One of the most popular activities on the internet is shopping. The reason for that is the ease of shopping 24/7 from virtually any location that has access to the internet. Shopping is now linked to the vast world of e-commerce, that includes bank transactions, online bids, electronic data interchange, funds transfer, and other services. E-commerce came to life in 1991 when the internet opened to commercial use and has seen explosive growth over the past decades. It has many advantages as compared to conventional brick-and-mortar stores.
Consumers can search the products and service in a large database, research on the prices and specifications, and manage their wish/shopping lists according to their needs.
Vendors are also adding value to their business by advertising their products online, tracking the customers behavior and trends and developing laser-targeted marketing campaigns for them, ensuring constant revenue growth.
The worlds two largest economiesthe United States and Chinadominate global online retailing. Together, these two powerhouses accounted for more than half of the worldwide eCommerce sales of physical goods in 2017, which is the last full year for which data has been reported.
However, there one developing region is yet to be understood and exploited to its full potential due to logistical reasons. The African continent is accountable for the second-largest internet connectivity network with over 400 million users and the reports show constant growth. This showcases the opportunity online retailers have, and the urgency of establishing their presence before the competition.
The history of e-commerce is unthinkable without Amazon.
com Inc. The company was founded in 1994 by Jeff Bezos (currently ranked the richest man in the world) and was originally conceived as an online bookstore. It later expanded its offerings by adding a variety of goods such as electronics, clothing, health products, and others. The name Amazon was inspired by the worlds largest river, as it matched its founders aspiration to become the worlds biggest website. Currently, Amazon is the largest online shopping platform in the world where you can find anything from the bestselling books to unicorn pajamas. It accounts for one-third of all the online purchases made in the largest economy of the world, the United States of America. The company evolved from being solely an online market platform to a technology company, focusing on e-commerce, cloud computing, digital streaming, and artificial intelligence, rivaling prestigious companies such as Google, Apple, and Facebook.
This paints an interesting picture going forward with Amazon growing into businesses we cannot even fathom. One thing is certain, Amazon will impact and disrupt almost every industry constantly challenging and improving its business model.
The business model is the main driver of Amazons value, which decides whether the company would turn into a failure or a success. Safe to say, it has been a success. Let us dive into the analytical part of the paper and have a look at Amazon’s current business model, presented in the below canvas.
Amazon operates with many moving components under a company model. Amazon offers products in a simple, intuitive and straightforward manner. Through Amazon Business Model’s online storefront, a range of products is provided to buyers with a tiny markup and the inventory is retained within the comprehensive warehouse scheme.
The products made available on the site are easily dispatched, accessible to buy and most of the time at competitive prices.
Third-party retailers are given the chance to sell their products and services on the platform without charging the advertising on the website, but by retaining a certain percentage of the purchase value. Amazons partner retailers are often less regular products or higher priced goods, enabling Amazon to refrain from holding high inventories of moving stock that could hurt earnings.
Amazon Prime is one of the latest developments of the company, for which the customers pay an annual subscription. In return, they benefit from second- or same-day deliveries and have access to the digital streaming service.
The business model generates additional revenue from the eBook and Kindle services, which grants the customers the opportunity to read or own digital book copies.
Logistical partnerships are more expensive and less reliable in the emerging markets such as the African Countries, that present potential for huge social and economic growth. Amazon has as yet not been able to address and grow in the market successfully, allowing start-up unicorn companies like Jumia Technologies (also known as the Amazon of Africa) to successfully copy its easy-to-replicate business model and establish a customer network.
Understanding the African e-commerce market
Africa has one of the most digitally connected populations on the planet with 400 million internet users. (McKinsey.com, 2019) The United Nations Conference on Trade and Development (UNCTAD)’s recent e-commerce ranking lists 151 countries worldwide, including 44 African countries, by assessing their willingness to shop online
Thanks to its large banked population, Mauritius ranked first among the African nations, accounting for 90 percent financial inclusion. Nigeria was the second-highest ranked nation while South Africa ranked third. However, by sheer volume, Kenya, Nigeria, and South Africa accounted for nearly half of the estimated 21 million internet shoppers from Africa in 2017. (Kazeem, 2018)
Fig.2 Proportion of online shoppers among the population aged 15 and older
Fig.3 Business to Consumer (B2C) E-Commerce Index for African Countries
However, Africa’s e-commerce markets are facing the so-called “last mile” challenge. This relates to moving products from a local delivery center to their final destination, thereby harming consumer confidence obtained by e-retailers. The poor infrastructure and lack of proper mailing address is the main cause of this challenge. For example, a common delivery address being second house with a blue door instead of a street name and house number.
We can get a better understanding of the growth potential by comparing the purchases made by the European Union internet users at 68%, while only 13% of African internet users in 2017. Increasing the number to 50% would translate into 77 million additional purchases. A driving force behind the optimistic forecasted target, being the. growth in internet connection in Africa from 2.1% in 2005 to 24% in 2018.
This leaves enough room and time for Amazon to move into the region and take control of the e-commerce market. Its presence would not only impact the casual shoppers, but will also bring value to the educational industry, by providing electronic bookstore, kindle, and also to the healthcare system, once Jeff Bezoss healthcare initiative comes to life. Earlier this year, Amazon acquired the online drugstore PillPack for nearly 1 Billion USD. The pharmaceutical platform along with the AI-based assistant Alexa and the Medicaid healthcare will most probably disrupt the healthcare system in all the developing and developed countries.
Three Hypotheses have been assessed in the section below to address the Blindspot.
? Hypothesis 1 E-Kiosks
Amazon launches an E-kiosk in strategic regions of the top three African countries for online shopping. This will address the “last mile” issue, as the customers will have to collect their products in peak condition from the E-Kiosks, without having to wait days for the delivery. The E-kiosk will also offer customers without internet connection the possibility of viewing the online catalogs and buying using Airtel Money or mPesa.
Once the product is delivered, the customer receives a notification via text message and can collect the product from the Kiosk by typing the encrypted reference code provided by Amazon.
Fig.4 Hypothesis 1 Business Model Canvas
The African customers have the same desires as the European, Asian and American ones. They want to have a larger product offering, affordable rates, and accessibility. Amazon will not deviate from its current business model too much, as it will still rely on the customer self-service and online commerce. The new business model will be a hybrid between the brick and mortar shops and e-commerce connecting the fulfillment centers with the consumers and vendors faster and safely.
? Hypothesis 2 – Drone Deliveries via Location Services.
As a direct approach to the last mile issue, drone delivery seems to be the fastest way to move a product from the fulfillment center to the doorsteps of the customer. A service made available to the Amazon Prime subscribers, it will subsequently increase the loyalty of the customers and safety of the products.
Fig.5 Hypothesis 2 Business Model Canvas
Besides the large initial investments required for such a fleet, the question of safety and air regulations remains, especially in residential areas, where some neighbors might not appreciate having boxes flying overhead. Another aspect may be corrupt governments advocating against such practices to enforce briberies.
? Hypothesis 3 – Bulk deliveries by Drones to the E-Kiosks.
Combining the two solutions designed above Amazon will see success and hopefully, explosive growth in the African countries. The new business model will remove the human stakeholders from the delivery process, enabling a fully automated system, of value stream mapping from the choice of the products online, to the sorting in the warehouse, air-delivery to the e-kiosk and collection by the customer. The drones in question will be larger than the usual ones used for single deliveries and will alleviate the risks of product damage or delays caused by traffic accidents or high jacking.
Fig.6 Hypothesis 3 Business Model Canvas
By digitalization and automation, redundant steps will be removed increasing the overall efficiency of the company, increasing the trust among the consumers.
The new business model will move forward based on the following steps:
1. Market research before penetrating the market, to understand which products are in demand.
2. Geolocation research will help Amazon select the best location for the warehouses and fulfillment centers.
3. Deeper research will be made in the urban and rural area, based on the concentrations of people, to strategically place the e-kiosks.
4. Marketing campaigns that educate the clients on the benefits and ways of using e-kiosks for the deliveries.
5. Design the E-kiosks to be self-operated and sustainable, to receive and dispatch the products without any human involvement from within.
6. Constantly follow-up on customer feedback in other to trigger the emotional benefits of online shopping.
The MVP will be the E-Kiosk. With or without the drones, the deliveries are being made which is increasing year on year in the African Market. Addressing the last mile challenge will position Amazon in an advantageous position compared to Jumia, who is currently contracting local distributors that are familiar with the areas.
The measure of success will be dictated by the market share they manage to secure as well as the number of Amazon Prime Subscribers.
In conclusion, Amazon has the resources and business model to dominate the African market and achieve not only financial growth but also bring value to society. Establishing their presence on the African continent will open other areas of opportunity, in vision with their core values of becoming the biggest company in the world.