More Africans have switched from Agriculture to Trading. While the internet has revolutionized many industries, these traders continue to depend on their traditional offline sales channel. A massive opportunity exists in bringing these traders online.
There are two problems you are trying to solve here—(i) traders struggling to get their wares in front of many buyers, (ii) buyers struggling to find the items they want, at the best deals. The startup you'll build has one objective—to enable sellers reach incredibly many buyers, more than the traffic they currently get to their stalls, and to enable buyers easily find the items they want, at the best prices. This objective sounds clear and simple but nobody has yet to crack this challenge. Here is why.
Perhaps this is one of the most complex startup opportunities to crack in Africa. Let me unpack this for you. There are different categories of traders. There are those who own shops from which they display their goods. Others have stalls in places zoned as open-air markets. Some sell from the streets by displaying their goods on the sidewalks. Others, usually labelled hawkers, use their bodies as display shelves and move around selling their goods—at bus stations to passengers, on the road to motorists stuck in traffic, along the streets to pedestrians—eking out a living at no specific address like the migratory birds. How do you build a startup to capture all these categories of traders?
The second layer of complexity results from their inventory. These traders sell goods ranging from clothes, shoes, accessories, farm tools, electronics etc. Bulk of the goods they sell are imported into their countries as second-hand items. A trader may specialize in selling a particular range of items, however, it is impossible to maintain the same exact inventory over time. This is because the goods they are able to access from importers are constantly varying. These variations mean that the specifications of goods they are selling today may not match those they will sell tomorrow (size/color/quality/price). Not a surprise as you would expect the same at a car dealership selling used cars to have cars of different conditions on sale, over time. An important fact to keep in mind is that a majority of the buyers who flock into the open-air markets or buy from these traders on the streets are looking for cheap bargain sales.
Let’s now begin your journey of building a tech startup that meets the aforementioned objective. The first problem you have to solve is how to bring these traders online. Not all of them are tech-savvy. You can’t just give them a Shopify template and expect them to fill in their inventory, as is done on e-commerce stores. Then there is also that challenge of their inventory constantly changing. A listing ceases to be relevant once that item has been sold. Their new stock does not match their previous listings. Any ideas on how to go past these two hurdles? Well, you are not going to reinvent the wheel here. You will borrow a leaf from Bird and Lime. You will introduce a gig economy around this challenge. Bird and Lime introduced a gig economy around the challenge of recharging their electric scooters. People (so-called juicers) rush to collect a bunch of these scooters in the evenings, charge them in their homes, early the following morning place them at strategic locations, and get paid for that. Here is what you will do in your case.
You will make use of currently available resources. Everyone in Africa has a mobile phone, fitted with a sim card, which they use for communication. Including these traders. Confidently, there is 100% mobile phone penetration in all urban areas in Africa.
Since not everyone has a smartphone, you will introduce a gig economy for those who have. These are mostly college students, many of whom, are always looking for part-time jobs to do. And Africa has so many of these young people. Here is how you’ll go about this. Traders need to have a working mobile phone number only. Nothing else. College students carrying their smartphones (you can find <$100 smartphones with quality camera these days) will go to these traders. On the App they will be asked to input the trader’s mobile phone number to Sign-Up/Log-In. A One-Time Passcode (OTP) will be sent to the trader’s mobile phone as SMS. This OTP will be used by the student to Sign-Up/Log-In. If it’s the first time, that trader’s phone number will be registered and his account created. That phone number will be tied to his account for all future logins. No need to input personal information like name or email (probably they don’t even have one). The student will then skillfully capture images of the trader’s inventory and write a brief description of each item. He will also pin the most precise location of where those goods are. Once all the data is captured the student’s work is done.
The student does not get paid until an item he listed makes a sale. He gets a cut from each sale. This model incentivizes the student to upload the best quality images and make the listings most appealing. He can list for as many traders as he wishes in a day. If so many of the products he listed make a sale, the cut from each, sum up to a decent payday. From the trader’s side, there is zero friction to going online. Since their inventory is always varying, listing their new stock means the student will always find a gig to do every day.
From the buyer’s side, you want to recreate the same experience they feel as though they were strolling through a real market. It is actually possible to make the online experience fun, endearing even to those who are ‘casually looking around’, and this means they can visit the app multiple times a day. This will be a discovery based shopping experience. Search based model is used by Amazon and eBay but it is not the best one for your case. So how do you create this? Again you don’t need to reinvent the wheel here. The Wish Shopping App has already perfected this and you will just follow along. Hey, not teaching you to be like Mark Zuckerberg with his eyes popped out on Evan Spiegel.
However, Wish, just like Amazon & eBay, rely on receiving online orders from buyers and shipping packages to them. This approach will lock out a majority of your buyers, many of whom are just looking for the most affordable items within their limited disposable incomes and hence can’t bear extra charges of fulfillment and shipping costs. Even then, there is another inherent problem with shipping this kind of inventory to buyers. Since most of these goods are used items (second-hand), there will be rampant cases of online buyers finding items shipped to them not in the same condition as what they saw (perceived) online. There will be massive complaints from buyers, a pile up of returned items will shoot up operational costs and sellers too will begin to get frustrated. This could throw you out of business. So how do you navigate through the constraints and overcome the challenges? After much brainstorming, there is actually a masterstroke, an innovative way that solves all these challenges and will boost both the buyers’ and sellers’ satisfaction to 100%. This solution caters for both—those who want their orders shipped to them while guaranteeing no returns happen, and those who cannot bear the costs of having goods shipped to them. This will be shared with you in a moment.
You still have another huge problem to solve. Before then, how big of a market are you looking at? Africa has a comparatively smaller portion of its GDP contributed by the manufacturing sector in contrast to the industrialized nations. While agriculture has traditionally been the biggest contributor to GDP, more people are abandoning farming for other sectors of the economy. Only a small fraction of people are employed in the formal sector, a majority ending up in the informal sector in which these traders belong. Your startup is staring at a chance of impacting millions of lives of Africans. This startup will create so many jobs, boost incomes of traders and provide stability for many families. Are you still doubting if this will be a unicorn? Ankiti Bose has already achieved this feat with her startup in South-East Asia. Her success story is enough motivation to set you on a path to building this startup.
Since you are eager to disrupt this century-long industry, let’s look at one further problem before embarking on solving them. One survival skill, familiar to those who have lived in Africa, is the art of negotiation. These traders will try to make the most they can out of each sale. And buyers too have mastered the skill of bargaining for fair prices. However, in an online setting, sellers are asked to quote a fixed price, and those who set high, may get hurt from competition. If the online setting results in less profits, the sellers may opt to stick with their offline method that fetches them more income. This could drive you out of business. How can you solve this challenge? I’ll first give you a hint and then elaborate the solution for you. The hint is part of what Eric Schmidt tells my good guy Reid Hoffman in this video. Can you spot it?
Let’s now look at the detailed step-by-step process of solving these challenges and how to scale this startup.
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