Behind the scenes of e-commerce in the handicrafts market in Egypt
Tindio is an e-commerce platform that allows handicraft makers to create an online store for free on the Tindio platform to display their products to all interested people inside and outside Egypt, in addition to obtaining: - Marketing and sales assistance. - Technical support for customers. - Shipping of the ordered products from the platform. In return for collecting 15% of the sales from each store.
Tindio was established when the founders noticed that talented creatives and designers were creating exceptional products, but struggling to reach potential buyers both within and outside of Egypt. To solve this problem, they created a marketplace that could connect these creators with interested individuals. Despite their initial success, the Tindio team faced numerous difficulties and issues on a daily basis. These challenges exhausted the founders' energies, ultimately leading them to make the difficult decision to shut down the platform after four years.
The founders took part-time jobs after the first year to cover the funding for the company. At the beginning of Tinido's operation, the founders were fully dedicated, but there was no understanding that this type of business would be profitable in the long run, so after the first year of operation, the founders' lost their energy, and therefore it was necessary to go to side jobs for the possibility of continuing to fund the company. This helped them continue for four years, but it cost them a slowdown in solving the problems they encounter on a daily basis. The founders think that the solution was to search for funding from investors since the first year for the possibility of dedicating their work full-time to the company and solving problems faster.
Lack of clarity in the contract terms between the seller and Tindio. Due to the ease of creating stores on the platform and the absence of paper contracts between the store and Tindio, the terms and conditions related to the relationship between the store and Tindio were not clear enough for the store. Among these terms is that Tindio sends the funds related to the store's sales, after two weeks from the date of sale, in order to ensure that there are no problems with the product from the customer's side. Due to the lack of clarity of the terms and conditions, the store demands that money on the day following the shipment delivery, and sometimes files a report at a police station, accusing Tindio of theft.
Lack of seriousness and interest by some stores in using the website. Due to the ease of creating stores on the platform, the seller did not realize the value of their store. As a result, many sellers created stores on the platform, uploaded a few products, and then disappeared. This led to the existence of many stores on the website that do not have any value.
The seller does not show a serious commitment to fulfilling customer orders after conducting an advertising campaign. To help sellers increase sales, advertising campaigns were carried out for some stores. For example, an advertising campaign was conducted for a store, and the campaign succeeded in generating more than 30 orders for the store. However, the seller cancelled the orders as there was a case of death in their family.
Difficulty in evaluating the quality of the products. Due to having over 700 stores and 8000 products on the platform, without having any physical warehouses, there was a difficulty in evaluating the quality of these products, especially since most of them were made to order. This led to, and customers having a negative perception of the platform.
The store's lack of commitment to delivering customer orders on time. An individual customer needed a product with a special design from a specific store for a certain occasion. The customer submitted a request to the store to execute the product, and the store confirmed the execution of the product at the agreed-upon deadline. However, when the delivery date arrived, the store disappeared and there was no response from them, resulting in the cancellation of the order and the customer's anger, and affecting their trust in Tindio.
The seller changing the price of the product after the customer has placed an order. Due to Tindio's ability to ship products to more than 50 countries, a customer outside of Egypt places an order for a product for 350 EGP. The seller is notified to deliver the product. However, when the seller realizes that the product is for a customer outside of Egypt, they refuse to deliver the product at the displayed price, claiming that the actual price of the product is 700 EGP, but they forgot to update the price.
The customer disappears after ordering a product specially made for them and Tindio bears the cost of the product and shipping. An order is placed for a custom product from a store, which is a wallet printed with the customer's name and image. The store executes the product, and when it is shipped, the customer disappears and cannot be reached. As a result,Furthermore, the product cannot be reused as it is custom-made for the customer.
Changing more than 25 shipping companies, and losing or theft of products by their representatives. Over the course of four years of operation, Tindio was forced to change more than 25 shipping companies, in addition to occasionally experiencing loss or theft of products by delivery representatives. In such cases, Tindio was obliged to compensate the stores and customers.
The seller's unwillingness to leave the comfort zone and use another platform outside of Facebook and Instagram. Handicraft sellers are used to using Facebook and Instagram as marketing and sales platforms. Convincing them to try Tindio as a new system and take advantage of the platform's services and continuous improvements proved to be challenging to the point that the founder expressed that convincing others to use the application was harder than executing the application itself. This, in turn, had an impact on the platform, where some products were out of stock with the sellers but still listed on the platform, while the prices of other products had not been updated.
The operating and marketing costs are higher than the profit margin (unit economics). On a daily basis, there were several attempts to help sellers increase their sales, such as creating advertising campaigns or promoting sellers' products on other sites. Each method used had its own cost, and there was difficulty in achieving a balance where the profit margin was higher than the cost of reaching the customer to fulfill an order. The cost of reaching the customer to fulfill an order was around 25-30 Egyptian pounds for Tindio, while the profit margin was around 30 Egyptian pounds.
Some sellers refused to accept Tindio's profit collection rate of 15%. Some sellers see the 15% profit collection rate by Tindio as a high percentage, and view Tindio as just a Facebook page or website, and demand to close their store on the platform, ignoring the costs involved in operations, marketing, and customer service.
Spending 7 months initially to develop the application and website without a minimum viable product (MVP) for testing. According to the founders themselves, the biggest mistake they made in the beginning was thinking that every problem could be solved by relying on technology. As a result, they spent seven months preparing the application and website, making many improvements and developments without having a minimum viable product (MVP) for testing. Therefore, founders advise anyone who is about to start a company to focus more on the business side and make sure that they have a partner who is knowledgeable and experienced in business before moving on to the technical side. In the beginning, they can rely on a simple platform that can be easily created using WordPress, for example, for testing purposes.
What has been presented is a part of the challenges and problems that the Tindio team faces on a daily basis. The founder did not mention the solutions used to deal with these challenges and problems, but the flow of daily challenges and problems was greater than their capacity as founders to handle. There were already some proposed solutions and plans for implementation in the next stage, which they announced on the website. However, the decision to shut down was made before implementing these solutions.
The founder does not blame the seller or the buyer, but rather blames himself for not finding suitable solutions to the problems he faced. He wished he had seen similar stories to his own before starting his journey so he could learn from them. Perhaps he could have saved his efforts and money by pursuing another idea that suited his capabilities. Therefore, he hopes that anyone with experience in a certain field or industry will not hesitate to share their knowledge with others Here are some proposed points by him for every upcoming entrepreneur in the Egyptian market.
- E-commerce is a very promising field if you have a high-quality and readily available product.
- The market place model is not the best option for those seeking quick profits.
- Marketing or selling for any seller should only be done if the profit margin covers the cost, which can be difficult to achieve.
- The handmade and specifically manufactured products industry in Egypt can be very discouraging despite great talents, and it is not recommended to work in it unless you are the manufacturer of these products.
- Daily operations and the business aspect should be prioritized over the technical aspect.
- It is important to determine if the project's profit will be short-term or long-term. If the project's profit is short-term, it must be profitable from the first day, or else it will be difficult to cover costs and continue.
- User behavior varies depending on the location of residence. Therefore, what is applied abroad in Europe and America may not be suitable for Egypt and the Arab world, and vice versa.
(Note: The following points are the result of solutions provided by the entrepreneurship community after identifying the company's problems. Everything that follows are personal opinions that may be correct or incorrect.)
The founders took part-time jobs after the first year to cover the funding for the company.
- It is possible to allocate a budget for burning money during the first three years of operation and approach angel investors who believe in the idea and are willing to wait for long-term profitability to invest in the project.
Lack of clarity in the contract terms between the seller and Tindio.
Create official contracts for sellers with a focus on clarifying important laws such as:
- If the product is found to be defective or does not meet the customer's requirements, the seller will be responsible for the cost of shipping and repair.
- The agreed profit margin is 15%.
- In case of cancellation of any order by the seller, a penalty will be applied.
- Request official documents from the seller (ID card - store address - criminal record - commercial and tax registration if possible, etc.).
- Obtain samples from the seller to inspect and ensure product quality.
- If the seller provides complete details, they will be given a mark indicating that their store is active and verified.
Lack of seriousness and interest by some stores in using the website.
- Products that are custom-made can have their details specified on the website, and customers can receive execution offers from sellers to ensure that the seller is present on the website for execution.
- Have a subscription system (monthly or yearly) for each seller to display their products on the website.
The seller does not show a serious commitment to fulfilling customer orders after conducting an advertising campaign.
- Prepare a storage space for goods with a minimum of 10 pieces for each product, and include the cost in the budget for burning money for the first 3 years (in case of investment).
- Store the products that have excess demand or the products that will have an advertising campaign, and link the available quantity with the seller's page, so that the seller can see the remaining quantity of each product.
Difficulty in evaluating the quality of the products.
- Implement a rating and review system for seller's products by customers, and having a storage system from the previous step will help evaluate the products before storing them.
- In case of a returned product, the customer will bear the shipping cost.
- If the product is found to be defective, the seller will be responsible for half of the shipping cost, and if the complaint is repeated, a penalty will be applied to the seller.
The store's lack of commitment to delivering customer orders on time.
- If the seller cancels an order or is unable to deliver the product at the agreed-upon time, an alternative store capable of providing it, especially for custom-made products, will be contacted to cover the order. If the cancellation occurs repeatedly, the seller will be blacklisted.
The seller changing the price of the product after the customer has placed an order.
- The seller is required to review their prices weekly by sending them reminders via email, especially during periods of floating exchange rates, inflation, and price instability.
- A clause should be included in the contract stating that the seller is obligated to deliver the product at the price at which the customer made the purchase.
The customer disappears after ordering a product specially made for them and Tindio bears the cost of the product and shipping.
- The value of the product that is custom-made for the customer must be collected before its execution or a deposit of the value of the product should be made as a guarantee before starting the execution of the product.
Changing more than 25 shipping companies, and losing or theft of products by their representatives.
- There should be dedicated company representatives in case of issues or disruptions with shipping companies, or the delegation of representatives on a case-by-case basis.
- Orders should be directed towards smaller companies as they can handle lower volumes of pressure compared to larger companies.
The seller's unwillingness to leave the comfort zone and use another platform outside of Facebook and Instagram.
- Conducting a small training session or tour on the website and application for the seller to explain how to use them (this method is adopted by Uber and Careem with their drivers).
- Setting goals for sellers and providing incentive packages and privileges.
The operating and marketing costs are higher than the profit margin (unit economics).
- Marketing to the Gulf countries and Europe is the best solution to cover the costs.
- The best pricing strategy would be to calculate the shipping and marketing expenses, multiply them by 2, and add them to the price of the product itself.
- It is possible to use affiliate marketing techniques to attract more sales through links with discounts.
- Marketing can be done on the platform in general, not just for a specific seller.
Some sellers refused to accept Tindio's profit collection rate of 15%.
- Including the collection percentage (15%) in the contracts between the sellers and Tinido.
- Reminding the seller of the profit margin by deducting the percentage when registering the price of any product.
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