This past weekend’s rainfall has brought a huge relief to residents and reservoirs in what has been another dry start to Cape Town’s winter….
Last November I was selected as one of 25 African entrepreneurs to join the eFounders Initiative Entrepreneurship Training Programme. The programme, titled “Shaping Champions for the New Economy”, is an initiative by Alibaba founder Jack Ma and the UN Conference on Trade and Development (Unctad).
In the two-week programme the founders and top level executives at Alibaba shared the highlights of their 18-year history, discussing both their successes and failures and what it took to become the biggest retail company in the world.
The absolute highlight was a lecture given by Jack Ma. Here are my five key learnings and takeaways and why the future for tech companies in Africa is bright.
1. Focus on Mobile
During Singles Day Alibaba processed over $25.4-billion in sales of which 91% came from mobile transactions. More than 50% of the Chinese population purchased a product from Alibaba that day using their mobile device.
By using mobile, hundreds of millions of Chinese people can now use products and services that they previously didn’t have access to.
In Africa, over 600 million people are expected to have a smartphone by 2025. The increase of mobile and internet uptake will similarly provide millions of people on the continent with access to products and services that they currently don’t have.
There is a big opportunity opening for companies that focus on offering these products and service through mobile applications.
2. How an Inclusive Eco-System helps grow ecommerce
The three biggest challenges for growing an ecommerce company in an emerging market are: 1) (a lack of) assortment, 2) logistics and 3) payments. To solve these challenges Alibaba decided to use the ecosystem approach as their main strategy in 2008.
Instead of converting Taobao to a traditional B2C model, they set up a dynamic market of reliable partners and started AliPay and Cianaio to manage their payments and logistics. They use big data to streamline the processes and manage the platform. Currently over 10 million business partners are benefiting from this ecosystem.
‘Simply by using the app and by tracking user behaviour on all other Alibaba companies, they collect data and use this to provide people with a credit facility’
In Africa companies face the same challenges and solving this through a similar ecosystem approach will have enormous benefits, specifically when well aligned.
Companies like The Foschini Group, OneDayOnly and Bidorbuy offer a wide range of products on their sites have taken leading roles in testing new approaches to ecommerce logistics, while online payments have been made easier by companies such as Peach Payments and Snapscan.
We at Pargo have been very focused on using a ecosystem approach to solving the logistical challenges in South Africa and is working together with these companies as well as couriers.
3. It’s all about Big Data
AliPay, Alibaba’s mobile money app, includes functionality that allows each of its 520 million users to take out a loan from as little as one renminbi , without having any banks involved or going through a credit rating process.
Simply by using the app and by tracking user behaviour on all other Alibaba companies, they collect data and use this to provide people with a credit facility that is more accurate than any bank will be able to do.
Using big data for all decision making will help to scale businesses in the future. One of the major reason for the efficiency at which Alibaba is able to capture and use big data as much as they do, is their shift to cloud computing.
Cloud storage is increasingly becoming available to companies around the world and utilising it well in terms of data capturing and storing makes it possible for companies in Africa to better understand their customers and grow their businesses.
4. Why we need Smart Logistics
In 2013 Alibaba launched their smart logistics company Cainiao. In a country that has around 150 cities with a population of over 1 million people, over 4 billion parcel deliveries per year and where the average cost per delivery is around 15% of the total value (compared to 8% in the US), they needed an efficient solution.
Cainiao connected various logistics companies in the country to their various businesses and manages the flow of parcel by using big data. They don’t own any fleets themselves, ensuring that they focus on their core business.
This strategy of creating a smart logistics ecosystem is important for the African continent.
We are dealing with very similar logistical challenges around parcel delivery and by building an innovative, data-driven logistics platform, that leverages the capacity of existing courier and retail partners these challenges can be solved to benefit South Africa’s leading ecommerce and retail firms.
We are working on creating such a smart logistics platform at Pargo and hope to connect more aspects of the ecosystem through intelligence, data and collaboration and play a key role in developing ecommerce on the African continent.
5. How Alibaba’s rural ecommerce plan has changed China and can do the same for Africa
Alibaba’s mission is “to make it easy to do business anywhere” and Jack Ma’s goal for the coming years is to further develop their rural ecommerce strategy and make it easier for people in rural China to order and sell goods online.
The company doesd this by setting up rural centres that supports their merchants as well as support people that are trying to buy from any of the Alibaba businesses.
These rural centres are typically set up in existing small retails stores that act as Parcel Pickup Points, enabling 60 000 small retailers to come closer to Alibaba.
In all, 63% of people in sub-Saharan African currently live in rural areas. African ecommerce and tech companies will need to set up a similar approach to reach these people.
Seeing the evolution of Alibaba’s strategy of setting up pick up points was very encouraging for us at Pargo, as we have also used the pickup point strategy when creating our network. This strategy enabled us to leverage the capacity of physical retail stores to become parcel delivery and collection points, especially in areas that are otherwise challenging to service.
*Lars Veul is a co-founder of Cape Town based logistics startup Pargo. The startup was selected in November as the first South African delegate to join an Alibaba and UN Conference on Trade and Development (Unctad) hosted initiative the eFounders Initiative Entrepreneurship Training Programme, in the city of Hangzhou, China.
Featured image: Pargo co-founder Lars Veul with Alibaba founder Jack Ma