Customer insistence on paying in cash is a major barrier to the growth of eCommerce in many parts of the world where the digital economy is still taking off. Helping customers reach a level of comfort with paying for their goods is a major way for online retailers to convert internet novices into keen shoppers. Novice online shoppers often favor cash on delivery payments. But this is usually the last method retailers would choose to receive their payments.
Nevertheless, a new program by Amazon aims to embrace cash paying eCommerce customers in Kenya and a handful of other countries where the eCommerce platform is keen to grow its presence. It may be costly and riskier for Amazon but the brand seems to believe that the reward of getting new eCommerce users to try its services for the first time makes it worthwhile.
Amazon will now offer a service called PayCode that allows Kenyan customers to collect their packages from Western Union agents and pay on collection. This enables customers to buy from Amazon when their local currency isn’t necessarily accepted by one of Amazon’s sites, and when Amazon doesn’t have any kind of local presence.
The program doesn’t help overcome other African eCommerce challenges – such as the difficulty of reaching remote areas and the lack of a formal address system.
In Kenya alone, the lack of a proper mapping and address system means that around 17% of drops are miss-deliveries, 58% are delayed and 25% are not delivered at all.
Amazon still plans to deliver to the customer’s home address after they pay via Western Union concessions but the address issue remains a problem.
The system proposed by Amazon also overcomes the difficulty of taking payment from customers who aren’t involved in the formal banking system and don’t have a credit or debit card. Cash is still not only the most familiar payment method but often the only recognized payment method for many people worldwide.
By accepting this, Amazon lets customers stay in their comfort zone even when trying out internet shopping for the first time.
Capturing new markets
Cash-loyal customers maybe aren’t Amazon’s ideal new audience but the eCommerce giant is keen to establish a foothold in exciting new markets around the world. The platform’s facing an uphill struggle in India, where new protectionist measures make it difficult to operate. And although China’s embracing online shopping, Amazon has not managed to gain a foothold there.
The eCommerce brand now needs to defend its position in available markets against rivals such as Alibaba.
That’s why Amazon is taking an innovative approach in Kenya. Amazon’s presently active in 10 African nations but international growth remains challenging. It’s taking a high-investment approach in the hope of winning a new emerging audience globally.
Rival Alibaba is also active on the continent, particularly in Rwanda. The Chinese giant recently launched what it calls an electronic world trade platform to boost cross-border eCommerce between Rwanda and China.
Amazon’s not been particularly first out of the gate when it comes to launching local language versions of its services. It’s been slow to scale up its Alexa home assistant tool to diverse languages, particularly in comparison to rivals such as Siri and Google Assistant. There’s no local language version of Amazon for Kenya’s Swahili-speaking majority to use.
This may mean that Amazon’s last-mile logistics are all for nothing. Although the marketplace may have sorted payments, language itself may be the main barrier. Only around 16% of Kenyans are thought to be able to use English and this language barrier may prevent them from using the service in favor of a local language alternative.
Amazon’s going to have to work hard to compete with local rivals, particularly if they offer a local language service.
Collaboration is the future
It’s starting to look like collaborations are going to play a big part in Africa’s digital growth over the next few years. Amazon isn’t the only operator to have spotted the emerging opportunities in African markets including Kenya.
China’s Alibaba is also courting local markets using its development-focused approach. Western Union is also working with MPesa, the hugely popular African mobile wallet service, to enable online payments.
Amazon’s collaboration with Western Union also enables consumers in markets including Malaysia, Chile and Peru to pay using a familiar hard currency for their Amazon purchases. To do this, they’ll have to use one of only 15 Amazon sites available worldwide; none of which are local to their country.
By setting up the partnership, Amazon is essentially betting that their service can provide branded products that aren’t available through local providers who haven’t already thought of a solution to the payment problem. But this may not be a realistic assumption, given the pace of change in local African innovation.
There are two ways of looking at Amazon’s approach to emerging markets. The optimistic way of seeing things is that the eCommerce giant is innovating to meet the needs of new customers. A more cynical view is that the brand is throwing money at the problem and making compromises it may later come to regret as the cost of serving customers becomes unsustainable.
All of the markets it is tackling have highly innovative domestic operators who may be better able to serve local needs. Only time will tell if Amazon’s bold approach will succeed.