The newly-established delivery app industry in Tanzania is serving up old business in a new format, diversifying the e-commerce market and driving consumer behavior beyond Covid-19.
When Zadok Prescott first started the home delivery application, Piki Tanzania, he only thought of it as a supplement to restaurant dining. However, when Tanzania also fell victim to the Covid-19 crisis in March, Piki, which was still new and the only established app of its kind in the country, soon became the only way some restaurants were doling out their services.
“I think a lot of people took that decision to stay at home and avoid contact. So, we suddenly realized how important we were becoming,” says Prescott, also former CEO of Jumia Tanzania.
At the end of November 2019, Jumia, Africa’s leading online retailer known as the ‘Amazon of Africa’, had shut its e-commerce operations in Tanzania in a review of its portfolio.
However, ironically, since the beginning of 2020, in the very market that Jumia exited, multiple e-commerce platforms suddenly sprung up, from food and grocery delivery apps to ‘online malls’ that sell commercial goods, besieging a market still relatively new to online shopping and dining.
With Covid-19, the role these platforms played in the lives of local businesses changed almost overnight.
For Levant, a fine dining restaurant offering Middle Eastern cuisine in upscale Dar es Salaam, delivery was not the path they wanted to take, but had to.
“When Covid-19 hit, our sales were 90% lower. Our plan was to give an experience, it’s not only the food you eat… [but] we realized people were afraid, so we had to focus on delivery… take-away was most of our sales,” says Hussein T Hamadi, the owner of Levant, which started delivering through Piki when the pandemic hit and even started its own delivery service.
Although this is the path Levant opted, Hamadi does not see delivery and e-commerce playing a significant role in his business with restaurants now reopening in full swing in the country.
Piki surely has an advantage in the country with its reliable infrastructure and experience, but the commissions are not reasonable in Hamadi’s opinion, since his own delivery service costs him much less.
He would rather people came into his restaurant because this is part of the service he wants to offer.
In addition to that, Hamadi is opening yet another restaurant, with a more delivery-friendly menu and where he hopes e-commerce may be more feasible.
On the other hand, Central Park Café, an American-style café and children’s park and venue that also works with Piki, does not see any way in which businesses, going forward, can avoid e-commerce.
“During these times, people rely on [Piki]… it’s basically a lot of the weight lifted off us for the pressure because it is a very tough market and things are very unpredictable here,” says Sidiqua Versi, co-owner of the café.
The fact that the liability for deliveries is also no longer her problem is an advantage, she adds.
Versi agrees the delivery and commission fees are not reasonable for all, and individual delivery is far more financially sustainable, but an app like Piki is reliable and she would rather keep working with them to use their customer base and keep her service timely and efficient.
However, she has noticed customers opting for cheaper options and more players foraying into the market with unique business models.
New players, renewed approaches
Duka.direct is an online grocery delivery service that runs on a platform created by Selcom Tanzania, a digital payment system developer that also saw a very quick change in consumer behavior when Covid-19 gripped the country.
“The adoption was a lot faster than we had anticipated and we even had to accelerate deployment quite rapidly,” says Sameer Hirji, Executive Director of Selcom. It is planning to expand to a range of services to include restaurant food delivery, as well as connecting to businesses selling electronics, pharmaceuticals and other items, eventually throughout the region. However, its approach is not only controlling the supply of products, but in the long run, seeing itself as more than just being a customer experience and service provider.
“We’re thinking like a financial services business, but using consumer goods and services… We want to hopefully one day make e-commerce extremely mainstream and as a result, for the common man, who previously couldn’t afford maybe cheese, because it was marked up at like 30% at a supermarket, to be able to access those premium products and consume them more readily and rapidly,” he says.
He hopes to eventually pilot using Selcom’s widely-used payment agents to act as sales and pickup points, as well as introduce lending on the apps to allow customers to buy goods by borrowing from banks Selcom has relationships with.
“At least initially, [duka.direct] can be a standalone business [not making much profit]. But it needs to be part of something bigger that can feed it, and then continuously grow it…
“I think raising awareness and giving back value is where we see the market going,” he adds.
The biggest problem Hirji’s platform did face during the time was running out of space and local suppliers who were not able to keep up with the demand.
“That right image in the market matters in terms of what the delivery, the last mile, looks like… [and] to a great extent the optics it presents in the market in terms of brand and professionalism,” says Hirji.
However, there are players in the market like Inalipa, a platform that mimics an ‘online mall’ with a variety of local shops and brands, ranging from Instagram businesses to large retailers, that has internalized all operations.
“I’m sure our competitors, because of our model, have much higher volumes than us. But the experience that the customer gets with us is something that stands out… We’re able to control the entire customer experience. And I think for us, that’s the big differentiator,” says Nadeem Juma, chairman of AIM group, which developed and runs Inalipa.
Inalipa also takes a slightly different approach by aggregating retail suppliers and leveraging their brands. While Juma says it was initially not easy to bring them on, Covid-19 forced Inalipa to be able to tell them a story of how this would impact their business positively.
“Trading is actually what the bulk of Tanzanian business is built on… it’s really old business in a new format. And that’s the way we look at it… We aren’t trying to change the culture or the way a consumer purchases traditionally; we are enabling that same experience on a digital platform,” he adds.
But even with trying to maximize customer satisfaction, Juma found that the number one question among customers who went through the process of putting items in their cart was that they weren’t sure if they could trust the platform.
“Right now, we’re realizing that people are the early adopters, starting off with very small basket sizes and now those basket sizes are growing.”
Duka.direct provides store credit and uses marketing to build credibility and confidence and Inalipa uses customer service calls to encourage people to go through with purchases.
“What [Covid-19] showed us is there’s enough space in the market for different players as long as they’re very focused on what they’re trying to achieve and not trying to do a little bit of everything,” says Juma.
The direct contact and understanding of the local market is a large advantage to players in the market, according to Prescott, and is what differentiates them.
Looking into the future
Both Hirji and Juma acknowledge that the global valuation-driven approach to e-commerce, which was Jumia’s too, is not necessarily the approach that can work in Tanzania.
“I don’t believe that that is the appropriate way to go about e-commerce because you really cannot raise money at that scale continuously to be sustainable. You have to make it a profitable business… You need to identify what are the levers, one of the things that you want to drive, and then map that out over a period of time” says Juma.
Being in the digital space does allow you to pivot faster, according to Hirji.
And this can be especially useful in navigating the regulatory landscape in Tanzania because of the penetration of mobile money, in Juma’s opinion.
“It’s a highly regulated space. So you need to be aware of what you can and can’t do. And sometimes that can be what could slow you down… But I think it also allows you to contribute to the actual country’s growth as well.”
However, Tanzania is still a difficult market, with about 60% market share in terms of smartphones in the country and utilization under 20%, and if the penetration is further discounted by the number of people who will actually swap their traditional practices for an e-commerce experience, then that drops even more, says Hirji.
Such data is available, but not in much detail about e-commerce, mostly because of how the market has diversified only recently in the country.
Juma believes there is a greater good if everyone is a bit more open and transparent in sharing their experience of this business, as Inalipa’s data collection has shown customer sets that he didn’t know existed.
While Prescott acknowledges Jumia did educate the Tanzanian market on the e-commerce experience, there is a long way to go in terms of how consumer behavior will change or adapt in the country to prove sustainable beyond e-commerce being a critical service in the time of Covid-19.
“It’s certainly beyond just your traditional corner store saying, ‘I want to go digital because everyone else is going online’. I think there’s a roadmap that’s a lot more sophisticated than just a Shopify storefront,” says Hirji.
– By Inaara Gangji