Berbera Market, an e-commerce platform launched in early 2021, has shut down its website and halted all operations. Berbera’s CEO, Berket Getenet, attributed the closure to their initial subscription-based business model. The company is currently rebuilding the platform as a B2B model, a shift from its earlier B2C subscription approach. However, until the new platform is ready, the website will remain offline.
Berbera Market was founded by a group of young friends who hail from Dire Dewa University.
“The idea came to us when we were at Dire Dewa University, where we were involved in a club that was mainly dedicated to science fair projects,” remembers Bereket Getnet, CEO and co-founder of Berbera Market.
Berbera’s team included Michael Fasika, COO, who brought a civil engineering background; Michael Gezahegn, CTO, a computer science graduate; and Haleluya Abebe, Vice CEO, who had a marketing degree.
It occurred to the team that instead of focusing solely on non-profit ventures they could venture into a business. They thought, “Why not create something that makes money?” and e-commerce, with its disruptive potential, seemed like the perfect fit.
“But mind you, we were just a group of passionate college kids with zero entrepreneurial experience yet eager to disrupt the market, but little did we know the toll it takes for customers to adapt to innovation,” adds Bereket.
Before its official launch in 2020, the idea had been brewing with them for a couple of years while at Dire Dewa University, and when COVID-19 broke out, they got to work on it and developed the platform in six months, which sped up the process, according to Bereket. Eventually Berbera Market came to the Addis startup scene in late 2020 with the vision of disrupting the e-commerce market.
Berbera Market aimed to preserve the traditional shopping experience for Ethiopians by creating virtual stores. The platform allowed customers to visit virtual stores within a certain radius, see details of their products, compare prices, and check the real-time availability of items.
The Now-Failed Business Model
The platform initially introduced commission and subscription models, but due to vendor resistance, their monetization model became solely subscription-based. Vendors can opt for a monthly or yearly membership when registering on the platform. Around the time they launched, the monthly plan cost 300 Birr ($6.25), while the annual plan cost between 3000-5000 Birr (around $83).
Before its eventual shutdown on January 12, Berbera saw some level of success over the span of three years. They were averaging one successful transaction per day, while in 2022 they sold 200k birr per year in transaction value.
Despite these successes, the e-commerce platform, which primarily focuses on apparel and fashion products, encountered significant challenges that ultimately hindered its ability to achieve the disruptive goals it initially set out to accomplish.
Hence, the founders of Berbera Market made the difficult decision to close the website. This prompts the question: At what point does a startup recognize the need to pivot or shut down? When did the founders of Berbera see the need to adjust their business model?
One thing we’ve realized is that subscriptions would not work in Ethiopia’s B2C market.
Bereket admits, “Around a year or so in, we started seeing signs that the subscription model might not be the perfect fit for the Ethiopian market. But why didn’t we pull the plug then? Honestly, we were focusing on the wrong metrics. We saw the high engagement rate on the website and thought that meant success, but it turned out that wasn’t the whole picture.”
He candidly reveals, “We were completely unaware of our cash flow situation. It wasn’t until a year and a half later, when we actually looked at the reports, that it hit us: despite the traffic, our conversion rate was low, and the model simply wasn’t sustainable.”
“One thing we’ve realized is that subscriptions would not work in Ethiopia’s B2C market. It may work in different circumstances with different consumer behaviors, but it is tough to create market disruption. So, we’re attempting to transition our business model to a B2B supply chain, a specific community of vendors with varied incentives, and iceaddis is now supporting us with research.” Elaborates Bereket.
Bigger and Grimmer Picture
Despite its potential for disruption, however, the Ethiopian startup ecosystem is hampered by a multitude of challenges. A report from 2020 report titled “Tracing the success and failure of African startups,” by Greentec Capital Africa Foundation and WeeTracker, Ethiopia has the leading startup failure rate in Africa, estimated at 75% of failed startups.
Though the report emphasizes that factors for startup failures on the continent vary from country to country, lack of sufficient financing and minimal structural development were indicated as the main factors. Another finding in the reports also reveals that digital firms were more likely to fail than product-based firms, whereas social media and e-commerce were the worst performers.
According to Markos Lemma, co-founder, and CEO of iceaddis, the first incubation hub in Ethiopia, “About 70% of startups fail within the first 1 to 2 years in Ethiopia. This rate is slightly lower compared to other advanced markets (I believe it’s around 90%+), primarily because it is relatively cheaper to sustain operations here.”
Revamping After Lessons
Berbera is down and will remain so, for the next year while strategizing a new business model that doesn’t necessarily operate on a subscription basis. Bereket states that E-commerce platforms with the same business model as Berbera mainly survive because they have an additional business that actually monetizes and subsidizes the e-commerce wing. “But we didn’t have that, and we could have survived as we are, but we would have been bankrupt,” so it’s important to opt to revamp our strategy and come back with a full force.”
Haleluya Abebe, Vice CEO, also shares Bereket’s commitment to strategizing. According to her, one of the major challenges encountered by the vendors’ side was their reluctance to update their virtual store. This posed issues where a product shown as available on the website might actually be out of stock, impacting buyer behavior.
Additionally, buyers were concerned that the product displayed online might differ from what was available in the physical store. ‘’ This prompted us to explore various methods to incentivize vendors, eventually leading us to take product pictures directly from vendors and upload them to the website. ” But eventually, that is time-consuming and needs a lot of commitment, which is why it’s important for us to shift our business model and come back with a committed management team,” elaborates Haleluya.
The team behind Berbera, despite the challenges, remains focused. “We now have more experience and a lot of case studies from our own mistakes, and we intend to utilize that,” emphasizes Bereket.
In addition, the co-founders are working on another platform, Findall, after recognizing the shortage of stock images and design assets that truly capture the essence of the Ethiopian identity.