Digitalizing Informal Distribution: What Systematically Fails
WhatsApp as commercial infrastructure, credit as the real barrier, failure of vertical models — what the field reveals about digitalizing informal markets.
This diagnosis comes from field observation of retail commerce in West Africa. The dynamics described — commerce on messaging apps, credit as the real barrier, inadequacy of vertical models — apply to any digitalization project in informal or underbanked markets.
In August 2021, I read a feature on Twiga — a Kenyan startup founded in 2014 that buys produce directly from small farmers and distributes it to Nairobi street vendors through a mobile app.
I read the article twice. Not for the bananas. For the logic.
What Twiga had understood — and what many informal commerce digitalization projects in Africa still miss — is that the problem isn’t the end consumer. It’s the distribution chain between the producer and the small neighbourhood shop. Solve that link, and you unlock an entire market.
Here’s what I was observing on the ground before any of that clicked into a solution.
What informal commerce in West Africa actually looks like
I had spent several months observing commercial dynamics in West Africa, primarily in Côte d’Ivoire and surrounding markets.
Two findings kept coming up.
Commerce runs on WhatsApp. Groups of dozens — sometimes hundreds — of merchants exchange product photos, negotiate prices, organise bulk purchases, all in unstructured message threads. No traceability. No order confirmation. No access to credit. It’s a living, socially efficient form of trade — but with zero infrastructure beneath it.
Credit is the real bottleneck. A small trader who wants to buy a bulk lot and get a better unit price has no access to bank credit. Traditional banks don’t lend to the informal economy, which accounts for the vast majority of retail transactions. The result: traders buy in small quantities, at worse prices, with compressed margins.
Those two observations defined a real, massive, and structurally unaddressed problem.
What Twiga confirmed, and what the data quantified
The Twiga story put words on something I had sensed but not yet formalised: in Sub-Saharan Africa, informal vendors account for roughly 90% of retail transactions. They can’t buy directly from manufacturers or producers — lot sizes are too large, payment terms incompatible with their cash flow. So they go through intermediaries who buy on wholesale markets.
This isn’t a marginal inefficiency. It’s structural.
A study by the Universities of Michigan and Chicago on Kenyan maize markets showed intermediaries pass on only 22% of cost reductions to final prices. The rest is absorbed through the chain. A separate MIT study comparing distribution costs in Ethiopia and Nigeria to the United States found them four to five times higher, after controlling for road quality.
Those numbers documented precisely what I saw in practice: a structural distribution inefficiency that penalizes producers, small traders, and ultimately consumers — and that creates an opportunity for whoever can build a more effective distribution infrastructure.
Twiga had done it for fresh produce in Kenya. The question became: how do you adapt that model to West Africa, with a broader scope and an integrated financial dimension?
Why the Jumia model wasn’t the answer
The obvious temptation, when you want to digitalize commerce in Africa, is to think B2C marketplace. A catalogue. Sellers. Buyers. An app. The Amazon model, transplanted.
Jumia tried it first, with more resources and visibility than anyone else. The results were disappointing.
The reason is straightforward: the average African consumer doesn’t buy the way a North American or European consumer does. They don’t buy a litre of cooking oil — they buy a spoonful. They don’t have a bank card. They don’t have a postal address in the sense that Western logistics systems understand it. And they don’t need an app to access products: their street is full of vendors who know their neighbourhood, their habits, and have been extending them credit for years.
That consumer cannot be reached directly by the B2C model at the same unit economics as in Europe. But the small trader who sells to that consumer every day can be reached, equipped, financed, and connected to a more efficient supply chain.
That’s the fundamental distinction most African e-commerce projects didn’t make early enough.
Why digitalizing Africa’s informal commerce requires a B2B approach
The B2B digital models that work in Africa don’t eliminate informal distribution. They give it infrastructure it doesn’t yet have.
Twiga didn’t replace Nairobi’s vendors. It gave them a more efficient sourcing tool, access to volumes they couldn’t mobilise independently, and delivery reliability they couldn’t find on wholesale markets.
Social commerce in Africa rests on the same principle: collective buying behaviours already exist — spontaneously, in WhatsApp groups and tontines. The challenge isn’t to create them. It’s to give them an infrastructure.
| What already exists | What’s missing |
|---|---|
| Active WhatsApp buying groups | Order confirmation, traceability |
| Informal bulk purchasing | Credit tied to the transaction |
| Community savings (tontines) | Loyalty programme with transaction history |
| Merchant trust networks | A platform that formalizes those networks |
| Demand for reliable delivery | Last-mile logistics infrastructure |
That diagnosis is what shaped what we designed next, co-founding JIPS: a B2B marketplace platform for West Africa with three interdependent components — group buying, integrated microcredit, and a cashback loyalty programme.
How it works in practice, and why the deployment sequence matters as much as the model itself — that’s what I explain in the next piece. Scale-up projects on African markets consistently follow this same logic: identify behaviours that already work, and build the infrastructure that lets them scale.
If you’re working on a digital distribution or retail transformation project in Africa, let’s talk — it’s rarely a technology problem.
Sources: reporting on Twiga (August 2021); The Economist / Le Nouvel Économiste, “Retail e-commerce African style” (June 2022). Studies: Bergquist & Dinerstein (Michigan/Chicago, 2020); Atkin & Donaldson (MIT).