Quality of service at the last mile will make or break African e-commerce startups

Photo: Techpoint.ng

Photo Credit: Techpoint.ng

With new e-commerce startups sprouting up everyday, competitive advantage in the urban African context will boil down to their quality of delivery and logistics managment. Given the lack of infrastructure such as home addresses, post codes with embedded information, or  as is the case in India – the last mile of delivery in the form of the village postman – the responsibility for ensuring customer satisfaction lies squarely on the shoulders of the online businesses themselves.

Online stores in more developed operating environments can focus on the aesthetics of their web presence, the design of an order form, or building a loyal community of users. Their business models emphasize the way they will distinguish themselves in a crowded marketplace and build brand awareness to gain a critical mass of customers.

But for the slew of  startups in emerging markets such as Nigeria’s or in the Cote d’Ivoire, it will be their distribution strategy and logistics management in the last mile that will differentiate the winners from the losers. Does the business plan have a viable solution for addressing this challenge?

New players are emerging who see this distribution need as an opportunity space, one such is ACE in Nigeria, whose last mile solution has been documented in detail by Techpoint.ng today. Others eyeing this lucrative space include the global courier behemoth DHL, whose forecasts are rubbing their hands with glee. Big or small, their ability to serve their customers’ needs will have impact on the entire value chain, both online and in the real world.

A matter of strategy: In house delivery or third party support?

With so much dependent on the quality of the customer experience at the moment of fulfilment – timely delivery, ease of payment, courteous service, receiving the correct order, etc – the decision to invest in building in house operations, like the well-funded Kongas and Jumias, or to outsource to third parties becomes a critical component of corporate strategy.

  • Which approach will allow you the opportunity to offer the best customer experience for your brand’s needs?
  • What happens when the still nascent market matures enough for potential conflict of interest with competing brands being delivered by the same service?
  • How important is your branding in the real world as compared to the virtual experience?

These are all the questions and more besides that startups will need to ask themselves, before their potential investors ask it of them. Word of mouth travels as fast the smartphones that are fuelling the internet boom and no amount of PR will help with ensuring quality of service that will make customers return for more.

One Comment

  • I agree that e-commerce companies’ greatest challenge is henceforth delivery; and this includes everything from getting the order right, facilitating preferred payments & timely reception by the customer. I believe that any company that nails that will implicitely develop customer loyalty because it will be graded high on quality service delivery.

    As for the right model for delivery: in-house vs. 3rd party, I think it depends on each company’s business model. Delivery & logistics are very expensive and represent a heavy investment. Moreover, there are technical skills that come with managing warehouses of products. Taking both aspects into account, it might not be affordable for many companies. The advantage of 3rd parties is definately the cost, especially that mostly it includes “informal” bikemen who take care of bringing packages to the right place. With some training and assistance, in the long run, they can be a valuable resource. There is also the option of customers picking up their packages at well known stores. This option can be further explored.

    Last, on the issue of conflict of interest in the long run. I forsee companies using the same delivery systems, iven that markets are small. But I don’t anticipate it being a problem unless certain brands make a disclaimer about it. I don’t know if we’ve reached that level yet but it’s not impossible … in which case, that will impact e-commerce companies and make them have to decide between carrying certain brands or finding funds for in house capacity.

    At the end of the day, it’s all about tradeoffs ….

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