The global adoption of ecommerce was accelerated by COVID-19 Pandemic that forced customers to adopt online shopping to maintain social distancing.

In 2021, the global retail e-commerce sales amounted to approximately 5.2 trillion U.S. dollars and is projected to grow by 56 percent over the next few years, reaching about 8.1 trillion dollars by 2026 according to Statista.

According to EcommerceDB report, Kenya is the 55th largest eCommerce market generating revenue of US$ 3.4B in 2021 ahead of Qatar.

This positive performance has motivated entrepreneurs to set up venture capital backed ecommerce supply chain startups. Retail stores have also incorporated online stores in their business structure with the e-retail sales estimated to contribute 24% of the total retail sales by 2026.

In Kenya, most of the ecommerce start ups are struggling to stay afloat like Kune that shut down after one-year operation, Sky garden that was facing closure after failing to close a round of financing and Sendy, a fulfillment and logistics business that announced 20% downsizing. A recent research by startup Genome shows that 9 out of 10 startups fail, 7.5 out of 10 venture backed startups fail and 1 in 12 entrepreneurs succeed.

With roughly less than 75% of venture backed ecommerce startups failing, stakeholders must interrogate ecommerce business models, operations and projections to identify leaks that lead to failure. I have identified some of the dominant failure magnets that trap ecommerce startups.

Business Case.

It is important to research on the market and identify the consumer pain points before launching a business. A lot of research goes into identifying the problems that need to be solved and the right product features. Development of a minimal viable product (MVP) at the initial stages will help better test some of the hypothesis before making huge investments.

A business that has created MVP has a better chance to grow 20 times faster than one that hasn’t. It is important to build a business case and generate business and functional plans that will guide the team. Rolling with the punches and build-as-we-learn approach sounds great but unsustainable in the long run.

A detailed business case gives a realistic visibility of the entire business and helps develop sustainable strategies and processes.

Ecommerce Adoption Readiness

The adoption of ecommerce is to a large extend affected by different dimensions of readiness including organization, industrial and national. Organization readiness to adopt ecommerce is determine by its culture towards digital transformation and resource allocation to grow ecommerce investment and ability to upskill an reskill talent resource to become competitive.

The existence of industry related ecommerce bodies drive development of global standards, practices and ethics that guide organizations towards maintaining global best practices. Such bodies don’t exist or are not as vibrant as they should be to generate positive impact in the eCommerce industry

Fast adoption of ecommerce is also affected by national infrastructure including connectivity, policy and legal frameworks driven by the state to create an enabling environment for local and foreign investors. Governments in Africa are in the initial stages of creating a favorable business environment for Ecommerce.

The shopping cultural behavior and especially the fact that Shoppers in the Sub-Saharan Africa are yet to trust online businesses with huge transactions has slowed down the adoption of ecommerce.

Fulfillment and Logistics

Ecommerce has multi-layered logistics that require visibility of the entire supply chain in order to navigate the logistics and delivery process. It is very expensive to set up a seamless fulfillment experience that will enable tracking of inventory, customer order tracking and timely last mile delivery. An efficient fulfillment experience will attract “added cost and rates” that has to be paid by the customer making the total order value more expensive. Practicing a cost transparency policy makes it very hard to optimize conversions since pricing is a key consideration in conversion rate optimization. The multiple fulfillment touchpoints including warehousing, hauling and repacking, fulfillment centers and last mile delivery logistics is an investment that can be covered by either high value goods or large volume sales. Building a model that allows the business to generate revenue from the different ecommerce value chain touchpoints or introducing complementing services can lead to financial health of an ecommerce start up. Last mile delivery in Africa remains a challenge since most households and roads are not numbered making it difficult to map out a delivery route.

“Imported” Venture Capital business Models

While it is important to appreciate the investment, role played by venture capitalists, it is also necessary to interrogate the different templates they present from other markets where the business model has worked. Markets have different structures, consumers shopping habits and adoption diffusion curve. Most of the business templates should be localized and customized for the local market to enhance connection with the target audience.

Most investors are obsessed with success and will focus on aggressive user acquisition and growth which in most cases is a blindfold to other valuable business processes. The scaling models make Startups overspend in different phases of the business leading to unrealistic view of associated costs that become unbearable in the long run.

Phygital Shopping Experience

Retailers all over the world are adopting a phygital shopping experience that combines online shopping elements with brick–and-mortar. Businesses that adopt omnichannel strategy are able to collect more data by interacting with multiple online customer touchpoints and in-store interactions.

The changing consumer shopping patterns call for customer centric leadership that understands the shopper journey maps at granular level and identifies phygital touchpoints to creates hyper-personalized customer experience.

Ecommerce Start ups should be ready to serve customers at their convenience by integrating online retail stores with brick-and-mortar stores.

E-retail Platform Agility

Different generations of consumers have exhibited varying technology preferences throughout their shopping journeys. There is a shifting from legacy web shopping platforms to instant messenger platforms and social commerce channels due to their accessibility and versatility. Integration of secure remote commerce/click to pay can lead to higher conversation rates.

Ecommerce start ups should study consumer technology preference and stay agile enough to rollout new platform features in order to stay connected with different customer segments and offer optimized customer experience through their convenient platform features.

Focus on right success measures through unit economics

There are numerous ecommerce metrics that can be tracked, analyzed and interpreted to generate valuable business insights. The process of tracking ecommerce metrics can be overwhelming due to the magnitude of data and glamorous vanity metrics involved. There are several priority measures that can gauge and track the success of ecommerce business.

Keep your eyes on Total Merchandise Volume, Average Order Value, Customer Purchase Frequency, Customer Acquisition Cost, Customer Lifetime Value, Fulfillment Cost Per Order, Conversion rate etc.

Make sure to maintain the Life Time Value (LVT) ratio to Customer Acquisition Cost (CAC) between 3 and 5. Less than three means your CAC is high and your business may not be sustainable in the near future while above 5 indicates a need to increase user acquisition efforts.