In our first Sufficient Balance series, we dedicated a chapter to a concept we called “Physical Ubiquity”, a state where physical distribution becomes so accessible that it creates new markets:

An ecosystem that enjoys physical ubiquity is a hyper-market creator. It asks everyone the question “if you could deliver anything to anyone, what would you sell?” Importantly, this is a question that can be answered by every restaurateur, “mom-and-pop” shop owner, and smallholder farmer in the country in contrast to the question digital ubiquity offers, which is: “if you could deliver any software or content to anyone, what would you build?”

Much has changed since we wrote that at the end of 2019. The pandemic has created the biggest consumer behavior shifts we’ve seen in generations. Some of the players we talked about have grown, some diminished, and others, revitalized. Globally, we’re able to see physical ubiquity “cross the chasm” into mainstream adoption.

In US tech, Mary Meeker’s April 2020 coronavirus trends report pointed out that “Net, we believe on-demand and to-the-door delivery services may be gaining permanent market share in these unusual times. While the benefits to consumers of on-demand services are relatively obvious, we continue to believe the importance of on-demand businesses in helping provide workers with work and flexibility is underappreciated in America.” In November 2020, DoorDash, an on-demand food delivery company, announced its intentions to IPO and reported a 223% rise in revenues and thus has reduced it’s net losses by 72% over the first 9-months of COVID-19. The pandemic has radically changed the trajectory of DoorDash and it’s “Future of Local” ambitions.

In Africa, fortunes are also shifting. South African retailers, Pick n Pay, Checkers, and OneDayOnly have seen an explosion in demand. “Grocery delivery business Zulzi was forced to limit trading to two hours a day for two weeks after shoppers overwhelmed its app, but it has since quadrupled the number of shoppers and drivers it employs and doubled its customer care staff. It is now processing 2,000 orders a day — five times 2019 levels — and has done a year’s worth of turnover in the past two months.” Jumia, after a much scrutinized 2019 for the publicly-listed ecommerce platform, saw a 150% rise in its stock price during the pandemic so far. By shifting its product mix more to more “everyday” products like groceries as well as exiting three slow performing markets, Jumia has managed to reduce its operating losses by 50%. It’s a boon that’s being felt across ecommerce on the continent.

We have written about “invested infrastructure,” a path dependency linked to the rails laid down in the past and the high cost of change in complex systems. Meeker writes that “the world doesn’t just end that often” and indeed it’s rare to see the utter upending of invested infrastructure in such a short amount of time. If change occurs in complex systems only when the benefits outweigh the pain of switching, then it’s no surprise that the benefits of good health and survival has overshadowed the pain of starting to move towards a world of physical ubiquity.

As we look towards a post-vaccine future, it’s likely that many of the market and consumer changes we’ve seen are here to stay. At the same time, while the pandemic has been less deadly than expected on the continent, the economic shocks from a year of quarantine will probably result in Africa’s first recession in 25 years.

Beyond the digitization of delivery

Delivery is being digitized in Africa. Startups like Kobo360, Sendy, and Lori Systems have found success as platforms who manage and fulfill delivery requests across the supply chain on the continent. Funding of logistics startups is growing rapidly and we don’t expect the pace to slow. However, digitizing delivery through logistics platforms is just the beginning of physical ubiquity. To get to a point where delivery is preferred, the benefits of offline commerce must also be digitized. One key aspect will be trust.

Markets that transition from offline to online commerce tend to face a trust issue with online payments. As recently as 2014, a third of Chinese online shoppers still preferred Cash-On-Delivery (COD) and it was a required payment option. Then Wechat pay and AliPay digitized payments for Chinese ecommerce shoppers. By 2017, COD was only 3% of ecommerce payments in the country.

Even more than trust in digital payments, physical ubiquity will require the digitization of other benefits that previously were associated with offline commerce for both buyers and sellers. Here are several trends we’re keeping an eye on as markets adapt:

1. The digital wallet for the physical world

After reading our previous chapters, it should be no surprise that we’re seeing strong momentum in the delivery of grocery, food and everyday goods as first experiences for many consumers in Africa. They make up the largest share of wallet for consumers and are also frequent, consistent purchases. Repeat experiences build trust. It’s also clear that once trust is established, the ecosystem is set for big changes.

A trusted “physical world” digital wallet operating in a world of physical ubiquity not only allows transactions to occur without physical cash clogging up the process, but also affords consumers the confidence that a single service can be used for all their shopping needs, down to the most obscure of local establishments.

2. The long tail of storefronts

Markets are defined by sellers. For physical ubiquity to flourish, companies must not just digitize access to some sellers, but rather, [have the potential to] digitize access to all sellers. Platforms must solve for the experience of product choice consumers have with offline markets and ensure that their catalogues satisfy the needs of every individual shopper, no matter how specific the need. They aren’t just competing with the local convenience store or wet market, they’re competing with the 5-kilometer shopping radius of every user. In communities where product choice is limited like in rural or periurban areas, a platform’s ability to satisfy needs alongside a much larger, discoverable product catalogue becomes a deep advantage versus offline experiences.

We’re starting to see efforts to help bring sellers online in Africa. Payment aggregators Paystack and Flutterwave in Nigeria have digital storefront offerings. Players like Copia are utilizing the prevalence of agent networks in many African communities to serve as intermediary storefronts. While these efforts are nascent, the opportunity is massive. Another interesting initiative is the Mojaloop open source payments system developed by the Gates Foundation. Mojaloop is a real time interoperable payment system that aims to reduce cost dramatically across the industry — its first rollout is TIPS in Tanzania but expect to see it popping up and changing the landscape in more countries.

3. Shopping while alone, together

Even if physically ubiquitous delivery brings a new generation of sellers online, they’ll be limited by the cost of acquiring (and converting) users and the rapid commodification of their products as geographic segmentation dissolves. It’s then no surprise then that social features have started to blend with traditional ecommerce to help alleviate some of these issues.

Social commerce digitizes a core value proposition of offline commerce: interaction. Whether it’s discovering products through word-of-mouth or the relationship between a regular customer and a store owner, offline commerce is inherently a social experience. Bringing these experiences into ecommerce can unlock many advantages for sellers.

The ability for sellers to acquire new users through existing social networks, either online or offline, can reduce customer acquisition costs to near zero when executed well. Similarly, the ability for sellers to connect directly to buyers as an audience can create brand loyalty and product provenance that counteracts the commodification that otherwise occurs on marketplace platforms.

4. Increasing revenues by increasing incomes

The growth of physical ubiquity must be built upon the growth of income opportunities for a larger segment of the population. As we’ve highlighted in our previous pieces, disposable incomes for the vast majority of African consumers are still low and spending is concentrated on core goods and services like food.

The marketplaces that are being created offer ample opportunity for companies that aim to help both sellers and on-demand workers increase incomes. For small businesses who are beginning to digitize, this new era of commerce offers both a larger market of customers to sell to as well as supply chains with less middlemen taking fees. By aligning their revenue models with SME income gains, platforms will be growing their own addressable markets.

For workers, the demand for flexible and reliable labor to drive the on-demand markets are here to stay. We’ll be watching closely to see how the quality of these jobs shift over time, but much like SMEs, products and services who are able to help on-demand workers increase their incomes will be able to tap into consistent and growing revenue sources. Income generation is key to detach digital commerce from the currently limited disposable incomes of Africa’s consumers — something that must happen if the market is to expand beyond the digitization of delivery into a world of physical ubiquity.


Chapter 1: The Frontier Blindspot

Chapter 2: Fortune at the middle of the pyramid: The contours of African consumer purchasing power and the opportunities for the tech industry.

Chapter 3: Who is ‘The African Consumer’?: A follow-up to Fortune at the middle of the pyramid

Originally published Dec 22, 2020