Sherpa Ventures
Published in

Sherpa Ventures

Why We Invested: ZUMI -Empowering Africa’s apparel retailers 🌍

Take a closer look into ZUMI and their work with apparel retailers

Sector Background

Although they form the backbone of African economies, microretailers (small shops) across the continent struggle to operate and grow their businesses.

Chief among the challenges microretailers face include their poor access to wholesale markets. For apparel retailers in Kenya — a vital group that ZUMI’s platform is well-equipped to impact — the challenges are striking. Retailers wake up at the crack of dawn, arrive at a crowded wholesale market, compete for purchases with hundreds of other similar microretailers, make a purchase with little accessible information, and then carry a heavy bale of clothes back to their market shop. Doing that consistently, day in and day out, just to earn enough income to eke out a living and pay for household essentials is draining. Yet microretailers across the continent continue to follow this playbook, despite the logistical barriers poised to prevent their success. Starting with the apparel sector in Kenya, ZUMI is leveraging technology to break down those barriers and make life easier for resilient microretailers across Africa.

On any given day, Nairobi’s Gikomba market — Kenya’s largest clothing mecca — buzzes with activity. Roughly 10,000 shops and 65,000 apparel traders haul an estimated $1.1 million in retail sales each month in the market alone. Across Kenya, over 100,000 clothing retailers sell roughly $1.8 billion USD per year. Local retailers primarily sell used clothes from Tommy Hilfiger, H&M and other Western brands. Much of the local apparel trade is informal, with an estimated two million shopkeepers in both urban and rural areas earning some form of income from the sector either directly or indirectly. ZUMI internal data shows that approximately 95% of Kenya’s retailers are women, who haul clothes to low and middle-income consumers at prices between $0.56 to $9.30 USD depending on the quality and brand. The margins they earn on each sale, however, ends up being only a fraction of that amount.

Key Challenges

Figure 1: Kenya’s apparel sector (source: Kenyan Institute of Economic Affairs)

Despite the African clothing market being valued at $31 billion USD, the women retailers of Gikomba, Toi and the other apparel markets in Kenya, and elsewhere, face significant challenges.

African apparel markets are informal, offline and fragmented. Supply chains are also muddied with a multitude of actors: starting with the importer who purchases the apparel from brands, clothing is then sold in bales to a wholesaler — and then sometimes a broker or two — before being available for sale to retailers. Without transparent pricing and product information across the market, it’s easy for actors to overestimate their costs, which compounds to make the whole supply chain inefficient. By the time clothes are available for consumer purchase at a place like Gikomba, their prices have been massively inflated by high transport costs and the need for each actor in the chain to profit. The end result is a recycled H&M t-shirt costing nearly as much as it would on Oxford Street in London, despite being sold to individuals who have a much lower average purchasing power. Case in point: some 91.5% of Kenyans purchase recycled clothing items at a price of Ksh 1,000 ($9.30 USD) or below, compared to just 8.5% who spend above that amount, on average.

ZUMI Co-Founder and CEO William McCarren illuminated additional challenges plaguing Kenya’s apparel retailers.

Challenges such as the complexity of the industry supply chain puts immense strain on retailers: most typically travel on a crowded bus to wholesale markets at 4 or 5 in the morning; upon arrival, they must haggle with wholesalers and brokers to find the products they’re looking for. Because each retailer is small and independent, they’re unable to make purchases with economies of scale. Further, their cash constraints, lack of data and need to make a rapid, in-the-moment purchase forces them to forego any possibility of receiving transparent and competitive prices. And once they’ve made their purchases, they must ride another bus carrying that bale of clothes back to their shop, losing half a day of sales — and money for inefficient transport — in the process.

Another major issue small retailers face is access to credit. As we’ve highlighted in another piece, credit access has the potential to grow microenterprise profits by over 50%, according to prior research conducted in East Africa. However, due to the offline cash-dependent nature of the market, it’s very difficult for retailers to build up a credit history that could unlock access to financial services at reasonable rates. When most retailers support two or three dependents with their income, having reliable credit access to increase earnings by as little as 5% could make a transformational difference when it pays for essentials like rent, food, school fees and medical bills.

Figure 2: How ZUMI disrupts the retail supply chain

The Opportunity for ZUMI

By building a transparent marketplace to connect retailers and wholesalers, ZUMI was founded to solve these problems.

In our conversations, William referred to their business strategy as the “Iron Triangle” because of their three-pronged approach to reducing friction across retail supply chains. Firstly, they provide an e-commerce platform for retailers to purchase stock from an aggregated list of 40+ apparel suppliers directly through SMS or a ZUMI mobile app. (For retailers without a smartphone, ZUMI has an agent network that can help them place orders for the first time). Second, ZUMI provides a free, same day, dropshipping delivery service to bring clothing supply directly to market stalls. Lastly, ZUMI has a credit product that leverages order history and other data points to enable retailers to access credit at affordable rates. All three of these solutions leverage data to improve supply chain inefficiencies, reduce market friction and unlock the barriers to growth for microretailers.

Figure 3: How ZUMI empowers microretailers

For apparel retailers like Joyce and Triza, ZUMI’s platform has had a profound impact.

One of the first customers to begin using their platform, Joyce has been ordering stock every week for over a year now. She became one of the first ZUMI customers to qualify for their credit product.

“I am really happy with ZUMI, they deliver right to my shop and give me goods on credit. I have increased my earnings by 40% and I’ve been able to open a second shop.”

Other customers, such as Triza, have also benefited from the ZUMI platform. She has turned her extra profits into payments for essential services.

“Since I started ordering with ZUMI, my profits have increased by 20%. I have increased my stock and I am able to pay my bills and my kids’ school fees.”

These stories highlight the impact that ZUMI can make for apparel retailers across Kenya, and soon, all of Africa.

ZUMI retailer Joyce at her market shop in Nairobi, Kenya

A key part of ZUMI’s success thus far is owed to its strong relationships with suppliers. Unique among other B2B e-commerce verticals, suppliers in the apparel sector are typically both informal and family-owned businesses. This reality makes relationship building incredibly important. William described the opportunity to engage suppliers through ZUMI this way: “A lot of the work that I do entails spending time with our suppliers, and also looking at what the data of their sales is through the [ZUMI] platform. How can we help them bring in new containers? One of the things that we’re also helping some of our suppliers do is finance more supply, so that we can get more dedicated stock from them on the ZUMI platform.” In a fragmented market plush with information asymmetries, ZUMI’s ability to broker trust and build bridges between both suppliers and retailers is admirable.

Looking Ahead

ZUMI’s platform has gained new relevance during the ongoing pandemic, allowing it to continually serve customers despite strict lockdown measures across Kenya. The company has further validated its platform by raising funds from noteworthy entities: it lists Seedstars as an investor and was pegged for up to £150,000 in grants and technical assistance last year by the Kenyan Catalytic Jobs Fund after winning their annual Business Innovation Challenge. The company has also secured investment from the likes of Global Partnerships, Optimizer Foundation and Zephyr Acorn. On the heels of these successes, the company is looking to grow even further: according to William, the company is looking to raise their Series A round later this year. This new round of financing will enable ZUMI to scale across Kenya and into new markets in East Africa. Additional capital will propel ZUMI’s vision to become a pan-African B2B business that helps informal microretailers build scale and formalize their businesses with the use of technology, access to training and financial services. While starting with apparel, ZUMI’s long-term vision is to expand into other product offerings by leveraging technology to mend broken supply chains and empower other retailers to sell online.

ZUMI retailer Triza at her market shop in Nairobi, Kenya

At Sherpa Ventures, we’re excited about the way ZUMI’s technology can unlock new economic possibilities for African retailers.

We believe in the potential for ZUMI to scale across borders by using tech to simplify the supply chain and capture more value for shopkeepers. Across African B2B markets, startups like ZUMI that embed credit and logistics services into their platforms are able to tap into key levers that catalyze economic development. Bringing such value-added services to underserved markets carries the potential to improve the way entire supply chains are structured. Our support of ZUMI reinforces our belief that startups building financially inclusive products can be a major part of Africa’s growth trajectory. We’re honored to walk this journey alongside them.

Want to learn more about ZUMI? You can check out their website here.

Are you a founder and interested in climbing with us? Subscribe to our newsletter or drop us a message by filling out this form. We’d love to hear from you!

--

--

--

We’re startup operators in Africa, backing startup founders in Africa. Tell us about a summit you wanna conquer at: http://sherpa.africa

Recommended from Medium

Stop encouraging dependence on the poorest

New York City, 4 March 2022 (CoNGO Infonews) — Civil society organizations that are predominantly…

Mosul’s Carnage Shows Us the Future of War Under Trump

Israel Bows To Russia, Gets Hit On All Sides

Sudan protest : 1 killed and 30 injured ; Pope appeals for peace

Sudan protest : 1 killed and 30 injured ; Pope appeals for peace

Lebanon: Weeks Away From Official Hyperinflation

5 challenges for NCVO’s new chief exec

Why Tigrinya? Travis Foundation’s first language project

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Jordan Wolken

Jordan Wolken

Sherpa Ventures | Bridges for Enterprise | Empowering startups in emerging markets

More from Medium

What is A * Search? What is Heuristic Search? What is Tree search Algorithm?

AI legislation is coming– what does it mean for Black and marginalised communities?

Only 2 Days Away from Fortnite Champion Series S3:1 Grand Finals

img

Analyzing hospital capacity data during the coronavirus pandemic