It’s been a bit of a rough week for South Africa. With SAA ailing, Eskom crumbling, and mayors falling, it’s a week that have…
Some bumper sticker wisdom: “You shouldn’t really worry when the competition’s trying to copy you, you should worry when they’re not.”
You’ve seen them, right? The so-called Facebooks or Amazons of Africa. Notoriously known as clones, emerging markets have their fair share of them, each with its own degree of success and unique challenges. If you think about it, isn’t it only natural for a working solution to be applied elsewhere? Are they then as bad as their reputation holds them to be?
Many of these startups initially start off with a borrowed idea, and by adapting it to its local environment, the idea becomes something unique.
Rightfully so — there are stories of startups who’ve been caught going as far as stealing code. As much as there is a great deal of stigma surrounding them, there’s also some degree of logic behind these half-baked copy-cats. If they work in market A, why won’t they work in market B? One of the reasons for them not being originally baked in their home countries is the fact that there simply isn’t as much room (venture capital) left for experimentation as there is in the US. Ultimately, it’s all about the ability to adapt and execute well.
Jumia, for instance, has been dubbed “Africa’s Amazon”. Based in Nigeria but operating in other parts of Africa, many of the obstacles to reach its target market are unique, and so the company has to adapt accordingly.
Trust, or fear of fraud, is still a major issue in Nigeria — especially for ecommerce sites, like Jumia. So establishing a well-known and trustworthy presence is critical to the company’s success. As recently mentioned in Business Day:
“To combat fears of online fraud and to educate Nigerians about shopping online securely, the company has a direct sales team of about 200 in cities such as Lagos and Port Harcourt. They wear outfits bearing Jumia’s logo and hold impromptu shopping sessions in businesses, churches, and homes, answering questions and using tablet computers to demonstrate how to order.”
Furthermore, there is the dynamic of having to cope with different payment methods. Cash on delivery (COD) is still very much accepted when buying products via Jumia or its competitor, Konga.
iROKOtv has been heralded for being the Netflix for Africa. Well, it’s more like the Hulu of Africa really — similar to its US counterpart, it’s an online platform that provides free and paid-for films on-demand but instead of Western content, it focuses on Nigerian media.
The company’s concept might have been borrowed from a popular US company, but iROKOtv still needed to adapt to its unique market. While obviously providing Nollywood content, more than 95% of the content is free while a US$5 monthly premium subscription gives you access to newer content.
This example could further prove interesting. A very successful company such as Netflix has already expanded to different markets facing cultural and local competition hurdles. In Brazil, for instance, there’s the existing NetMovies and the Hulu-like Terra. Though 14% of Netflix’s revenue comes from foreign markets, the global audience is fractured with local tastes and and highly specific technical and legal requirements and annoyances.
Rocket Internet is notoriously behind a lot of the cloning popping up in emerging markets, and is responsible for backing startups such as Jumia. The online startup incubator, also known as the “clone factory”, is popular for its approach to back startups from emerging markets similar to those that have existing business models that proved successful in Western markets.
In the case of Rocket Internet, according to a VentureBeat article, it’s all about execution — and boy does Rocket Internet have the resources to execute well. According to a Goldman Sachs research report:
“In our view, Rocket manages the startup phase very well; quickly rolling out a new business and, critically, establishing processes that enable growth (e.g. logistics, marketing, tightly measured KPIs, etc.) and, eventually, profitability (own brands, internally managed warehouses, credits, fulfillment, and other added services).”
Take for example the collaboration of the online real-estate marketplace Lamundi and the online marketplace for vehicles in emerging markets, Carmudi, that officially launched under one brand and one umbrella in 12 different countries.
This cookie cutter approach isn’t perfect of course. Although there are many startups performing exceptionally well by riding on the successful growth of emerging markets, there are many who have failed. Some of them only last for as few as three months. Even a company such as the famous Jumia is not yet profitable. It’s also worth pointing out that iROKOtv’s biggest markets are ironically based in the US and the UK — and not Nigeria.
For a successful company to defend itself against clones, the only options are to think global from day one, or buy your potential competition.
Image:Nick Royer via Flickr