Kenya basedÂ SokowatchÂ aims to shake up the supply chain market for Africaâ€™s informal retailers.
The B2B e-commerce company closed a $2 million seed investment led byÂ 4DX Ventures. Others to join the round were Village Global, Lynett Capital, Golden Palm Investments, and OutlierzÂ Â Ventures.
Sokowatchâ€™s platform connects Africaâ€™s informal retail stores directly to local and multinational suppliersâ€”such as Unilever and Proctor and Gambleâ€”by digitizing orders, delivery, and payments with the aim of reducing costs and increasing profit margins.
The term disrupt is used less frequently in African tech since startups are often entering new business spaces where thereâ€™s little to actually disrupt.
Thatâ€™s not the case with Sokowatch, which sees price and productivity benefits to revamping existing supply chain structures for Africaâ€™s informal retailers.
â€œWith both manufacturers and the small shops, weâ€™re becoming the connective layer between them, where previously you had multiple layers of middle-men from distributors, sub-distributors, to wholesalers,â€� Sokowatch founder and CEO Daniel Yu told TechCrunch.
â€œThe cost of sourcing goods right nowâ€¦we estimate weâ€™re cutting that cost by about 20 percent [for] these shopkeepers,â€� he said
Quantifying the size and potential of Africaâ€™s informal markets hasÂ captured the attentionÂ ofÂ economists and startups.Â GDP revisionsÂ in several African countries have revealed outdated statistical methods were missing billions of dollars in economic activity.Â AndÂ one estimate by The International Labor Organization places up to two-thirds of Sub-Saharan Africaâ€™s non-agricultural employment in the informal economy.
On the number of small shops on the continent, Yu noted a lack of reliable numbers but cited aÂ 2016 KPMG studyÂ pegging fast moving consumer goods spending in Nigeria alone at $41 billion annually. A portion of those goods move through the continentâ€™s vast network of roadside markets, shops, and stands.
“There are millions of informal stores across Africa’s cities selling hundreds of billions worth of consumer goods every year,”Â said Yu.
These stores can use Sokowatchâ€™s app on mobile phones to buy wares directly from large suppliers, arrange for transport, and make payments online. â€œOrdering on SMS or Android gets you free delivery of products to your store, on average, in about two hours,â€� said Yu.
Sokowatch generates revenues by earning â€œa margin on the goods that weâ€™re selling to shopkeepers,â€� said Yu. On the supplier side, they also benefit from â€œaggregating demandâ€¦and getting bulk deals on the products that we distribute.â€�
The startup has delivered 100,000 orders to customers for â€œa few thousands shops,â€� according to Yu and company data.
The company recently launched a line of credit product to extend working capital loans to platform clients. With the $2 million round, Sokowatchâ€”which currently operates in Kenya and Tanzaniaâ€”plans to â€œexpand to new markets in East Africa, as well as pilot additional value add services to the shops,â€� said Yu.
Peter Orth, Co-Founder and Managing Partner at lead investor 4DX Ventures, will join Sokowatchâ€™s board of directors.
Yu also noted the possible big data benefits to informal African retail from Sokowatch. â€œIf you are â€¦selling into this market you have no clue who ultimately ends up with your product, even two layers down. Thatâ€™s a big challenge,â€� he said.
â€œWith us, not only do we know whoâ€™s buying the product, we know when they are buying the product, what theyâ€™re buying it in conjunction with, and the pricing.â€�
Source: Techcrunch Disrupt