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African B2B Marketplace Wasoko Takes On Supply Chain Inefficiencies

It can be a major inconvenience when a favorite product is out of stock at a store, especially when it happens on a regular basis. For small retail store owners across the informal and fragmented retail markets in Africa, however, running out of product stock can be a huge hit to their bottom lines.

It’s a challenge that Daniel Yu took up six years ago when he founded business-to-business (B2B) marketplace Wasoko, hoping to disrupt a billion-dollar sector with huge growth potential across the continent.

“Anything that can be done to improve the efficiency and ultimately improve the affordability and availability of these essential goods for a billion and a half people is going to be a huge business,” Yu, global CEO and founder of the Africa-focused B2B eCommerce startup, told PYMNTS in an interview.

Since its launch in 2016, the business has grown into a successful pan-African marketplace with over 50,000 informal retailers in its network across East and West Africa — Kenya, Tanzania, Rwanda, Uganda, Cote d’Ivoire and Senegal — with revenue increasing over 500% over the past 12 months and more than 2.5 million orders completed during that time.

Through Wasoko’s platform, informal retailers can order products via SMS or mobile app, which are then automatically pinged to a warehouse or fulfillment center for free same-day delivery to their store — often in less than three hours.

When it comes to facilitating cross-border payments, particularly in emerging markets like in Africa with relatively weak payment infrastructure, it can be a challenge for businesses. However, Yu said the prevalence of cash transactions in the markets the firm operates in has worked in its favor.

“We do actually still primarily collect payment on delivery, and the majority of that is actually still happening in cash,” he explained. “[That] is a reflection of the fact that informal retailers operating local communities do largely still serve their consumers through cash.”

Since launching in 2016, the business has boomed, which Yu attributes to a sector that is worth over $600 billion annually. “That’s the amount of consumer goods that are bought and sold through informal retail shops across the African continent right now,” he added.

With those numbers and potential for growth, investors’ interest has soared, enabling the B2B firm to close a $125 million Series B round this month, which claimed to be the largest non-FinTech and venture financing round raised in Africa.

Read more: B2B eCommerce Startup Sokowatch Announces Rebrand to Wasoko After $125M Funding Round

The Success of BNPL

Due in part to the rapid growth of Wasoko, the business has encountered issues when it comes to sourcing and procuring products from manufacturers.

“And this means that we’ll place a purchase order for 10,000 boxes of soap and only get 6,000 delivered to us, and this is very frustrating because it’ll lead to stockouts for our customers — products not being available for them to restock,” Yu explained.

This can lead to a bad experience for customers, so improving the supply chains to help build up more capacity at the supplier level has become key — something an in-house brand could potentially solve.

“Private label is something that we’re actively exploring right now,” Yu said. “I think the opportunities to get more vertically integrated in our value chain are exactly what are going to unlock some of these constraints.”

One area where the company had a smoother ride is with its buy now, pay later (BNPL) offering, which currently drives over 10% of Wasoko’s total sales volume across its markets.

According to Yu, the BNPL product is only just the start, providing an opportunity to a broad array of services Wasoko can offer “through unique relationships, data and infrastructure that we built to serve the African mass market that previously did not have any directly digitized platforms offering these kinds of services.”

Expansion Plans

To further address the working capital constraints local retailers face, Wasoko is exploring other financial offerings that could be given to merchants, including direct loans and insurance products in the near future.

“I think the opportunity there is for us to be, in some sense, a financial services marketplace where existing institutions, banks [and] insurance companies would be able to access our customer network, and we can help facilitate access to their products in a way that they never had channels to distribute them before,” he noted.

The company also plans to replicate the success of the model to six more cities by the end of 2022, including to Nigeria and other markets in southern Africa.

The business is also looking at expanding its product offerings and is considering other services that could be offered to merchants — or even to other players within the value chain.

“Both of the strategies of in-house innovation and research and development, alongside potentially external investments and even acquisitions, can help us achieve growth in both of those categories,” Yu said.

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