Africa’s Torrid Logistics Landscape Is Jumia’s New Tough Task

Logistics can mean many different things to many different people. That’s because the industry is a broad sector that comprises several sub-sectors.

However, here, the idea is to spotlight the consumer logistics side; the part that comprises courier and dispatch services, who are involved in getting goods from businesses to consumers and from businesses to other businesses.

It is undeniable that logistics form the bedrock of commerce. This is because, most of the time, goods are produced or sourced in a different place from where they are needed and hence, need to be transported. And this all-important process is the core function of the logistics industry.

The advent of e-commerce, for instance, has caused changes in consumer buying behaviour. Ease is now derived from buying online, compared to going through the stress of visiting stores and markets.

It follows that there’s almost no way that the e-commerce sector would thrive without a properly-functioning logistic structure. Hence, the role of the sector in commerce and trade cannot be overstated.

Africa’s e-commerce ecosystem has experienced tremendous growth over the years. However, the surface has been barely scratched. The poor logistics network has made it hard for those operating e-commerce platforms to scale smoothly. Therefore, allowing the logistic sector to function optimally would simultaneously enhance e-commerce in Africa.

A report by McKinsey & Company suggested that by 2025, online channels could account for 10 percent of African retail. And attaining this would only be a function of how well the logistics industry on the continent is fairing.

Industry key players

So far, there has been no single company that has perfectly-made provisions for the logistics sector in Africa. This has led to the advent of a more fragmented approach, marked by the proliferation of small-scale businesses that are venturing into logistics. This broken approach has interestingly brought the industry closer to businesses that need them.

Regardless of the fragmentation, there still exists the top players moving the needle and who make up a good percentage of the total share in the industry’s market.

Among the prominent ones are Sendy, MAX.ng, Gokada, Parcel-it, Pargo, Picup, Dreevo, and most recently, African e-tailer, Jumia, which has now set out to put in work in consumer logistics.

Sendy, a Kenyan start-up founded in 2014 offers on-demand door-to-door package delivery services.  Sendy is regarded as a platform for e-commerce door-to-door delivery.

MAX.ng and Gokada also are two formerly primarily e-hailing startups that have forayed into last-mile delivery while attempting to disrupt the industry from Nigeria. Both startups started with bike-hailing but later pivoted to logistics following the controversial commercial motorcycle ban effected by the Lagos State Government earlier in the year.

South African start-up, Picup, boasts a 90-minute, same-day, nationwide delivery. The startup claims its focus is to improve delivery efficiencies to the last mile.

African e-commerce giant, Jumia, has an in-house logistics arm that, before now, has only been exclusively available to vendors on its marketplace.

But as the e-commerce business in Africa continues to prove a tough nut to crack for e-tailer in general, Jumia has now opted to open up its logistics service to third-parties users across 11 countries in Africa — which effectively makes Jumia a logistics company also.

Jumia fancies getting a hang of this new foray into full consumer logistics in no time on the back of its years of experience in logistics from product handling to last-mile delivery. But in reality, it would anything but a smooth ride.

The logistics problem

The African logistics space is a billion-dollar industry that is hamstrung by several challenges. Problems such as poor infrastructure, poor regulation, high cost of operation, and low-profit margins have made logistics in Africa a tough task..

Poor road networks are one of the prominent issues affecting logistics in Africa. The bad road network has a ripple effect that presents other problems such as higher fuel consumption, vehicle depreciation, and a higher delivery time.

As a consequence, all of these have led to an increase in logistics costs, making delivery services in Africa to be quite costly.  Data by logistics consulting firm, Knight Frank, shows that the cost of transportation represents 50-75 percent of the retail price of the goods. 

Another seemingly understated problem with logistics operation is the poor addressing system in Africa. In various countries across the continent, there is a large number of people living in areas that lack a street address and street signage. This has made it difficult for deliveries to be done.

However, Google has since launched a seemingly attractive solution called Plus Codes to take care of this problem. It is a geolocation system that uses longitude and latitude to find any location in the world. Interestingly, the codes also work offline.

The “Parcel-it” way?

Based on the approach, there appears to be a uniquely different logistics startup in Nigeria, called Parcel-it, which launched in 2017.

The striking thing about this startup is how its operations mimic the Kobo360 model. Kobo-360 is a logistics company likewise, but for cargo and truck deliveries. It calls itself the “Uber for logistics”. Instead of owning its trucks, it serves as a marketplace for truck-owners, just like Uber is for car owners.

This is the same approach Parcel-it has taken, as it also doesn’t have its own vehicles or bikes, but instead serves as a marketplace for courier service owners to serve businesses and individuals that need them. 

Could this bring the breakthrough the consumer logistic industry badly needs? Well, it’s rather almost impossible for a single company to make provisions for all motorcycles or cars that would be needed in a country for delivery. Hence, the Parcel-it way appears to be a better way to connect the already fragmented small scale delivery businesses by bringing them all to one platform.

In Lagos, for example,  Nigeria’s commercial capital, the delivery business is becoming heavily decentralized and this appears to be a good approach to solving the issue. However, one thing is sure, a lot of capital would be needed to scale and optimize this.

To innovate or die

The need for innovation cannot be overemphasized, as the surface of the wonders the industry can achieve is yet to be scratched.

Technology has providentially been a blessing to the industry. One of the exciting things that have happened in the logistic space is the emergence of drones for delivery.

With challenges such as poor road networks, delivery by drones is one thing that can help beat this. The global giant, Amazon, is already experimenting with drone delivery and this is definitely worth looking into in Africa.

A good case in point is that drone delivery is already in operation in Africa via a company called Zipline which operates drone delivery in Rwanda, though headquartered in California.

Zipline claims to be leading the way in commercial drone deliveries. Although the company is focused on delivering blood to remote health centers that are otherwise difficult to reach due to Rwanda’s hilly terrain, it’s been expressed that Zipline’s drones will in the future be used in other sectors including e-commerce. This is an indication that drone technology can actually be harnessed in Africa.

But the bad news is that technology alone isn’t enough to fix Africa’s logistics problems completely. For growth to happen in the industry, the roles of the policymakers and industry players in the respective countries cannot be overlooked.

The government can catalyse growth in the space by improving on the infrastructure; like fixing the road networks for starters, and also by refraining from unfriendly policies that do nothing but cripple the industry.

Featured Image Courtesy: VectorStock