WHY WE INVESTED
Most small informal retailers in Africa rely on a highly personal yet extremely inefficient restocking system: when they run out of goods, they close up shop and go to buy the goods they need with the cash they have on hand.
Kenya-based Sokowatch — in which Quona led a Series A investment in February 2020 — is on a mission to revamp the continent’s informal retail supply chain, bringing the power of e-commerce to mom and pop shops across Africa. In the beginning, Sokowatch wanted to reinvent African retail by making it possible for small merchants to utilize an app to place orders and have goods delivered free to their shops, saving them time and lost sales.
But along the way, the company discovered that merchants using their app were more likely to make larger and more frequent transactions in an effort to increase their own inventory efficiencies, and merchants needed access to working capital. Sokowatch expanded its offerings to include access to credit for inventory purchases, aligned with embedded business intelligence that can show shop owners how products are moving.
In fact, the success of the working capital product led Sokowatch to launch loans to purchase smartphones — which allowed merchants to tap business intelligence (like information on projected stock shortages, based on inventory analysis) and other value-add services Sokowatch offered through its mobile app, which are not available on simple feature phones.
These new credit offerings have buoyed Sokowatch’s success as the company expands across Africa. “They’ve identified the way financial services enhance their core logistics business,” says Quona co-founding partner Monica Brand Engel, who oversees the firm’s cross-border investments. “It’s very clear that on-demand inventory, restocking and credit lines are mutually reinforcing.” Today Sokowatch has operations in Kenya, Tanzania, Rwanda, and Uganda.
The market opportunity is huge. Fast-moving consumer goods (FMCG) represent a $180 billion industry across all of Africa, and for large swaths of the continent, it’s the only local source of goods like rice, paper, and other daily essentials. It is estimated that some 60–80% of FMCG are sold through informal retailers.
Quona sees its investment in Sokowatch as core to its commitment to bringing more people into the financial system and providing economic opportunities to the underserved. Providing inventory management tools and intelligence — along with access to credit — enables small retailers to grow, while providing sustainable livelihoods to their operators. For most of Sokowatch’s users, the platform is their first step toward recording and digitizing their inventory purchases and sales.
More on Sokowatch in Next Billion.