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Shopping via Text Message

E-commerce startups are targeting emerging economies where cell phones, not browsers, rule.
November 23, 2010

In much of the world, shopping online involves browsing e-commerce sites or typing what you want to buy into a search engine. In countries where Internet-connected computers are a rarity, a Seattle-based startup called Slimtrader hopes to offer Internet shopping via text message instead.

Text app: This Android phone app helps store owners in Colombia track their stock and accounts, an example of mobile commerce tapping the explosive growth of phones in emerging economies.

Just like a conventional e-commerce business, Slimtrader relies on interactive databases to handle product inventory, pricing, orders, and payments. But unlike, say, Amazon, it has a database that users can interact with through short message service (SMS).

“Instead of searching for products with a computer, we make it possible to query a retailer’s inventory by text message,” says founder Femi Akinde. “You are sent the results and can then buy via text as well.”

That could prove a hit in countries where shopping or paying bills means paying cash payments, and standing in a long line, he says. Slimtrader transactions draw funds from a person’s cell-phone credit or can be provided using a prepaid or conventional debit or credit card.

The startup is working with partners including Microsoft and T-Mobile. Since July, the firm has been powering e-ticket sales for the Nigerian airline Aero, which wants to reduce the cash payments that currently make up the majority of ticket sales. This month, the company that runs ferries connecting Kampala in Uganda to Mwanza in Tanzania via Lake Victoria will also start using the system, allowing users to query the timetable and book tickets via SMS.

Slimtrader is one of a handful of startups hoping to ride the explosive growth of cell-phone connections in Africa and other emerging markets. These efforts are sometimes described as “social” enterprises, likened to aid agencies or nongovernmental organizations because they attempt to gain traction by helping low-income people. Akinde presented Slimtrader at the SOCAP conference in San Francisco this week.

But that doesn’t mean they don’t have the potential to make money, says Rachel Payne, Google’s country manager for Uganda. She points to the success in Kenya of M-Pesa, a service developed by cell-phone giant Vodafone that lets users transfer prepaid credit between one another by sending SMS messages. With approaching 10 million users, M-Pesa is forecast to handle some 20 percent of Kenya’s gross domestic product this year.

“There is such latent demand out there that can be unlocked by a new service or platform,” says Payne, adding that Google views its efforts to develop mobile apps and services in Africa, for example to provide health and farming information, as a for-profit activity. “We treat it like any other investment in a new area–if a market is big enough, there will definitely be a way to monetize it, and this is a really big market.”

Companies aiding the transfer of funds, like Slimtrader, have obvious paths to monetization by taking a cut of transactions, says Amy Klement, who invests in mobile technology in emerging markets for Omidyar Network, an investment fund created by eBay founder Pierre Omidyar.

Even in developing countries, smart phones and better data services will soon make an impact, says Klement, which means SMS-centric services will have to start supporting additional platforms. “I’m bullish about the prospect for data services in the emerging markets,” she says, pointing out that India recently freed up the spectrum necessary for 3G services.

Smart phones are already beginning to appear in developing markets, says David del Ser, founder of the startup Frogtek. His firm has developed an app for Android cell phones to help shopkeepers track the flow of goods and money using a low-cost bar-code reader. The app links back to servers that generate simple accounts, helping shopkeepers who don’t usually keep books to improve their business. It also provides data that can be sold to large corporations like Coca-Cola that have little data on how their products are sold in these markets, says del Ser. He is currently rolling out the service in Colombia.

“The lack of normal computers or laptops in these places means that they covet smart phones more than we do,” explains del Ser. “I think we’ll see those devices spread rapidly among certain demographics, like the small shopkeepers we work with.”

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