Masoko – Is Safaricom really ready to hit the e-market?

It currently controls over 70 per cent of the country’s mobile telephony market. Its subscribers also account for almost 75 per cent of the mobile internet users in the country. And last but not least, its mobile payments platform M-Pesa handled almost 70 per cent of m-commerce transactions in the first quarter of the year. That company is Safaricom.

Now, because of its dominance in the above three areas – subscriber numbers, mobile internet users and volume of m-commerce transactions – Safaricom has set its sights on the e-commerce market. All in the hope that the telco can revolutionize (or ‘disrupt’) the market with its product called Masoko, Swahili for ‘markets’.

(TOP: Juliet Karinga explains how online shopping app Masoko works to Safaricom staff during the internal launch of the app in late July. Photo: Flickr).

In early August, Bloomberg reported that Safaricom plans to introduce Masoko in the next 8 months and target both formal retail and informal online traders. The portal, which will offer electronics, beverages and cosmetics among other range of products, is still being taken through period of in-house testing with the telco’s staff as clients before it can be opened to the public.

“This offering will not be holding inventory and neither will it be an anyone-can-sell arena,” Safaricom CEO Bob Collymore is quoted as saying, while Rita Okuthe, the telco’s Director of Enterprise Business stated that “Safaricom is carefully screening all the merchants before giving them access to the platform.”

This is all good. However, unlike the mobile telephony and mobile money transfer arena where Safaricom was more or less the first provider when it launched its services, the online retail or e-commerce market already has established players.

Among the most dominant of these are Jumia, Kilimall, OLX and PigiaMe. This means that Safaricom, with its Masoko platform, will have to prove and differentiate itself in an already crowded scene teeming with names of other service providers.

Even though it may seek to stay as customer-focused as much as it can while holding no inventory – as indicated by Collymore in the quote above – Safaricom has to be aware that much of Masoko’s success will depend on how well it works and interacts with merchants who supply the goods being sold via the platform.

This is because most merchants sell their goods on multiple online platforms and will thus only keep supplying a particular e-commerce marketplace when they’re getting value. In other words, they’ll stay loyal only when they feel the relationship with a particular online platform is beneficial to their needs in terms of sales revenues and margins (or profits).

Even though it is still undergoing a pilot, with just Safaricom’s own staff as clients, Masoko is already engaging various merchants to join the platform as suppliers. And the feedback from the suppliers is not very positive or encouraging; with murmurs being that the telco is very rigid and not keen to listen to their concerns.

A merchant who supplies goods to both Jumia and Masoko recently spoke to us in an attempt to make a comparison between the two platforms and highlight the concerns he – together with others – have when it comes to dealing with Safaricom.

The trader, who sells household electronics on the two platforms, said that selling on Masoko means that one gets over few hurdles. “First is that the business has to be legally registered, have a KRA PIN, then all the items being sold on the platform also need to have to be KEBS-certified which becomes a bit tricky and cumbersome for small traders,” said the supplier, let’s call him James, as we can’t disclose his real identity because of the sensitivity of the issue.

Jumia, on the hand, has an almost automated system of signing up, meaning that if you’ve all your material ready and in soft copy, you can be live on the platform in about 24 hours.

For Jumia, a supplier submits an application, receives an email notification, after which someone from Jumia follows up with a phone call to verify their details. The supplier’s account is then set up, then they are booked for raining on how to sell online and also sent tutorials which they can study on their own in case one was not available for face-to-face training session.

“The training covers various areas such as how to load products, how to process orders and how to do pricing etc. After the training, you’re then free to load items on to the platform and begin getting orders. Then you also have to choose your mode of payment – whether by cheque, wire transfer or mobile money – and the frequency of payment – either weekly or monthly,” said James.

In terms of accountability and transparency when it comes to dealing with Masoko, the suppliers have issues with Wells Fargo, Safaricom’s logistics partner, because the information they send to merchants once a consignment of goods has been delivered to Masoko centres and sold is not detailed – has no breakdown of the item(s), value, model or price. According to James, this is because the Wells Fargo system is not configured for online retail.

Still on Masoko, the Service Level Agreements (SLAs) entered into with merchants do not explicitly spell out timelines, something that has so far been discouraging to the merchants who supply the items for sale. Because it’s still under trial with Safaricom staff as clients, Masoko has experienced a high rate of items being returned, a disadvantage to the supplier because the same product or item would have been sold offline by the supplier if it had not been ordered.

In terms of SLAs, James said that Jumia is very strict and “promises you that in 21 days, from the day your items are delivered to its hub, two things will have happened”. A supplier is either paid for the items that have been sold (or compensated for those lost or damaged during the delivery phase) or given back the products that are not sold during the 3 weeks period.

Then there’s the important bit of commissions and margins; that is the amount each partner gets to keep after every sale. Here, Jumia has set up different rates – ranging from 5 to 9 per cent – depending on the products category (that is Phones, Electronics, Laptops, Home or Appliances etc).

Suppliers on the Masoko platform however have to contend with higher costs. First, one has to get a Till Number to enable their clients forward them payments via the ‘Lipa na M-MPesa’ feature which attracts a 1 per cent charge per transaction. Added to this is that Safaricom levies a 10 per cent commission on each sale done on the Masoko platform.

“This really eats into our margins as the 10% commission rate applies across all categories. The only group allowed to negotiate the commission rate with Safaricom is the big suppliers who stock and sale a lot of products on the platform but for the small time traders, this is not possible as a Safaricom is very inflexible,” stated James, adding: “So far, I wouldn’t know whether I’m making a profit or losses as the platform and the payments process is very opaque.”

This is not all as transferring the cash from the Till Number to the supplier’s account also incurs a cost, leading to so many overheads along the chain.

The other advantage for being on Jumia, noted James, is that unlike Masoko, Jumia conducts trainings under its Jumia University unit every Tuesday for suppliers. During the sessions, merchants are taught various areas of online retail, thereby ensuring that they are fully empowered.  Jumia also has a whole Vendor Support unit which directly addresses merchant issues through a dedicated communication line as well as Live Chat feature on the portal for real-time interaction.

Jumia also engages its vendors through Focus Groups as well as informal events like Vendor Cocktails. Through this, vendors are advised on what items to stock on the platform and which prices are most attractive.

“The Jumia system keeps evolving. The company conducts weekly surveys to gauge vendors’ (dis)satisfaction with the platform… Previously, the platform was mostly focused on the customer but now, they are working with both customers and suppliers to ensure that all groups are happy and that none feels neglected,” he said.

Of course these are just but some of the challenges vendors have so far noticed with Safaricom’s Masoko platform.

And we’re sure merchants will all be happy and keen to continue working with Safaricom to mutually benefit from its new e-commerce platform if it addresses the concerns and issues highlighted above.

That’s if at all the telco is keen on becoming a serious player in the e-commerce industry which recorded over 290 million transactions through mobile phones according to the latest sector statistics compiled by the Communications Authority of Kenya (CA).

If not, Masoko may soon find itself being forgotten and lumped together with Safaricom’s other unsuccessful ventures and projects like Big Box.

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