Ecommerce is a rapidly growing sector in Africa, with projections indicating a positive outlook for the future. However, breaking through and achieving sustainability can be a significant challenge for startups. This is a reality that Zumi, an ecommerce startup in Kenya, recently experienced as it announced that it was closing down its operations. The company’s CEO and Co-Founder, William McCarren, shared the news through LinkedIn.
Zumi began as a women-focused digital magazine in 2016 but later pivoted to become an e-commerce platform for apparel. The company had some early success, raising over $920,000 in funding and achieving over $20 million in sales with 5,000 loyal customers. Zumi built a team of 150 people with experience from companies such as SpaceX, Amazon, and Jumia, among others. However, despite these achievements, the company was not able to achieve sustainability in time to survive due to the challenging macro environment that made fundraising extremely difficult.
The closure of Zumi highlights some of the difficulties that ecommerce startups in Africa face. One of the primary challenges is the lack of access to capital, particularly seed capital, which can limit the ability of startups to scale and achieve profitability. Additionally, the high cost of logistics, including shipping and delivery, can make it challenging to compete with established players in the market. Most of these platforms also have it hard competing with some of the small and flexible retailers who have their own digital platforms that they can use to reach a bigger customers base. Most of these big ecommerce platforms rely of seed capital to build any meaningful business and I believe that is the wrong approach. I feel like most do not take time to understand the market and are of the opinion that if they just get enough funding, they can survive. This is half true but they do need a local approach to the business and this involves creating platforms specifically for the Kenyan market and not just a copy-paste of a platform from a different part of the world.
Furthermore, the ecommerce sector in Africa is highly competitive, with established players such as Jumia and Konga dominating the market. These companies have a significant advantage due to their early entry into the market, access to capital, and established logistics networks. This makes it challenging for new entrants to break through and gain a significant market share.
However, despite the challenges, the ecommerce sector in Africa remains attractive, with significant growth potential. The sector is expected to continue growing as more Africans gain access to the internet and mobile devices. Additionally, innovations such as mobile money and digital payments are making it easier for consumers to transact online, creating new opportunities for ecommerce startups.