Chika, an African lady in her twenties, had always dreamed of owning a fashion store. Her passion drove her to learn how to set up an online clothing platform that would act as an interface between her and her target audience.
Being a meticulous person, Chika spent several months researching the best local designers she could work with. Unfortunately, this wasn’t the only challenge she had to grapple with. Chika’s business was growing fast, and soon her small apartment couldn’t handle the storage demands of her business.
What could she do? She opted for independent warehousing. Luckily, she found a company online that offered to store her inventory and fulfill her orders for a small fee. Problem solved.
Soon, she faced another challenge—this time, handling her returns. Because her business was still growing, Chika didn’t have a refined process to handle returns. As a result, she was spending a lot of productive time dealing with processing returns. Seeking a solution to this problem, she reached out to a more established online vendor who told her about a return management company that would help her reduce her workload by picking up items from customers and delivering them to her directly. Now, Chika doesn’t have to worry about her customers who need to return items to her. The return management company does it all and she can focus on handling orders.
Delivery has always been one of the biggest challenges faced by SMEs within the online space in different parts of Africa—and Chika was not exempt. Many of her orders were either getting delayed or missing in traffic. This wasn’t good for her reputation. She had to find a local logistics company with a specialty in last-mile delivery. Now, delivery was faster, more affordable, and she could serve her growing list of customers better. In the end, the key to unlocking Chika’s business potential and solving her problems was staying abreast of the latest innovations and opportunities available within the African e-commerce industry.
Key opportunities within the African e-commerce space
When entrepreneurs, like Chika, are open to new ideas and solutions, they are better equipped to provide more value to their end users and other businesses. In a previous article, I discussed the current drivers of growth and highlighted the potential for collaboration among players in the industry. In this article, we discuss such opportunities in detail.
A major peculiarity of these opportunities is that they are evolving. These opportunities are like an API service, where you stitch different services together to build a full service. Here, you don’t have to do everything but depend on various parties to solve different parts of the problem.
Some of the opportunities include but are not limited to:
- Independent warehousing
- Refined return process
- Last-mile delivery
Independent warehousing is an arrangement where independent proprietors own warehouses instead of e-commerce companies. For example, did you know that some of Amazon’s warehouses in the US are not completely owned by Amazon? Some of the buildings were leased to Amazon. Most of them are owned by a company called Prologis. The company builds these warehouses and leases them to Amazon. Amazon brings in the operations that run the warehouse. It means that Amazon doesn’t need to spend money building warehouses everywhere. This also plays out in the hospitality industry, where companies develop the physical buildings, and management companies handle the daily operations of such facilities.
In the fictional story you read earlier, Chika needed help storing her orders before dispatch. An independent warehouse sorted the issue out easily as she only needed to lease the space when she had lots of orders with no storage space in her home. This cost her far less than building a warehouse from scratch or leasing one that would remain fallow when she didn’t have a need for it.
E-commerce players are beginning to move away from the one-size-fits-all approach or the one-company-solves-every-problem approach. Early e-commerce players had to build out everything because the proper infrastructure was not in place. But as time progresses, we are beginning to see other players break down the various parts, handling different challenges with the supply chain of specific industries, and focusing only on those niches.
Take, for instance, the AWS model, which lowers the barrier of entry for startups. Before now, if you needed to build a software company, you had to obtain a well-ventilated building with a lot of cool air, get an electrician who will wire your space to allow you to bring the kind of heavy equipment that you need, buy a bunch of service racks, and hire networking personnel. Today, nobody has to do that; you just need to sign up on AWS and get your startup running. It will be the same for e-commerce businesses as we move along.
Refined return process
Recently, DoorDash, an online food delivery company in the US, began partnering with e-commerce companies to handle returns. Returns are a huge component of e-commerce in the US, and the challenge for most customers is that they have to go back to the store where they bought an item to return it or go to the post office to drop it off.
Truth be told, most customers would hardly ever go through with the process. They prefer conveniently returning such items. This means they just want to drop the package in front of their houses and have someone pick it up.
DoorDash is doing exactly that as a service. They will pick up returns from people’s homes and get them back to the merchants where the purchase was made. We can have last-mile businesses that decide to focus on returns. They can help businesses go anywhere their returns are and pick them up. This has the potential to transform e-commerce.
While this solution is not so rampant in many parts of Africa yet, companies are already seeing the opportunity that lies in seizing the opportunity. Like Chika, many vendors struggle with handling returns—which is telling of their productivity—and delivering orders. With this solution readily available, their work becomes less stressful, and they become more productive.
Today, to get your items delivered to you, someone picks them up and they have to schedule a time to meet you at home or at the office to deliver them. However, companies can find a way to collaborate with people in the community to deliver your items rather than delivering them to your home or office. Instead of trying to deliver to people’s home addresses, they can drop items off at lock boxes within neighbourhood hubs—such as gas stations or eateries—for a customer to pick them up. If customers prefer a different method, companies can establish pickup kiosks at specific locations. They will provide customers with access codes that will allow them to pick up their packages at these kiosks. These are ways that last-mile deliveries could play out. Some businesses might decide to focus on building kiosks across multiple neighbourhoods and partnering with e-commerce players.
E-commerce in Africa is no longer just an idea, it is a reality that is growing at breakneck speed. With more entrepreneurs entering this space, there is bound to be a plethora of opportunities that will spiral into further development of this sector. While the African e-commerce industry may take years to catch up with what is happening in the Western world, its growth is profound.
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