In a geographic market as large as Africa, fragmentation within the food and agriculture industry has created plenty of points of friction and inefficiencies that disrupt B2B trade workflows — for both farmers and their buyers.
Suppliers are often small, independent farming operations with limited resources available to focus on optimizing their B2B sales initiatives, whereas buyers similarly operate in a fragmented market with significant barriers to optimizing everything from vendor discovery to payment.
Rick Kleinhans, co-founder and chief technology officer (CTO) of recently-launched Nile, explained to PYMNTS that many of the biggest pain points for farmers and buyers can be addressed through digitization. In an interview, he explored the most pressing challenges across the industry, and highlighted some of the biggest opportunities to inject optimization through technology.
Multi-Sided Pain Points
Across Africa, the traditional process of buying and trading food products occurs at various physical B2B markets around the continent. There are plenty of challenges for farmers who need to connect to buyers in these locations, as Kleinhans described.
On top of the potential for food waste involved in the process of trucking produce to and from the marketplace — which can often be a far distance from where a farm is located — the traditional workflows of these physical marketplaces are numerous. Farmers rely on third-party marketers to secure a buyer and establish a price for the farmer, who then take a percentage of commission off that sale.
“This raises a couple of problems,” said Kleinhans. “The first one is that, historically, there has not been any transparency there. Ultimately, the power of the price sits with that agent, and the farmer doesn’t really know what they can get.”
The risks of fraud have been high, enabling those marketers to lie about the price they secured in order to skim a higher commission from the deal. Additionally, this mode of B2B transacting also prevents the vendor from obtaining payment upfront, causing cash flow challenges.
Further, thanks to the fragmentation of these markets across countries and across the continent, it’s next to impossible for farmers to be able to track prices across each one. One market might have a shortage of apples, causing the price of that product to be higher, but unless a farmer is able to have visibility into those kinds of fluctuations, that vendor is unlikely to be able to take advantage.
The alternative to physical marketplace is to secure direct B2B relationships between buyers and farmers, which means sellers can be paid upfront and have greater control over pricing. The problem with this strategy, however, is that market fragmentation means sellers would have to manually establish thousands of individual relationships and contracts with their buyers — a feat Kleinhans said farmers don’t have the resources to achieve.
Though some of the largest retail giants across Africa have secured the buying power necessary to ease many points of friction in the procurement process, the industry is also filled with smaller B2B customers that face their own set of challenges.
Because farmers lack the ability to secure direct relationships with buyers, those customers must often resort to those physical marketplaces to procure the products they need to stock the shelves. Like the farmers themselves, smaller buyers have to take what can often be an overnight or multi-day journey into physical marketplaces, with similar risks of food waste.
Data And Digitization
Many of these hurdles can be overcome through the digitization of the B2B trade workflow, Kleinhans said, with the B2B eCommerce model well suited to provide the vendors the scale they need to establish direct relationships with their buyers. This strategy enhances visibility and efficiency on both sides of the transaction.
Digital trade processes can also optimize the actual payment of goods, he added, supporting cash flow for both buyer and seller. Sellers can secure funds upfront, with Nile able to facilitate EFT transfers as well as the ability for B2B buyers to procure goods on credit.
For the customer, payment choice is vital to an optimized experience. Kleinhans said buyers can choose an EFT service that facilitates near-instant funds transfers to the supplier in order to expedite the trading process, if they need to stock their shelves more quickly. Or, they can choose a traditional EFT that clears in a few days. Nile also supports the ability for buyers to upload funds to a sort of digital wallet, allowing that business to place an order and pay for it with funds available.
“There is a lot of choice for the cash framework for the buyer,” said Kleinhans.
In such a vast industry, the opportunities to tackle friction and introduce efficiencies in the B2B trade and payment process are just as prolific. As Nile grows, Kleinhans said there are other key challenges the company hopes to address by making use of valuable transaction data aggregated on the platform.
That data can be used to provide vendors the level of pricing transparency across the physical marketplace landscape, for instance, or to consolidate smaller orders to enable full truckloads and optimized logistics operations.
Though there is progress to be made to help modernize a highly manual and fragmented industry, Kleinhans said B2B eCommerce technology has the opportunity to digitize key processes that are already well-established for buyers and suppliers. Technology must meet those companies where they are in order to gain traction, and solve the biggest pain points for everyone involved.
“Whenever you’re a B2B marketplace that’s trying to be that bridge between the buying and selling of an entire industry, you have to take care of the very large players, and the small players,” he said.