For any consumer goods company, reaching Africa’s millions of small groceries is a daunting task. With low volume and limited capital, servicing these small traditional outlets is often seen as the quickest way to lose money.
However, where others see financial ruin, Sokowatch is seeing an opportunity. The Kenya-based business-to-business (B2B) e-commerce company was founded in 2013 by CEO Daniel Yu and COO Josh Middleman.
Sokowatch is making it easier for shopkeepers to source products at affordable prices — increasing the availability of essential goods, in even the smallest outlet.
How does it work?
Small retailers can order products from Sokowatch’s online platform by SMS, phone or mobile app. The system notifies nearby delivery agents, who deliver the goods at no extra charge, from Sokowatch’s warehouse within 24 hours. To reduce costs, the company uses low-cost delivery vehicles such as tuk-tuks and motorbikes. The startup also introduced a geotagging and mapping system to ensure improved delivery to East Africa’s hard to reach outlets.
The B2B focuses on fast-moving consumer goods products, and essential items stocked by small groceries, such as soap, chewing gum and condoms. To simplify operations, they don’t stock heavy bulky items, such as beverage glass crates, that require a reverse logistics system.
Where do they operate?
Sokowatch is targeting East Africa’s fast-growing urban centres in Kenya, Tanzania, Rwanda and Uganda, and have operations in Nairobi, Mombasa, Nakuru, Dar es Salaam, Kigali and Kampala. They have serviced more than 10,000 outlets in East Africa and are looking to expand on the African continent.
The company estimates there are 10 million informal retailers in Sub-Saharan Africa, selling over $180 billion worth of goods every year. They have been inspired by the success of B2B operations in China (Alibaba) and India (Udaan), and the opportunity it represents when you build your own infrastructure to service micro retailers.
Africa’s small shop challenge
The African retail environment is highly informal with modern trade such as supermarkets, still in the early stages of development in most countries. The millions of micro retailers dotting the urban landscape, have limited capital and routinely run out of stock.
Servicing micro-retailers is difficult and expensive. In most cases, large consumer goods companies aren’t serving them directly, but work through distributors and wholesalers.
Sokowatch first planned to launch an inventory application targeting manufacturers and distributors, but quickly realised that most small groceries aren’t receiving services and deliveries. The company saw first-hand the many barriers traditional trade outlets face in search of affordable goods.
Small mom-and-pop shops buy limited quantities and often require frequent delivery services. In some cases, they might need daily delivery. Low volume drop sizes increase delivery costs, resulting in unprofitable delivery routes.
Micro-retailers are also often in hard to reach areas, where delivery vehicles can’t enter. Sales teams sometimes need to search for parking spots in congested commercial districts or travel on foot to reach these outlets. This creates delays and inefficiencies, further driving up delivery costs.
Small groceries often only work with distributors and wholesalers that can provide credit and break packages into smaller more affordable quantities. They aren’t always getting the best deals, but the need for credit and the lack of price visibility in the market, limit their options.
Benefits of a digitised supply chain
By aggregating orders from micro-retailers, Sokowatch can negotiate bulk purchases, and provide small shops with better prices. They can evaluate retailers’ historic sales data and provide them with access to credit and other financial services. These services aren’t typically available to informal traders that lack a paper trail and credit score.
Sokowatch’s treasure trove of point of sales data, gives them access to market trends, purchasing habits — enabling them to better target individual groceries with product offerings and promotions. The platform drives down costs, creating visibility in even the smallest outlet.