Jumia has a lot of money to conquer e-commerce. Don’t try to compete against them. Instead, try to conquer a single niche.
Online retail is booming in Kenya
A lot of new retail businesses being set up are focusing on online platforms. Traditionally, individual investors would open stand-alone shops like boutiques, jewelry outlets, minimarts, etc. Therefore, setting up stand-alone businesses is not a new phenomenon.
However, the prevalence of online shopping platforms has given small online investors the illusion that they can compete against significantly larger businesses. While it is partly true that such competition could exist and be beneficial, it is also true that it could be detrimental in the long run.
The gist of this article is that your small online retail business should focus on a single niche and be built on already established e-commerce platforms.
Jumia’s Pile of Money
Let’s look at Jumia. Some things that stand out about the firm is that it has a massive infrastructure (albeit online), it has significant capital and human resources and by extension, a greater ability to absorb losses.
In an interview with Larry Madowo, Jumia revealed that it was still making losses 8years after setting up its e-commerce operations in Africa. This is a major concern given how much investor money has gone into fine-tuning operations for the retail giant.
In addition, while Jumia has been criticized for several aspects of its business such as hiring a technology team from Portugal, wrongfully claiming its African etc, its main problem is that it used too much money, too fast and in a very low-margin market.
The One-man Team
Now consider a small stand-alone startup by a single investor going against Jumia. The usual script in online retail is to set up a website and related social media pages, find a source of products and list them, create delivery options and then market aggressively. It takes a lot of resources and time for a single investor to pull off such an online store.
After the setup process, the investor has to efficiently deal with the low-margin. Customers will not pay more just because they are buying an item online. In fact, they expect to pay less. Over and above the struggle to make operations efficient enough and deal with low-margins, such an investor has to outdo Jumia in targeting and converting customers.
The cost is simply high for the benefits you will get even if you manage to be a worthy competitor to Jumia.
Focus on a Single Niche
The first rational thing to do while investing in an e-commerce store is to serve a niche market and do it better than anyone else. Examples of such stores are the Facebook pages each dedicated to specific products such as earrings, earphones, phone cases, indoor plants etc.
Using the focused strategy makes everything easier from sourcing to delivering to the final customer. Advertising for example is much effective in this case because instead of an ad budget that is spread across all products and tries to reach multiple types of customers, your budget has a more specific audience to reach. This is with the assumption that as a small investor you budget is limited.
Equally important is using already existent and established e-commerce channels.
Social media pages work too!
You can create your own e-commerce website from scratch and add paid plugins for different functionalities. However, this is very costly because you need to hire a professional web developer to keep making changes as you grow.
Alternatively, you could exploit options such as Shopify, WooCommerce or simply social media pages such as Facebook Shops that are much cheaper and easier to maintain. An additional and much ignored 100% free alternative is the power community groups. These include WhatsApp groups, Facebook groups and online forum communities. You can easily start selling from these groups and gradually move to a Facebook page once you have identified that a market for what you are selling exists.
Over time, you can then build an ecommerce store with platforms such as Shopify.
In the meantime, don’t compete with Jumia.
