Social commerce and the rise of African DTC brands
A look at social commerce and the African brands running on the DTC(direct-to-customer) business model.
In my last post, I spoke about how Nigerian payment companies are ensuring their long-term survival, by becoming key players in the eCommerce space. They’ve gone from just offering online & offline payment functionality to businesses and people, to building eCommerce services on top of their core payment feature.
In a world where the biggest e-commerce companies in Africa continue to struggle for any type of market domination. Where Small & medium enterprises (MSMEs) & merchants are finding success selling on social media platforms.
Payment companies have reached the understanding that to survive their very competitive environment, they must establish a competitive advantage in the eyes of both consumers and merchants.
eCommerce is any type of business transaction that is conducted via an online medium. However, for most people, when they think about eCommerce, their minds only focus on the buying and selling of products happening on websites. They tend to forget the buying & selling that occurs on social media sites.
eCommerce businesses tend to fall into four major business model buckets. They are:
B2C – Business to consumer.
C2B – Consumer to business.
C2C – Consumer to consumer.
C2B – Consumer to business.
However, B2C is the most common eCommerce business model and it has many unique approaches under its umbrella.
The current interesting B2C approach is DTC(direct-to-consumer) model. Where companies build a business by selling directly to the customer.
Running a DTC model allows customers to click and buy products on their websites, and also helps build stronger one-to-one relationships with customers by leveraging the direct channels that social media sites provide.
This allows DTC companies to make the online shopping experience more informative and enjoyable for customers.
Every day more and more consumer spending is moving away from traditional physical retailers to online brands.
We’re seeing the way we shop evolve before our eyes. People can now share content, send messages & pay for products from a single app.
shopping in a store vs shopping online
Shopping in the brick and mortar world is very much a social activity — alright maybe not for everyone. On the whole, if you shop from a physical retail store, you take part in an activity that is as social as you want it to be.
Shopping online can sometimes be very much a solitary experience; especially when you do it more out of convenience than out of pleasure.
DTC brands use social media apps to bring back the physical store experience to the online shopping world.
In the business world, the customer is king, and kings often have advisors. When you shop from a physical store you can ask for advice from the sales staff, the friends you are shopping with, and even other customers. But what about when you are shopping online via a website?
There are no sales staff to ask advice from, no friends or other customers to shop with.
Social Commerce: A DTC Enabler
If you’ve ever come across a product while scrolling through your Instagram feed or your Twitter timeline, and purchased it without ever leaving that social media app, you have participated in social commerce.
This is isn’t the same thing as seeing an ad on Facebook or Instagram and then being taken to another landing page or website to make a purchase. With social commerce, you never have to leave Facebook or Instagram to complete your purchase.
Social commerce allows businesses to quickly interact and respond to customers, not just sell to them.
Because people trust other people more than brands. Customers can easily make a buying decision based on the recommendations, comments and reviews of other customers on a business social media page. This, in turn, provides more social proof for the business.
Social commerce isn’t just about making sales. It is about creating a personal connection between businesses and their customers.
As people are starting to understand their importance as customers. They expect brands to speak to them directly.
Brands, in turn, are leveraging these powerful social media tools and integrating them with e-commerce to directly connect them to customers.
The Actual Case For DTC
The Direct-to-consumer (DTC) or Direct-to-Customer (D2C) model became popular when it was used to refer to the earlier people and businesses, who sold products & services to consumers through the internet.
Traditionally, businesses employed the B2C(business-to-customer) model by focusing on retail trade. Here, manufacturers and merchants sold physical products to customers indirectly. They used physical retail stores while directly using online stores; retailers sourced products from manufacturers and other retailers before selling to the consumer. E.g Amazon and Walmart.
Unlike B2C companies, DTC brands only focus on selling their products directly to consumers via online stores and social commerce. Thus, DTCs bypass third-parties in the sales process. No retailers. No wholesalers. No middlemen.
The DTC model gives companies direct access to the customer. It gives them more control of the customer experience as they are at the very beginning of the sales cycle all through to the end of the cycle.
DTC companies also tend to focus on a single product category. They sometimes even evolve into owning physical retail stores.
The first DTC brands - the Caspers, the Warby Parkers and the Harrys - initially took off in America. Now you can find the DTC sales model springing up across different corners of the globe.
DTC in Africa
As more Africans go online, engaging bits & bytes on their social media feeds. They’re creating fertile environments for eCommerce endeavours to thrive. The game is not just about creating and consuming content anymore. Some heavy buying and selling is going on too.
The DTC model is just starting to take off in Africa with more brands going down this route on the continent.
Natural Girl Wigs is a hair company in Nigeria focused on black women around the globe. The company started as an Instagram page with $1000 in capital and then went on to rake in $250k in its first year.
Taeillo, a Nigerian furniture and lifestyle brand leverages immersive tech like Augmented Reality, Virtual Reality and Mixed Reality, allowing customers to visualize & customize furniture products in their personal spaces before getting them to their doorsteps.
Smileysocks (an in-house favourite) sells comfortable and colourful socks. The brand also allows clients to customize their socks with their name, initials or an image.
In South Africa, Cellardirect, allows customers to buy wine online directly from wineries to their doorsteps. The prices of the wines sold by the brand are the same with standard winery prices proving the DTC model isn't just appropriate for fashion and beauty products.
Curlfit is another DTC hair brand from Nigeria. Specialising in temporary hair dye colours, Curlfit also caters to global demand as well. The company operates in an interesting product niche. One that it will be looking to own in the foreseeable future.
Then there is Drowzy, the Cairo-based DTC furniture and home accessories company that has about 100 products on its eCommerce platform. It has grown traction by offering faster delivery times than its competitors, who can take up to 2 months to deliver. Drowzy delivers with 6 to 10 days and in July 2020, raised a six-figure USD investment from a UAE-based angel investor.
Here They Come: More DTC to Follow in Africa?
Some of the largest brands in the world, like Google, Nike, Samsung and even Toyota, are going the DTC way — or doubling down on it, like in Nike’s case.
Other than e-commerce, social media is a major force behind the DTC model. It offers companies the ability to connect directly with consumers, whenever and wherever they are shopping.
It's easy to see the rise of the DTC model in Africa as a case of startups on the continent imitating business models that have worked elsewhere. However it goes beyond imitation, they’re emulating these successful business models.
As Africa continues to display an appetite for digital services, and the world of retail changes at break-neck pace, new companies & brands are placing their increased focus squarely on DTC sales. They are looking for ways to bypass major resellers for distribution.
Perhaps the biggest DTC enabler is the social commerce option available to brands right now. Both Facebook and Instagram are offering e-commerce options to businesses and turning them into powerful engagement, commerce and customer service tools.
Naturally, as more Africans engage in social shopping. The African brands of today and tomorrow will look to build their own stores and create cross-channel experiences to reach more customers. These experiences will contain unique content that will help establish brand awareness, build engagement and loyalty with their customers.
While it might seem like DTC is a novel and innovative model, that’ll be a take being a bit too creative with the truth. What sets the model apart is the process it requires. Having a “modern” logo and publishing Instagram ads isn't a novel experience.
Whether your strategy includes owning a brick and mortar store, developing a retail network, or listing your products on e-commerce marketplaces to complement your DTC strategy, what will give an African DTC brand a competitive advantage is the meaningful connections it makes with its customers and the simple fundamentals to enable them to continue to acquire customers at a value that’s right.
While the endgame is to have successful African DTC brands. Right now we are happy to see innovative DTC use cases in Africa.
Things we’ve kept a tab on
It was very interesting reading Alex Danco’s multi-part series on Status and the Gift culture economy, and how the gift culture economy adapts to environments of abundance like Twitter and the Open software community. How it differs from our society’s usual exchange economy which adapts to scarcity. Here’s my short summary:
“Status like money is about scarcity. It is a representation of what you have. And unlike money, it is also the representation of what you’re owed. Status is also about abundance.
Our society is predominantly an exchange economy. Allocation of scarce goods is done in a decentralized way through trade and voluntary cooperation. In an exchange economy, social status is primarily determined by having control of things (not necessarily material things) to use or trade.
On the other hand, the culture of Twitter and open source software community operate an entirely different economy. The gift culture economy. Unlike the exchange economy that deals with scarcity, the gift culture economy deals with abundance. In gift cultures, social status is determined not by what you control but by what you give away. in a gift culture like the free software community – or on Twitter – the way you earn status is by putting in real effort and then giving away the fruits of that effort. This abundance creates a situation in which the only available measure of competitive success is reputation among one’s peers.”
In August we were blessed with an array of Afrobeat albums, but one these albums particularly flew below the radar. If you’re an Afrobeat fan you should check out the ROOTs album by the Cavemen. That’s if you haven’t.
In Africa, we too often discuss "tech ecosystems" rather than "entrepreneurial ecosystems" which are much more important. Entrepreneurial ecosystems give rise organically to all the other types of sub ecosystems.
Find out what makes an entrepreneurial ecosystem by reading all about it here.