Although the growth and challenges of Business-to-Consumer (B2C) tend to generate the most headlines, the Business-to-Business (B2B) marketplace in Kenya, and by extension East Africa, is also experiencing significant growth. While most of this growth has become obvious, and necessary, as businesses adapt to pandemic needs, it has been gradually happening for years.
At the heart of it is the many ways in which ‘simple’ technologies like the mobile phone have changed the way we do business with one another. Doing business with other enterprises was a mostly physical, tasking project just two decades ago.
For example, if you ran a retail store, your relationships with wholesalers would be built mainly on physical visits by either the owner or a trusted messenger. If you didn’t have your own car to transport the goods, you hired someone else and either sat with your inventory all the way back or trusted them to deliver it in full and without damage.
Some businesses, a good example being beverages, had this stage somewhat figured out, but once the inventory got into your shop or bar, then it would need a few more people not only to move the inventory into storage/display but also to monitor how fast it was going so you would know when exactly to repeat the cycle again.
Then there was the issue of money, the underlying currency of all these transactions. Do you carry all that cash to pay the wholesaler, the transport teams, and incidentals on you? Or do you split it, carrying cash for some while using other means to pay others, such as a cheque hand-delivered to the wholesaler?
For the wholesaler, of course, similar problems existed. Among the biggest here was not just how your B2B customers paid, but when. This is one of the reasons why some wholesalers would also sell retail in the markets, to supplement the cash flow problems that come up when your clientele can only pay in say, 60 to 90 days after you’ve delivered their orders.
All this is, of course, strenuous to everyone involved. Not to mention time-consuming.
A few things have changed since that have made such B2B interactions easier, and are contributing to rapid growth today. The most obvious one is MPesa and other cashless payment options which reduce the need to carry hard cash. Many of these options, such as Paybill-to-Bank deposits, make it easier to track your money while reducing the transaction and other costs that would spring up if you had to pile all that money in your mobile money account.
There are also multiple trade financing options now, so purchasing businesses do not necessarily need to hold payment for stock received for 60 to 90 days. A small but illuminating example is the story, told years ago by a prominent journalist on Facebook, of data from a short-term loan facility offered by Kenya’s leading telco that showed that a large tranche of loans (a third of total loans at the time) would be borrowed between 3am and 5am, used to settle debts with the wholesaler and the mkokoteni guy, and then repaid by the end of the day. This example is illustrative of the realities of many small businesses, which face critical trade financing challenges on an almost daily basis.
Customers also now know that they can demand traceable on-demand logistics from service providers. This particular solution has eased the uncertainties B2B commerce faced with informal logistics solutions, which wouldn’t allow for enough time to prepare for the many things that could go wrong. Logistics networks are also making sure that such things do not affect delivery times, and retailers can rest easy knowing that their deliveries are on the way, and they can not only track them, but also know the when, where, and who is supposed to deliver them.
There are other things that are spurring this growth. A good example is the evolution of workplace communications from just in-person and phone calls. You can now communicate to just about any business on Whatsapp and other social messaging apps, as well as slightly more formal channels such as e-mail. This possibility has reduced the time it takes to find what you need in the marketplace, at the right price.
This has been further driven by the fact that more and more inventory is coming online, and the digital marketplace now looks like a physical market, driven by both high demand and high supply.
In B2B commerce, nearly every usable online space is playing a role in online inventory; if you are shopping for your business online, you could find what you need to be listed anywhere from Facebook, Instagram, Google Docs, Whatsapp, Ms Excel, and many other online platforms.
These platforms have not only solved the basic issue of finding what you need for your inventory fast and readily, but it is also encouraging cross-border trade between and among small businesses. Combined with a litany of ready delivery options, from long-distance buses, logistics companies, and even your neighbourhood bodaboda, running a business is easier now, at least as far as inventory is concerned.
Other innovations, such as digital signatures and digital tax receipts, have also even further reduced the need for physical paperwork. Like cash, physical paperwork complicates B2B commerce because it must be hand-delivered, and it can be lost. Digital signatures are now legal in Kenya, which will significantly enhance B2B trade by reducing the need for physical interactions. What’s more, small businesses also get to save a lot from not having to incur the costs associated with such interactions, hopefully leading to better margins.
There is, of course, still a long way to go. B2B commerce is a complex system that needs to continually evolve and solve many existing and emerging challenges, but the progress so far is impressive. One likely complication to regional growth might be the difference in tax and regulatory regimes, as well as contextual and cultural realities. The goal, however, is still the same, or at least it should be; to make it as easy as possible for businesses to work with each other.
The writer, Mesh Alloys, is the founder and CEO of Sendy.
