Is B2B eCommerce the next big thing in consumer goods and retail in Africa?
+ 2 companies to watch
I wrote about how consumer eCommerce in Africa's biggest market (Nigeria) is falling behind compared to India earlier this year.
To make it clear, there are some good reasons to compare African markets to those in the East. Similar levels of mobile/internet adoption, high data costs, poor road networks, inefficient distribution channels, and and a consumer need for low cost.
This presents a clear problem: consumer eCommerce in Africa is largely, for now, too expensive and too high-friction to meet the needs of consumers.
Today, no one is solving the B2C eCommerce problem well in a meaningful way.
Amazon will launch in 2023 in Nigeria and South Africa. Will global suppliers want to pay a massive premium to ship their goods to relatively small global markets? With limited supply of in-demand big brands, will local consumer adoption drive profitability and growth for these new marketplaces? And if those brands are only available at a massive premium, is this the solution Nigerians need? TBD how this will play out.
Jumia, the biggest player in B2C eCommerce on the continent, is struggling with profitability as they face ongoing logistics hurdles and leadership departures. Overall, B2C eCommerce in most of Africa is constrained by infrastructure challenges and consumer spending power.
But consumers on the African continent still do have unmet needs, and those are for inexpensive products, from well-known brands, on their doorstep.
B2B eCommerce - a solution to a critical market inefficiency
How do you get products from well-loved brands straight to the doorsteps of the urban African consumer, cheaply?
You act as an aggregator and distributor to the many local shops in the area. One-click purchase and cheap delivery of exactly as much product as that retailer needs.
Consumer spending in Africa is heavily concentrated in the informal sector - like, local markets and spaza shops.
This type of retail is convenient for customers because this distribution network of micro-retailers are often located conveniently close to consumers' homes or places of work, unlike large malls.
However, prices at small retailers are often high because all the middlemen involved in getting goods the store.
The solution - digitizing distribution of the informal retail trade.
This fixes broken supply chains, and offers wider selection that customers want, at a lower price.
Win, win, win.
In addition, B2B eCommerce has the potential to create totally scalable efficiencies for local retail, by enabling access to credit and offering value-added services like transaction recording and market insights.
I'm very excited by this
Like M-Pesa, B2B eCommerce could be one of the areas where Africans can innovate to find local solutions to meet both consumer and market needs.
There's an increasing amount of investment interest in this space, notably from NY-based giant Tiger Global.
International players are taking note. Dubuy.com, a Middle-East based platform shipping to East and West Africa, launched in 2021.
But there are a couple of exciting, upcoming local players making some inroads...
Jabu - Namibia
"We connect the continent’s leading brands with the largest network of shops in Southern Africa."
Jabu was founded in the height of the COVID-19 pandemic, with wide-scale store closures. It's founder, David Akinin, decided to start delivering consumer goods out of his truck to people without access to food and essentials, but soon realized that shops needed to reopen to fully meet the needs of the communities. He created the company by partnering with "with local and multinational suppliers to deliver their goods directly to informal retailers across Namibia"
"In the process, [Jabu] faced a challenge: it was difficult to locate retailers who didn’t have registered or verified addresses. The startup then worked with local community leaders to register retailers in their area and log the GPS location of each shop in the Jabu app. Within 2 weeks they identified the location of 1,000 shops.
"Headquartered in Namibia, with operations in Zambia, Jabu is a data-driven e-commerce startup that helps small retailers with sourcing products and inventory management. Its platform connects over 6,000 retailers to local and international suppliers; and digitises their orders, payments, and logistics. The startup currently operates out of 5 cities and 9 sites.
"Mid-2021, Jabu raised $3.2 million in seed funding, led by Afore Capital, with participation from Y Combinator, FJ Labs, Quiet Capital, Kli Capital, Pareto Capital, and unnamed angel investors.
"The funding makes Jabu the first Namibian startup to be backed by YC."
Jabu has expanded into Zambia, and will be looking to expand operations into other Southern African countries in the near future.
Getting around complex hurdles like unmapped roads will certainly be tough, but Akinin and his team remain motivated to succeed: “When you’re building something and people start thanking you for it, you know you’ve found something great.”
Watch this space.
Kapu - Kenya
Kapu was founded by ex-head of Jumia Kenya, Sam Chapatte, in 2022 with the express mission to "bring down the cost of living in Africa".
It operated on a hybrid B2C agent model, where agents take customer orders face-to-face or via WhatsApp. This is a genius solution, because WhatsApp penetration in Kenya is the highest in the world (97%). Kapu makes deliveries to agents the next day, and some even deliver customers' groceries for them.
There's lots of competition in this space in Kenya, with players like Wasoko and Marketforce growing rapidly, and Tushop also offering WhatsApp ordering.
This competition is a good thing: it'll force fast innovation and reduce consumer costs.
Kapu raised a seed round of $8m late last year. With Chapatte's experience and his all-star team of investors and business leads, the company is well positioned to gain a foothold in its current market in Nairobi while making plans to expand into other adjacent in the future.
Thanks to Emeka Ajene for inspiring this article - you can find his excellent writing at Afridigest.
Great insights Jamie. The point about Jumia was fascinating. Looking up their perilous fin position was honestly quite scary. The B2B startups in Namibia and Kenya are really exciting - I wish them luck and strength.