Investors in Africa’s e-commerce and retail-tech space should take an ecosystem-growth approach to success rather than expecting quick returns, and as such local investors may be better placed to build out the space, according to retail-tech entrepreneurs interviewed in the latest Disrupt Podcast series.
Disrupt Africa has partnered Omnibiz and MarketForce to release a four-part podcast series on the African e-commerce and retail-tech space – “A digital future for African retail” – with episode three, focusing on funding of the space, now available.
Speaking on Disrupt Podcast, the founders of Omnibiz and MarketForce both agreed investors need a deep understanding of Africa’s reliance on its network of small local retailers – known locally as “mom and pop stores”, or “spazas” – for access to essential goods and services to be able to meaningfully engage with the space and make successful investments.
Investors focusing too narrowly on a single investment and failing to understand the broader need for ecosystem-growth may be disappointed.
“We’ve seen two sets of investors have a lot of interest. One is local investors who grew up visiting mom and pop stores. I did that myself and that’s how I understand the challenges. So any investor on the continent understands pretty quickly and gets excited about the opportunity. The other set is those who take a longer term view on the continent, and understand that online retail revenue will continue to increase substantially […] and that’s what excites global investors who take a longer term view on the continent, they know there’s going to be massive gains,” said Tesh Mbaabu, founder of Kenya’s MarketForce, which facilitates trade between informal retailers and consumer brands via its digital marketplace.
This is echoed by Deepankar Rustagi, founder of Nigeria’s Omnibiz, which operates an end-to-end supply chain framework.
“Some of the difficulties we’ve faced from global investors is understanding of the landscape, the returns expected from startups, and maybe the pressure in terms of gaining large GMVs (gross merchandise value). That [idea of]scale without growing the ecosystem doesn’t work,” he says.
There’s no comparison to be made between the trajectories of e-commerce success stories in Western markets, as Africa is a totally different place in which to operate, Mbaabu and Rustagi agree. The needs of a scaling startup are different in Africa, and the path to profitability and success will take a different route than in other markets.
“Local investors have a very clear understanding of the landscape, and the challenges that emerge in different countries, whereas global investors lack on that side. There’s a direct comparison from a global investor in terms of the scale, in terms of the transition from a similar startup in the US or in Europe. I would say Africa is a different market, and there’s going to be a different transition for unicorns, for how they emerge and how soon they become profitable. I would say local investors have that understanding and normally are the ones who take the initiative to spread information and share knowledge with global investors. If you find a global investor who has this knowledge, they’re great partners,” says Rustagi.
Episode three of this podcast series – “A digital future for African retail” – is out now, listen here.
About Disrupt Africa
Disrupt Africa is the one-stop-shop for all news, information and commentary pertaining to the continent’s tech startup – and investment – ecosystem. With journalists roaming the continent to find, meet, and interview the most innovative and disruptive tech startups, Disrupt Africa is a true showcase of Africa’s most promising businesses and business ideas. Its research arm releases in-depth reports on various aspects of the African tech startup ecosystem, and Disrupt Podcast is one of the leading Africa-focused business podcasts on the continent.
Omnibiz is a tech-first B2B E-commerce company focused on transforming traditional retail in Africa. Through a deep understanding of our customer owing to our extensive experience in FMCG retail and platform tech for SMBs in Nigeria, we have been able to create a decentralised approach to digitize retail. By activating networks of logistics and warehousing partners on our platform, we take the retailers’ business to the next level, quadrupling their revenues in six months. We currently are in key cities in Nigeria and are scaling in other geographies with similar challenges. For more information, visit www.omnibiz.com.
MarketForce is a US and Kenya-based technology company, building the operating system for retail distribution in Africa. MarketForce provides an all-inclusive B2B Commerce and Fintech platform (dubbed “RejaReja” – Swahili for ‘retail’) that empowers neighbourhood merchants in Africa to source, order and pay for inventory digitally and conveniently, access financing, collect digital payments and make extra money by reselling digital financial services such as airtime, electricity tokens and bill payments. Launched in 2018, MarketForce is a fast-growing YC-backed company currently operational in 5 markets in Sub-Saharan Africa, with over 200,000 merchants and 100 consumer brands trading on the platform.