African B2B e-commerce is a terrible business. But a fantastic Trojan Horse.
By Ismael Belkhayat
About this op-ed’s author:
Chari was the first Moroccan startup to get into Y-Combinator and is active in three African countries (Morocco, Tunisia, and Ivory Coast). Prior to Chari, Ismael founded three other companies: Wib.co, VotreChauffeur.ma, and Sarouty.ma.
He also spent three years as a consultant at the Boston Consulting Group.
Ismael holds a degree from Cornell University.
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Digitally equipping Africa’s ubiquitous mom-and-pop convenience stores is a great pitch. The problem statement is clear: these stores’ operations are antiquated and analog, which damages their bottom line. The proposed solution is elegant: leveraging smartphones, arm store owners with digital tools to facilitate logistics and procurements, thereby boosting their revenues.
This overarching thesis has convinced the continent’s founders and investors alike: startups digitizing Africa’s small convenience stores have sprouted profusely, from Morocco to Kenya. Wasoko, MaxAB, Omnibiz, TradeDepot, Chari… the list goes on.
These companies have raised significant levels of funding because the thesis’ pertinence translates into encouraging, top-line growth. It is, indeed, more efficient for store owners to order their products from their smartphones rather than make frequent trips to various wholesalers.
At the height of the VC funding boom, a good thesis and promising growth were enough to raise. But as VC dollars grew frisky and investors regained interest in coherent unit economics, these startups were faced with a reckoning. Unfortunately, the tiny margins yielded by store owners ordering shampoo and snacks on one’s app weren’t enough to build a large, venture-scalable business.