Earlier this week, OLX announced it was shutting down its offices in Kenya and Nigeria. Going forward, the team in South Africa will handle operations for the rest of Africa.
Yet, it's not only OLX facing hard times. In January 2018, Jumia market Rwanda folded into Jumia Deals. Becoming a classifieds e-commerce platform. In December 2017, Konga shifted to what many believed to be a classifieds model. Before getting acquired by Yudala's parent company - Zinox - for $10 Million in January 2018. In November last year, Jumia Group's Jumia House, Jumia Deals and Jumia Jobs laid off all staff in Uganda.
In all these cases, there's one thing consistent. A classifieds e-commerce model. It seems to not be working in the African market.
This year, Geopoll polled 2,031 respondents in Nigeria, South Africa and Kenya. The report pointed out that "Informal transactions through Facebook groups are threatening the success of e-commerce giants." It also added that "Jumia still remains the most preferred e-commerce vendor".
Shopping in Africa is not a transaction, especially for the lower-middle income group. It is more of a social activity. Before a person gets something off the shelf, they engage in a conversation with the vendor. This conversation enables the establishment of trust between parties. Some end up buying depending on the tribe or something they share in common with the seller.
Thus, carrying out a transaction in Africa needs more trust than most places. Yet, the majority - if not all - of the products on these classifieds platforms, are second hand. Which calls for even more trust if one is buying something from such platforms.
Being a diverse continent, people are looking to buy from those they can relate to. Again, for trust issues. Because remember, there's no return policy when it comes to platforms like OLX.
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Statistics of one of the leading E-Commerce Facebook Groups in Uganda called Liquidation Uganda[/caption]
In Africa, you can tell someone's country, district or region by mere looking at the name. For example, in Uganda, I can tell a difference between a Munyankore and Muganda by the surnames. I can as well tell the difference between a Nigerian, Kenyan, Ethiopian, Egyptian and more. This allows one to establish who is closes to them that they can trust, hence buy from.
This is the experience Facebook Groups bring to the table. With them, you're able to do a 'background check' on someone and find out what you have in common before buying. Yet, I would have to either email or call someone on OLX to find out what we have in common. That's so much a cost for establishing trust.
You may argue that Jumia (Mall & Market Place) doesn't offer the same service as Facebook groups. Yes. But let's not forget that all products on Jumia are new products. There is also a return policy. Which, by default, establishes some level of trust between the parties.
In this post, Prof. Ndubuisi Ekekwe predicts "Facebook Groups To Become Africa’s #1 Ecommerce Platform". He points out the reasons for that being the 'free internet', trust and the Network effect. The lack of all these combined makes it hard for an e-commerce platform to thrive on the African internet.
Anyone thinking of a classifieds model in Africa should incorporate social and trust. Plus, if they can, should secure partnerships with the leading telecoms. This can ensure users access the platform without incurring internet data charges. Which is impossible. Given classifieds platforms are not the most profitable to attract such investment in them.