South Africa opens up physical Retail Stores & Flutterwave's store

Good morning, 

Last week's update was a bit difficult for me to write as the topic was touchy.  In hindsight, I realised I might have played it too safe and failed to mention a few things:

I don't think the problem of curbing misinformation can simply be solved by paying for content although it’s important. I agree that every effort made counts, every question raised or publisher dragged online for not doing well adds to the fight against misinformation. 

The issue of biased coverage dates back to the era before the fall in Ad revenue, so the reason for the tilt towards negative news is not just because there's less money to report good works. There's always been an inherent bias to place a priority on negative stories as being more important. 

Unto this week’s update

South Africa opens up physical Retail Stores

From FT

“I often tell the story that when I grew up as a kid, when you saw a black child that was not dressed in hand-me-downs or things that had been stitched together, that was the exception,” “Today the exception is the opposite.” “What it [the retail revolution] has done to people . . . you needn’t be ashamed of how his child is dressed when the child goes to school. He’s got a proper shirt, proper shorts, etc”

Talking about Africa’s supermarket revolution Christo Wiese, the former billionaire patriarch of African retail who grew up in what is now Northern Cape province, a remote, rural part of South Africa describes what it was like growing up as a kid and the change retail stores brought to his community. Retail physical stores brought quality products to communities at affordable prices and that was a game-changer. Up until eCommerce retail stores came and made everything affordable and accessible irrespective of where you are. 

The lockdown which reduced sales in physical stores also shifted people’s attention to eCommerce stores. This shift led to an interesting incident in South Africa, a month ago when lockdown rules were relaxed for the first time in 5 weeks, allowing certain additional items to be available for purchase, but the sale of most non-essential items via eCommerce was still not permitted. 

The reason according to South Africa Minister of Trade and Industry, Ebrahim Patel’s was: 

If we open up any one category, let’s say e-commerce, unavoidably there’s enormous pressure to do the same for physical stores, for spaza shops, for informal traders, so there is fair competition.

The minister’s response which is understandably political -- hinting that appeasing unhappy physical store businesses is better than giving many people the avenue to buy non-essential items from eCommerce stores -- worked against the progress of trade, as these two avenues to trade should be complementary and not at loggerheads.

Looking at the split of retail sales between physical stores and eCommerce stores in SouthAfrica,  the result was quite surprising as eCommerce represents less than 2% of total retail purchases in the country.

In case you’re asking what’s holding back e-commerce in South Africa? One of the key factors identified is that merchants have been slow to come online.  A response to this would be “How difficult is it to set up an online store?”  In this era, it’s pretty easy and a reminder that a better response from the government should have been to encourage the physical store owners to set up an online presence as opposed to restricting eCommerce sales.  

On the 1st of June, South Africa eased restrictions again which meant wholesale and retail trade will be fully opened, including in the informal economy. This puts physical stores back in business and could as well be the end of the plans of some of them to come online.

Flutterwave’s New Store

Talking about how easy it is to set up an online store, in response to the Pandemic, Flutterwave - an African payment company launched its store at the end of April. The store simply allows sellers to upload products, set prices and (in some markets) have integrated delivery partners to pick up orders and deliver customers. For now, Merchants do not pay any extra costs, and Flutterwave only makes money off payments as it normally does. 

There are many aspects to this story.

According to Flutterwave, it’s a response to its merchants not being able to sell offline due to restriction in movement. My first thoughts were that this was quite a good PR spin as there are already countless options for people to sell their products online. While I don’t doubt their good intentions to help their users, I suspect it had been in the works for a while and they took advantage of the season we’re in. I give them credit for this as the announcement of the store got a lot of applause from people. 

Eat.Drink.Lagos’ Flutterwave store

At the moment the current version of the store is simply a basic list of products.  The first image is Eat.Drink.Lagos’ Flutterwave store while the second is their website.

Here’s how Eat.Drink.Lagos uses the service to sell branded items, When you click on the buy button on their website, it takes you to their Flutterwave store page on the right, where you can buy it. I’m really curious as to why they’re not selling directly from their website having gone this far in setting up their online shop.

The next thought that came to mind was, what of Paystack, the other big player in the payments space? What would be their response? Well, it didn’t take too long to realise that Paystack had launched its own ‘store’ more than a year ago, they just didn’t call or see it as a store, but a payment page with multiple products. 

Please don’t ask me why the example is Weight loss Packages 😄 It’s a legal and noble business.

It doesn’t look like Paystack is interested in launching a store as it’s busy with it’s Merchant App which gives it’s Merchant better analytics on their business performance. 

Next, There are sentiments online that the launch of this store means Flutterwave is competing with some of its Merchants who use its payment platform for their online stores.

To answer this, when Flutterwave closed its $35 million Series B in January this year, its CEO said that they didn’t want to be just a payment technology company. At the announcement of the store, Its CEO also said, “It’s not a direction change. We’re still a B2B payment infrastructure company. We are not moving into becoming an online retailer, and no we’re not looking to become Jumia.”

To me, Flutterwave store is a basic listing site with products. I’d argue that all other merchants have better platforms with search functionality for now. I also think it’s too soon for even Flutterwave to know if it’s a journey it wants to embark on, as there’s more to eCommerce than just building a listing page, for now, it’s just an experiment to better understand the activities of its customers. 

How could this turn out? It could fail and be shut down but if this experiment goes on well, with a lot of people using it, what would it look like?

The typical eCommerce space is a very capital intensive business, with the most serious players needing to have Warehousing space and Logistics to make it happen. It took Amazon 9 years to be profitable in the USA — arguably the best market for e-commerce in the world and Jumia is still a few years (for those who are optimistic) away from being profitable. So choosing to become a typical eCommerce store like Jumia would be costly and unnecessary in my opinion, however, remaining in the background and enabling its users like Shopify -- the third-largest online retailer in the U.S. after Amazon and eBay that makes it possible for anyone, even individual entrepreneurs, to set up storefronts online -- sounds more like it.

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