Editorial | Oct 10,2020
October 9 , 2021
By Tigabu Haile ( Tigabu Haile who has interests in business and entrepreneurship. )
Everyone wants to ride on the bandwagon of e-commerce these days. But they underestimate how tricky the market is, not to mention the true value of e-commerce, which is to make the lives of end-users easier, writes Tigabu Haile (firstname.lastname@example.org), CEO of Eshi Express, a delivery service company.
Working as a delivery partner for a number of e-commerce companies for a few years affords a great deal of insight if one is curious enough to observe what works and what does not. This includes those already in operation and those that are struggling to take off.
Let us start with what does not work. At the top of the list is the error of seeing e-commerce as a new fashion and assuming it is what every business should be trying out. Many people think they can start such a company because it is the latest trend and the future. Indeed, on both fronts, it is but only for those who provide a unique value to the customer.
Another miscalculation is the myth of becoming the Alibaba or Amazon of Ethiopia. This is mainly stated by people that do not have an in-depth understanding of these global brands. The needs and problems of Ethiopians and the market are markedly different from the environment these companies lead.
The we-have-everything syndrome: people think doing everything oneself makes us look cool and there is not anyone who can do it better. This could be something we can see everywhere but it is worse when an e-commerce company tries to deliver its packages itself, as a startup always has scarce resources like money, people and expertise. As a result, one always needs to be smart in how resources and expertise are managed, even if there are hundreds of millions of Birr to work with, let alone when boot-strapped.
The industry has seen a lot of e-commerce companies trying to do everything in-house, including delivery. Eventually, after wasting a great deal of money, time and energy, they start to recognise the problem with trying to create a one-stop-shop at the outset but failing to focus on the core business.
The scale of everything that will make a company fail could go on and on. But there are a few business hacks that can help an e-commerce scale up, and add value to society.
It starts by making any product sold online cheaper – by 10pc to 15pc – than any product sold through a brick-and-mortar retailer. Price is the main differentiator here, and people will have enough reason to shop online. This is what worked in China and made Alibaba and its subsidiaries like Tmalla success. This applies to food delivery; it has to be cheaper to be delivered to our doors than going out and eating in any given restaurant. As things stand now, e-commerce companies are adding the price of delivery on the cost of goods that consumers would find if they physically visited a retailer. Expensive services are nearly impossible to scale.
Another differentiator for e-commerce must be the exclusivity of products. For instance, the site could focus on locally crafted products not readily available in the market. Even if they are sold by a brick-and-mortar retailer somewhere, it would be easier to order them online because people can not find it everywhere.
A more complex but necessary part of e-commerce business should also be a credit model. Mostly, people join equb, a traditional saving and credit system, to benefit from a money pooling system where they could buy something valuable and eventually pay down the principal in instalments. E-commerce can work in a similar way, where people can be offered a loan – based on their credit history – and buy something. The loan is to be repaid in a given period.
This will give enough value for Ethiopian consumers to migrate to the online space. This model has been very successful in Middle Eastern and North African countries. It can be replicated here if electronic payment systems, which collect transaction history and make uncollateralised credit possible, grow to their potential.
The mentioned business hacks focus on understanding the real challenges of consumers and addressing them. They are about delivering real value to end-users. People follow trends because they add value to their experience and solve their problems, not merely because they are trends.
The assumption by many is that e-commerce is for rich countries, specifically urbanites. It is actually the reverse. Done right, it can cut prices and democratise shopping – it is more useful for developing countries and people living in rural areas.
PUBLISHED ON Oct 09,2021 [ VOL 22 , NO 1119]
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