Closing shop: Local marketplaces facing headwinds


Local marketplaces facing headwinds. PHOTO | POOL

The middleman gets a bad rap as part of the value chain most innovators aim to disrupt. Disintermediation based solely on the use of technology can be flawed, as it does not account for several things that traditional players infuse into relationships outside transactions.

Over the past few months, we have seen reports of several marketplaces rationalising staff, shutting down entire business units, or closing shop altogether.

They had solid investments from Seed to Series A, and some even got to Series B. The feedback from the market has been what I term as curiously disappointing.

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Outside any analysis based on first-hand information shared directly by the C-suite or insiders, we are left to speculate on each predicament.

However, some fundamentals, or lack thereof, can be looked at through global trends tempered for local nuances and understanding.

First, we blindly adopt business models we have seen used in other markets. A point of comfort for many foreign investors who have an eye on Africa’s next frontier potential, I am not surprised that founders are aligning to improve their chances at closing on capital. 

I have an experience where a business model presented was unpalatable. The feedback was not surprising. Why don’t you do X as Y does? Even where Y was burning through capital at an unsustainable rate.

While I get it may be necessary to subsidise one side of a marketplace, the call must be strategic. Where the marketplace produces nothing in and of itself outside the mediation, one must keep an eye on the cost of customer acquisition.

Not all growth is welcome or warranted. 

The second is that we fail to appreciate what we are trying to disrupt and become intermediaries in ourselves, only this time seated in the proverbial cloud facilitating.

We lack visibility into what may cause stickiness, even where trust is an issue for all. For marketplaces, there is always the risk of trades happening off-platform.

For buyer and seller, quality guarantees and revenue assurance remain the main concerns, even as both frown on the controlling role and commissions of the marketplace.

Technology platforms may find it hard to mimic or recreate environments where relationships are more personalised.

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We must uncover core market pain points and uniquely fashion interventions that will solve them at scale, unafraid of going down uncharted paths with our strategies. 

Njihia is the head of business at Safiri Express.