E-commerce firms across Africa continue to struggle to achieve profitability and sustainability, but digital logistics services may be the solution to one of the major challenges facing Africa’s e-commerce players.
Nigerian e-commerce company Konga recently relaunched its payment on delivery (POD) service following a suspension of the payment option, with CEO Nike Imudia mentioning that the brand had invested heavily in logistics following its acquisition by leading Nigerian information and communication technology company Zinox.
“After the acquisition, we have taken our time to restructure and improve our technology and capacity in terms of our own staff and logistics to meet customers’ expectations,” he said.
“We have invested substantially in our logistics arm to meet the commitments of not just POD, but also to achieve a minimum of 85 percent same-day delivery of major products categories across the nation by July 2019.”
We have delved into the trials and tribulations of doing e-commerce in Africa generally and Nigeria specifically in these pages before, but one of the major reasons why even a huge firm like Jumia is still not turning a profit, and Konga ended up being acquired for less than it had even raised in funding, is the huge cost of building logistics fleets to deliver purchases to customers.
The answer, however, is staring e-commerce companies in the face. Digital or e-logistics startups are increasingly common in Africa, with a recent report by Disrupt Africa finding that they were the most common on-demand services available in Africa, more prevalent even than transport and home services apps.
One such service, Nigeria’s Metro Africa Xpress (MAX), has been racking up the milestones. Co-founder Adetayo Bamiduro is adamant e-logistics apps can help the growth of e-commerce across Africa, and help online merchants turn a profit.
“With technology, the barrier to entry into e-commerce is reduced and smaller merchants can now get online easily, especially since the onus is no longer on them to manage the logistics process. It is also more cost-effective than the non-technological alternative,” he said.
“We have an enterprise partnership with telecoms that allows all our drivers and motorcycles to maintain 24/7 connections to our mobility platform, and this ensures that goods in transit are safer.”
But why use services like this rather than more established firms like DHL? Well, for one, they are generally much cheaper, but Bamiduro says there is more to it than that. Transparency is one aspect.
“Customers and users have more insights into what is happening with their requests or orders in real time,” he said.
Efficiency is another key feature.
“The logistic process becomes more efficient because technology eliminates pen and paper records, and provides real time updates for status changes, removing the bottlenecks typically associated with traditional “follow-up” methods for both clients and the logistics company,” Bamiduro said.
Customers and merchants save time because the process is seamless and tracked in real time.
“Also, this improves overall safety for goods and products, which is an important issue for merchants and customers in this part of the world,” said Bamiduro.
Platforms like MAX also help connect more remote areas with major cities, which is a serious problem and source of much expense for e-commerce companies. Bamiduro said MAX had redesigned its systems to reduce the points where connectivity is absolutely required, meaning it can do more offline and synchronise data when it is connected to the internet.
In some places, issues with connectivity and infrastructure are not restricted to rural areas. Deeq Mohamed Hassan is co-founder of Gulivery, Somalia’s first e-logistics platform. Even in the capital Mogadishu, internet penetration is low, but the startup has come up with a solution.
“We have created an inbound short code number where customers can easily call us for their orders. As a result we are also seeing an increase in orders from rural areas that have no internet at all,” he said.
Gulivery does not face a challenge from the likes of DHL and FedEx, which are relatively inactive in Somalia and in any case used for cross border services and focused mainly on transporting documents. Door-to-door deliveries have the potential to seriously boost the local e-commerce industry, if it is prepared to adopt platforms like Gulivery.
“The benefits tech-enabled platforms bring are mainly the flexibility, accessibility and cheap service,” Hassan said.
“In Somalia, e-commerce platforms are not really fully behind the idea of using door-to-door service providers, and as a result they are already hurting and complaining about their diminishing bottom-line. In Somalia, businesses like doing everything themselves and the concept of outsourcing has not taken off yet.”
However, he believes merchants and e-commerce companies will slowly begin to understand and see the value.
“Tech-enabled platforms and door-to-door service providers can propel e-commerce platforms further into all corners of Somalia and Africa in general,” he said.
Konga, and other major e-commerce firms losing money by maintaining costly fleets, should take note.
Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.
