Across Africa, many companies are trying to make previously analogue industries more efficient through digitisation. One such company is Sokowatch, a digital marketplace connecting informal retail shops in East Africa with consumer goods manufacturers, such as Unilever and Procter & Gamble.

Take Mama Angela, for example, the owner of Tibbs Restaurant in Nairobi. It was not too long ago that her mornings consisted of finding transportation and spending two hours on the road to buy her produce from wholesalers at the market. The size of the purchases she made was limited to the cash she had on hand.

Now, Mama Angela can order her daily stock on the Sokowatch mobile app for quick and reliable delivery to her door via a three-wheeled tuk-tuk. During times of cash flow constraints, she can also buy goods on credit from Sokowatch. Leveraging historic purchasing data, Sokowatch evaluates retailers to provide access to credit and other financial services not usually available to informal businesses in East Africa.

Expansion along the value chain

While typical, Silicon Valley-style entrepreneurship advises narrow focus, increasingly, African startups are expanding vertically along their value chains. Sokowatch is an example of such a company that runs multiple businesses in one business.

Its mission, as explained by the CEO of Sokowatch Kenya, Angela Nzioki, is to become “the number one partner for local retail shops … by ensuring they are able to get essential goods and services at any time and free-of-charge same-day delivery”.

In order to get products to small retailers, Sokowatch built a smartphone app and inventory management system, a fleet of tuk-tuks to provide free delivery, and a geotagging and mapping system to better ensure service delivery (of especial importance in harder to reach areas of a city like Nairobi).

However, along Sokowatch’s journey, it became apparent that its customers could not survive, nor thrive, without access to more than just FMCG products. A growth opportunity for Sokowatch was to also provide financial services to shopkeepers.

“A lot of the value-added services, including the financial services, come out from being able to experience the lives of the retail shops,” says Nzioki. “A lot of businesses come to us and say, ‘I'm unable to replenish my stock because the cash that I had at hand, I had to use it to pay school fees for my children’.”

Embedded finance

Embedded finance refers to companies in non-financial sectors extending financial products and services to their customers. Sokowatch’s core offering falls in the consumer goods sector, yet the transaction data of shopkeepers it has access to, allows it to provide credit to its customers, which in turn contributes to the growth of their businesses. Models such as these, where lenders have a degree of visibility of a company’s cash flows, greatly reduces the risk of default.

Throughout the continent, a wide variety of tech-enabled startups have moved into the embedded finance space, in sectors including ride-hailing, agritech and healthtech.

Earlier this year, Sokowatch announced a $14 million series A investment round, led by Quona Capital, an emerging market fintech investor funding startups with financial inclusion objectives. Another example is Nigerian ‘Uber for trucks’ platform Kobo360, which last year raised $20 million in funding, led by Goldman Sachs. While its core product is freight logistics software, Kobo360 has since expanded to offer its drivers financial services products, including working capital finance and insurance.

From manufacturing to consumer insights and beyond

In addition to logistics, embedded finance, and geographic expansion, the fragmented nature of consumer goods markets in East Africa has given Sokowatch additional opportunities to expand its business beyond simply connecting shopkeepers with FMCG manufacturers.

Currently, to service the Rwandan market, Sokowatch has to organise cross-border logistics to bring specific goods from Kenya.

“Rwanda is traditionally very challenged when it comes to getting access to some essentials products,” says Nzioki. “If I was to pick soap, as an example, if Sokowatch doesn't have soap, then a lot of people in the country don't have access to soap. It's actually that bad that it's forcing us to think of how we can start manufacturing soap in countries like Rwanda.”

Besides expansion into manufacturing on the demand side of its marketplace, Sokowatch also found an opportunity to better service FMCG manufacturers with consumer insights.

“The missing piece from the supplier perspective is that they didn't have visibility as to how their products are doing in the market because of the broken down distribution,” says Nzioki. “So we've bridged that gap in that we get access to goods directly from the manufacturers and supply them to the retail shops, and we aggregate all of this data and give it back to all our suppliers.”

This, and other expansion initiatives and opportunities are all part of Sokowatch’s goal to leverage technology and data to become the number one partner for local retail shops across Africa.

Further reading

Sokowatch – reinventing East Africa’s…