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The promise of e-commerce in Africa is
manifesting, but just not in the way we all expected. Jumia became and unbecame the basis
of definition for African tech startups, but its detour opened eyes as to which
niche is genuinely profitable in the continent.
The banter between B2B and B2C companies
on the continent – regarding where there’s really market – has been on ever
since e-commerce became nascent. The B2C niche is as good as written off, while
B2B remains challenged. But a recent string of developments in Africa proves
that the latter is becoming the grapevine of success.
Recently, Egyptian B2B e-commerce startup
MaxAB made the
headlines for raising an
impressive USD 6.2 Mn in seed investment. The company, which was founded
in 2018, has built a digital platform to manage the procurement and delivery of
grocery products to shops in the North African country.
Kenya’s Sokowatch, a USD 4.5 Mn seed-funded startup operating in Rwanda,
Uganda, and Tanzania, is taking logistics head-on. The firm has developed B2B
e-commerce supply chains for retailers in Africa’s informal markets to work
(more) efficiently with large FMCG suppliers – Unilever, Procter & Gamble.
The B2C sector in Africa can be
unnerving, that’s according to D.O Olusanya, who called it quits on the B2C
sector (Gloo) and remodelled his
business to become a B2B e-procurement platform, Gloopro. With
what seems to be the right pivot, the doctor-turned-entrepreneur is looking to
take his company to new markets outside Nigeria – the unofficial bellwether for
e-commerce development in Africa.
Belal El-Megharbel, Co-founder and CEO of
MaxAB told WeeTracker that the B2B sector has been previously ignored “in
this part” of the world.
“B2B, in general, is not considered
to be as sexy or charming as B2C – that’s why a lot of entrepreneurs don’t dig
deeper into it. Also, there has always been this misconception that it’s hard
to get tech adoption from the small business in this region as they prefer
human interaction, which is not true,” he said.
The Egyptian market currently has the
largest population of internet users in the MENA region. The most populous Arab
nation, its internet penetration is projected to hit 53 million in 2019, 8 per cent
of which will make regular online transactions. It has been found that a
significant chunk of online purchases is in the categories of electronics,
entertainment, fashion, and airline tickets. As such, e-commerce is hamstrung
with a handful in the market.
First, there’s a low number of
credit/debit cardholders – around 10 million. This means, 80 per cent of the
e-commerce in the “cradle of civilization” would rather have it the
cash-on-delivery way. Regardless, credit card issuance grows annually by about
40 per cent, foretelling the possible decrease of cash dependency. But until
the perfect moment comes, e-commerce in Egypt, both in the B2B and B2C sense is
challenged – and to a substantial extent, ignored.
In Egypt, half of the e-commerce users
find it hard to return products or get a refund. Also, more than half of the
nearly 100 million people in the country simply lack the know-how to do so. The
main reason why e-commerce is challenged is that most Egyptians prefer
face-to-face transactions. This is asides from the fact that Egyptian B2B
buyers are affected by a
product’s country of origin
While working as the General Manager at Careem, solving the logistic conundrum in the e-commerce sector consumed Belal, initiating the idea behind MaxAB.
“There was a lot of room for
optimization using technology, and there was no bigger opportunity than the B2B
grocery sector. We set up MaxAB to address this problem,” he underlined.
“Besides being my home country,
Egypt has a massive young population that is growing. The traditional grocery
sector here gets USD 45 Bn annually, which is quite massive. Also, after
speaking to several food suppliers and local grocery stores, we realized how
unconnected they are and that they both needed a solution,” Belal
The startup will use the money to further
enhance the technology and data science capabilities of its platform. Expanding
geographically to cover Egypt’s underserved markets is also a part of the
masterplan – which will be fuelled by another investment next year.
Belal, alongside his co-founder, Mohammed
Ben Alim, looked to reduce the cost and complication in Egypt’s B2B food and
grocery markets. Its business model is simple. It is called the just-in-case
inventory, where the company keeps 3 to 4 days of additional inventory to
accommodate for the unreliability of suppliers. The retail supply chain in
Egypt is segmented.
“Small shops in Cairo have to go
through six or seven layers in between — the shipping, unboxing, determining
product quality and setting base prices — and that’s what we’re fixing for
them,” said Belal in a statement.
With its fleet of 60 trucks and a larger
warehouse that serves Cairo, MaxAB is bringing life back into the e-commerce
sector through its B2B operations. The investment, according to Belal, is quite
significant as it reflects the trust regional and international investors have
in our team.
MaxAB seed funding was co-led by 4DX
Ventures and Beco Capital, alongside 500 Startups, Endure Capital, and Outlierz
Ventures. Outlierz Ventures, in
context, mainly invests in tech-enabled B2B companies in Africa.
Kenza Lalhou, the e-commerce managing
Partner at Outlierz Ventures, told WeeTracker that B2C in Africa isn’t ready
due to payment, logistics, and purchasing power drawbacks. According to him,
the VC firm sees enormous opportunities for founders to leverage technology to
solve fundamental problems across key industries where infrastructure is
“All our portfolio companies fall in this category: WaystoCap (Morocco), Sokowatch (Kenya), Asoko Insight (pan-Africa), and TousFacteurs (France/diaspora). We backed MaxAB early, starting from their pre-seed round. We believed in the team, and the model applied to a big market like Egypt, and we are delighted with their execution, growth numbers, and what they have accomplished in less than a year,” Kenza concluded.
Featured Image Courtesy: Nairobi Business Monthly
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