The company is planning to enter Côte d’Ivoire by the end of the year and Senegal in 2022, says Yu, who is based in Rwanda. Sokowatch already has staff on the ground in Côte d’Ivoire and has created a subsidiary there, Yu says.
It currently serves 24,000 shops operating in Kenya, Rwanda, Tanzania and Uganda, where it has electric tuk tuks in its delivery fleet.
Yu argues that Africa’s informal retail market is much larger than that which can be addressed by e-commerce retailer Jumia, which has been billed as the ‘Amazon of Africa’. He questions whether Amazon is an appropriate model. For Jumia to close a sale, he says, a long list of conditions must be met.
- Someone needs a higher-end phone to be able to place an order.
- They also need to have an easily identifiable street address, someone able to wait at home to recieve the order, as well as the willingness and ability to pay cash when the goods arrive.
- The truth, Yu says, is that these conditions are only reliably met by small urban elites.
Sokowatch’s model, by contrast, concentrates on what the vast majority of African consumers buy. The answer, says Yu, is staple products such as rice, maize, flour, sugar and soap, usually purchased from a local family-run store.
Such stores, Yu says, are hampered by inefficient supply chains. The storekeeper often has to physically travel to a wholesaler and then transport the goods back. “There is no supply chain last mile.”
Sokowatch seeks to provide a solution by ordering the goods for shop owners, financing the purchase and providing same-day delivery to the store. The catalogue is restricted to a few hundred staple products, in contrast to the thousands of products on Jumia. The model, he says, has “huge potential to aggregate mass-market purchasing power”.
Last year, investors in the company’s $14m fundraising round included Quona Capital, Amplo, Breyer Capital, Vertex Ventures, Timon Capital and 4DX Ventures. Yu remains the largest single shareholder but does not have a majority stake.
The model of providing short-term, one-week financing for shopkeeper purchases is, Yu says, “unique in the market context”. Access to the shop’s order and payment history means that Sokowatch knows the reliable stores.
Credit limits are adjusted in line with the reliability of the payment record. If shops don’t pay, then in the end, they won’t be able to order again.
- Yu says the system ensures that repayment rates are above 99%.
- Covid-19 has spurred business on, Yu says, as people still need to order basic goods. The amount of merchant finance provided by Sokowatch is currently 10 times higher than a year ago, he says.
- The company, he says, has only a “small” amount of debt, which is “insignificant” relative to its equity.
- Yu’s long-term aim is to list Sokowatch on the US’s Nasdaq stock exchange within five years.
Sokowatch’s model starts from where the majority of retailers are, rather than where it would like them to be.
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