Often times, people approach me asking for guidance on how to go about starting an e-commerce platform. Sad part is they don't even realize it is what they're asking for - that shows you how bad the situation is. I simply link this to the poor research habits among some of the people here who want to venture into entrepreneurship.
One of the most recent was a friend who wanted to develop an app that she would use to sell to her customers. According to her, she wanted a "Jumia" for her products. I sat her down and explained what it actually means to develop and run an e-commerce site effectively - that can become profitable, at that. She left convinced and resorted to setting up a shop as a vendor on Jumia (then Jumia Market).
The second case was a gentleman who (up-to now) is trying to set up a platform that'll allow his clients to order fresh fruits and vegetables in his words "conveniently and cheaply". To him, i just gave my unsolicited advise because i realized that he needed it badly. He was poor at his figures and didn't know exactly where he was headed for.
These are just some of the few cases of people who want to go into e-commerce just because they've seen Jumia, Konga, Takealot or Kilimall do it. They think - they too - can do it, and should do it. Which is wrong.
My working with Jumia has given me great insights into what it means to run an e-commerce site. I think when people hear that Jumia hasn't broken-even yet, probably they think the team is a joke. Let me set the record straight, Jumia has some of the brightest minds across the world. But Africa is just a different piece of cake.
I therefore decided to just bring to the attention of those who aim to venture into e-commerce what they should expect. I had a quick chat with Ron Kawamara, the Managing Director of Jumia Group in Uganda and Country Manager of Jumia Food Uganda. Ron has been with Jumia since its launch here.
Are you looking at launching an e-commerce platform in Uganda (or any other Sub-Saharan country), here is what you should keep in mind.
Mobile Money is Queen, Cash is still King
When you read about Mobile Money in the media and how it has penetrated the lives of day to day Ugandans, you may think integrating it into your system will make the pain of dealing with payment on delivery go away. False! People here are still addicted to their cash.
It's true that most Ugandans do use Mobile Money compared to Debit or Credit Cards. However, most people still prefer to use cash for payment on delivery - Ron
Ron emphasizes that this stems from the fact that customers don't trust. People don't want to pay for something they haven't seen yet. However much they know their order will arrive, they want to see it first. He therefore recommends that in order for you to mitigate the issue of trust, allow your end users to have cash as a payment option.
Personally i have been ordering food on Jumia Food (formerly Hellofood) since 2015 (a couple of times per month) but have never paid using Mobile Money. All my payments are 100% cash on delivery.
Africa is different, you won't do one thing - but everything
In already developed countries, an e-commerce platform is purely an e-commerce platform - in Ron's words "a market place, period". In Africa, that's not the case. If you're to set up something (new), expect to also setup the support structures.
For example, Ron highlights the fact that some of the restaurants don't even have packaging. This means Jumia Food has to go an extra mile to support them when it comes to acquiring packaging. He also points out the fact that in Uganda there's no formal address system.
When we opened here, we thought that we were going to be a pure marketplace but that has changed. We spend about 10-15% of our revenue on just delivery. If there was an already established delivery system by restaurants, we would be 10-15% better off - Ron
This implies that if you're to launch such a service, you'll have to get software that can allow you setup your own address system. You'll also find that some of the businesses on your platform can't properly calculate their margins. In the end, it makes it hard for you to be 100% a marketplace.
In short, these are some of the challenges that you'll find. Ron simply recommends that you face reality and adjust. So, what happens if you're a small startup that can't invest in helping your vendors calculate their margins, set-up a formal address system or all the support structures required so that you can run smoothly? It is simple - you go down the drain.
Strategic Partnerships are not an option, they're a must
Trust came up as one of the issues above. Well, it still remains one of the biggest issues as long as you decide to run an e-commerce platform. People won't trust that they can order a laptop from just a website and have it at their door step the next 24hrs. They simply want to enter a shop and walk away with one.
But how do you circumvent this? Ron recommends that you setup partnerships. Set-up partnerships that'll "endorse" you.
Strategic Partnerships are the cheapest and quickest way to break-even. As a startup, you don't have the resources to reach everyone. You also need credibility as a new player, but it's hard to get it. The fact that we work with MTN gives us credibility - Ron
The second reason why you need strategic partnerships, from what Ron highlighted, is to have a more smooth ride. As an e-commerce platform, you'll have to handle logistics, you'll need address system software, internet providers as well as the associations of the vendors you're bringing on board. All these are good to keep close.
Curious
When asked about what has surprised him since they launched in Uganda, he stressed that Ugandans are always eager to try out new technologies - when compared to other countries like Egypt, Nigeria, Morocco and Kenya (which Jumia considers the big 4), Ron says Uganda, ranks in the same caliber when it comes to the willingness to try out new things. This is an upside for those who'd like to launch a new platform.
Launching an e-commerce platform is no joke. But in case you decide to set-up one, we hope you find these guidelines helpful.
Disclosure: The writer also works with Jumia as Head of Content for Jumia Classifieds Uganda