in-time delivery means that merchants do not need to have warehouses; most of these startups deliver within 6 hours an order has been completed. Across many domains, this business model seems to be a better playbook than the old ecommerce model. Over time, I do expect another evolution where end customers would be served more efficiently.
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