Episode 3: Premium “Informal” Retailers?
How Sarafu Captures Value in B2B E-commerce
This conversation with Firas Ahmad, Group CEO and Co-founder of Sarafu, a B2B e-commerce platform, was a huge unlock for my understanding of B2B e-commerce business models. Why? Because he stated what was to him, an obvious fact—many B2B e-commerce startups were sourcing and selling low to no margin commodities—flour, sugar, and oil. And to do so, they ingested the business model-killing costs of last mile distribution, which Kikonde Mwatela highlighted from Twiga’s story in the previous episode. That context explains Sarafu's decision to focus on customers willing to pay for premium customer service. But let’s zoom out for a bit of context…
During the post-ZIRP (zero interest rate policy) era, VC poured into African B2B e-commerce startups. Some of these companies focused on moving high volumes of commodity goods at razor-thin margins, achieving impressive gross merchandise value (GMV) numbers that seemed to mask challenging unit economics.
Questions emerged about the buoyancy of these business models, particularly those internalizing the difficult, complex work of building and restructuring supply chains—the so-called “asset heavy” model. This strategy involves connecting supply from brands/merchandisers/importers to retailers, essentially replacing “middle men” such as distributors and wholesalers. In contrast, an “asset light” approach leans toward owning few to no assets (e.g. trucks), aiming to deliver value to all supply chain actors by augmenting their activity through the provision of data, financial services, etc.
What Firas made clear is that irrespective of which strategy the market demands, you have to make the unit economics work. Read on for a few outtakes from our conversation:
🔁 1. Solve the last mile and payment problems together.
An early insight from Sarafu’s journey was that streamlining last-mile delivery without fixing digital payments wouldn’t work. Retailers in Tanzania often avoid digital orders because mobile money fees cut too deeply into their slim margins. By building logistics and payments as one integrated system, Sarafu made digital B2B commerce viable.
“You need to process a payment and deliver a product all at the same time... Otherwise, whatever efficiency gains you might get from ordering digitally are lost.”
💎 2. Premium service in informal markets isn’t a contradiction.
It’s reasonable to assume that informal markets require thin-margin, high-volume models. But Sarafu focuses on underserved retailers willing to pay for the convenient and reliable delivery of goods. These customers aren’t well served because they’re beyond wholesalers’ normal delivery routes, so it makes sense for them to pay for better service.
“We identified a slice of the market... willing to pay a premium because they don’t want the headache of not getting a product on time.”
🔄 3. Turn cost centers into revenue streams.
Instead of remaining a pure play e-commerce business, Sarafu developed an ecosystem approach. Its internal payment infrastructure is now being offered to other companies. Similarly, Sarafu is exploring logistics-as-a-service, leveraging its low-cost delivery model to serve third parties. This diversification allows the company to build a more resilient revenue model beyond trading margins.
“Now my assets are no longer that much of a cost — they’re paying for themselves.”
🧮 4. Create value, but also capture it.
Firas underscores a key principle: many digital services create value, but not all of them capture it. Sarafu carefully designs its offerings to ensure it can monetize the transparency, trust, and reliability it delivers—by charging a premium to customers who care about service and selling goods that generate more margin.
“You can build a lot of cool stuff... But the question really is, can you capture all the value that’s being created?”
🚚 5. Asset-heavy vs. asset-light? Let the market decide.
Rather than adhering to an asset-light model (which investors tend to prefer), Sarafu adapts based on local infrastructure reliability. In Dar es Salaam, where third-party logistics are unreliable, Sarafu built its own delivery capability. But it plans to expand through an asset-light model in other regions. The key is to stay flexible and make the unit economics work, regardless of which path you take.
“If I could do the business asset-light, I would. But if I can’t, then I’ll figure out how to make the heavy part work.”
⚡ 6. EVs have cost-cutting potential.
Sarafu ran a pilot with electric vehicles in Dar es Salaam and found a dramatic drop in delivery costs—by up to 60%. Maintenance and fuel savings were significant, but broader adoption is constrained by import duties and infrastructure gaps in Tanzania. Still, EVs could be a game-changer for logistics efficiency in African cities.
“We further reduced our cost on delivery by almost 50, 60% with the electric vehicle… but it’s not easy to build a fleet around EVs in Tanzania.”
Well, that’s all for this week’s recap. See you next week!