Disruption by the strong-arm

Been looking at the start up scene for quite a minute. One thing that comes up quite clear is that startups that make a huge impact either do something revolutionary that creates a new way of doing (new) things or ears into the status quo.

For the latter, this could range from doing things easier than they were being done previously by existing players or plain undercutting, or both. Mostly undercutting. New players undercut when they have the advantage of user acquisition. User acquisition is everything.

If you take a random 5 players in the tech scene, Amazon is known to pull something like that for publishers, Apple was accused of the same. Locally, I’ve heard whispers about a prominent e-commerce site doing just that to the suppliers.

“We will take your stock, we can push numbers, but this is the price we will buy your stuff from you, doesn’t matter if there’s a margin, take or leave.”

Many players end up taking since they don’t have distribution and sales channel set up, they need to push numbers so they have a chance at being seen as a seller. Catch 22.

What do you think of this @bankelele @rebecca @frilacer @gichuri_fk @Mwirigi @sallymugure?

Okay let me put some of my thoughts here. In business, I am sure you have an idea about economies of scale. An e-commerce website if large enough…like the one we know…has all the leverage against the suppliers since it is arguably the only viable distribution channel. that said though, I believe the same firm may be receiving numerous requests for product supply and some of the suppliers may be requesting unreasonable prices. This means they could just be doing rational pricing. However, the main challenge for a start up is to prove your worth to the market. I mean if you really have good product then they will not cut you out but if there are a hundred people doing what you do then someone is bound to offer it cheaper than you, lastly, do we have regulations covering such unexplored grounds in Kenya?

Distribution is vital to any business.

Unfortunately, for startups/small businesses, whether you have a revolutionary product…without distribution, you have no business.

Big businesses know this and use it to exert themselves and ask for absurd terms. From a big business POV, its a good deal. From a small business’ POV its not a good deal…but what can they do? (many things, but thats for another day)

Catch 22 kweli.

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Let me take the angle of a startup entering a saturated market mostly by big corporates, how does it disrupt that. They just have to be smart and think differently…
I think for startups to really disrupt the existing businesses, it helps to be a business that is of great impact to the society as a whole. If they can offer the service in a cheaper, easier way then soon enough they take over. I read this article today showing how some fin-tech startups are disrupting the money-sending (remittances) business fully or mostly controlled by banks and other operators such as Western Union by simply providing cheap rates and delivering much faster by leveraging on deals with local banks where money is sent from diaspora. Now one constant challenge that presents itself is the difficulty of obtaining licenses as newcomers and of course resistance from players in the market like banks, who also offer the same services. But all in all, in time more and more users are seeing the benefit of using the startup compared to the big guys so it is important for the startup to figure out ways to make themselves relevant and in business even with all the resistance, because in the end, they might just edge out ahead.
I think this is a representation of most startups trying to disrupt the existing status quo. As long as they have the guts and determination to do it and find hacks for solving challenges, they can surely do without acquisition and become a major player…
But then again not many startups are willing to face the giants for the long run, so opt out and take the safer route…

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