šŸ· When Gogoā€™s Rands Go Digitalā€¦

Plus: Repo-ed microwaves, SAā€™s e-comm wars & how to lower your CAC and be more profitable.

Hi there,

Cool off? Talk about the environmental impact of crypto; researchers have just shown that a single Bitcoin transaction could use as much as a swimming poolā€™s worth of water to cool the processors executing it. Sheez.

In this Open Letter:
  • R50bn play: Stokvels when Rands go digital.

  • Repo-ed microwaves, e-comm talent wars & Cell C still insolvent.

  • For profit: Lowering your customer acquisition costs.

  • Where we shop: The results are in.

  • Tell someone: Share this & get free business tools.

TRENDING NOW

When Those Rands Go Digital

The next wave of tech opportunities will follow

Itā€™s Dezemba! And, for many, that means a few more weeks till summer break. But for millions of South Africans participating in grocery stokvels, it could mean Christmas grocery is on the way. 

What you might not know is that the uniquely South African communal savings mechanism we call stokvel gets investments of about R50 billion per year, split across around 800k stokvels running in SA's informal sector.

Thatā€™s a lotta vel

No wonder then that many a digital entrepreneur has tried to digitise the stokvel. So far, with little success ā€“ simply digitising the process with tech doesnā€™t work and feedbackā€™s non-existent since most users canā€™t articulate what they need ā€˜cos they have no banking or tech frame of reference.

What hasnā€™t worked

Common misconceptions around stokvels are:

  • Record keeping and planning arenā€™t a problem ā€“ replacing pen and paper with an app adds little value since the few members in the group often know and trust each other and the calculations are simple.

  • Participants mostly donā€™t expect more money back than they put in, so offering interest isnā€™t as appealing.

  • There is some risk in carrying cash, but transaction fees on cash are still zero. Fact is: If you contribute 12xR100 into the stokvel you expect 12xR100 back. Interest and transaction fees confuse the equation.

  • Onboarding needs to be unbelievably simple. Participants usually know the person running the stokvel. And to join, you just give them R100 or whatever and there you go. It needs to be as simple or simpler than that.

Donā€™t feel too bad, though. Banks havenā€™t figured out how stokvels work either ā€“ case in point, these are the requirements for opening a ā€œstokvel accountā€ at one of the major banks:

What, no blood samples needed? Should be simple.

But R50bn in deposits is attractive

Letā€™s say you capture just 2% of that market. You could buy R1 billion of SA government bonds using the deposits, earning a cool Ā±R100m per year in interest (if those rates stay this high). 

So itā€™s worthwhile figuring out the stokvel marketā€¦

Now, there are complicated regulatory hurdles here. But probably the biggest challenge to overcome is transaction fees. 

Enter PayShap

PayShap is a rapid interbank payment protocol that allows instant transfers between different bank accounts at a low fee (or even free). Currently, each bank has its own fee structure and itā€™s a bit of a mess. But there is pressure from the reserve bank to make PayShap universally free

Investec customers can participate in stokvel under R500 for zero fees. I'm sure chartered accountants would be elated.

Now, when PayShap goes free, itā€™ll become the direct digital competitor to cash, with a lot less risk of getting mugged etc. 

And stokvel is just one of many applications that can take off once we get to totally digital cash. So if banks can just find some consensus on fees, there might be opportunities everywhere soon. 

Tech entrepreneur, watch out for this oneā€¦. it's about to get real.

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IN SHORT

šŸš™ Uber 500. Would you believe Uber Technologies Inc. has been added to the S&P 500 Index? This after two straight quarters of posting some operational profits, which sparked renewed investor interest (Uber Shares gained 132% in the last year). Hereā€™s hoping the optimismā€™s enough to carry them all the way.

šŸŖ‘ Removable Assets. Working at Luthuli House? Warming up your lunch might be hard going forward as the Sherrif is set to attach anything and everything (even microwaves) in an attempt to settle the R100 million account run up with an events company during the 2019 elections campaign. R100 mill ā€“ thatā€™s a helluva lot of Streetwise Twos and yellow T-shirts.

šŸ§² E-Comm Talent War. Looking to cash in on the e-commerce giantsā€™ plays in 2024. Takealot has double the amount of e-commerce jobs available compared to Amazon. Amazon will be hitting SA shores early next year with its jobs portal having around 22 e-comm-related jobs, compared to SA e-comm king, Takealot, with 47.

šŸ—¼Low Signal. Despite recapitalising in September 2022, Cell C remains insolvent ā€“ as seen in its latest financial results revealed last week. The mobile operatorā€™s assets are pegged at R5.7 billion with liabilities of R15.09 billion. Its subscriber numbers have also decreased significantly over the last 5 years from 17 million to 8 million.

šŸ§¶ Time Travelling Knitwear. Longing for the days of the Windows XP Wallpaper (you KNOW the oneā€¦)? Well, last week Microsoft dropped its ā€œWindows Ugly Sweater: Bliss Editionā€ onto its Xbox store and itā€™s already sold out. You can still add it to your wishlist ā€“ who knows, they may just do another run in future.

BUILDERā€™S CORNER

How to Lower Your Customer Acquisition Costs

OK, so you got some adoption, your usage is growing and youā€™re making some sales. Now, why arenā€™t you making any real profit yet?

Get down

Good business comes down to one thing: The money you get in (Customer LifeTime Value or LTV, i.e. revenue) minus what it costs you to get that customer (Customer Acquisition Cost or CAC) equals profitability (considering your customer servicing cost is under control, but more on that in a future edition).

Servicing costs aside, there are basically 2 ways to make more money from each customer :

  1. Raise the LTV ā€” This can be done through partnerships, reducing churn or upselling.

  2. Lower your CAC ā€” Acquire those customers for less.

The first one only works up to a point, I mean you canā€™t keep raising prices without taking pain. So, like most of us, youā€™ll want to focus on number 2.

5 Strategies for lowering your CAC

1. Know your numbers

The first step is to actually know what your current CAC is per channel. Build yourself an ā€œOmegaā€ dashboard that combines all your analytics with your weekly/monthly sales. Then looking at these costs, try different strategies in different channels while still measuring your CAC per channel.

Once you have your lowest CAC channels, Aā€“B test and double down. Boom.

2. Build a hyper-engaged audience/community

Create a standalone, associated audience-based product (ask Elvorne to help you) ā€“ a newsletter, community, blog, tool etc. ā€“ with marketability, so you can develop high value and engagement on it.

Test acquisition costs into that product instead ā€“ it should be cheaper because itā€™s a more neutral, value-driven space. Build your funnel to go from audience to your main product, optimise the conversion and double down on acquiring users via that route instead.

3. Build a solid referral mechanism

Word of mouth is great (because itā€™s practically free!), and its digital cousin is getting current customers to refer their friends and family. If your Net Promoter Score is pretty decent, take it a step further and build a referral mechanism with a strong internal campaign ā€“ reward people with value for referring others.

4. Diversify and upsell

You donā€™t want to raise your prices to the point where youā€™re not competitive. But that doesnā€™t mean you canā€™t increase your LTV in other ways.

Remember, you only pay CAC once. Once theyā€™re in your database, you can reach them cheaply. So why not create new products/services and upsell them?

5. Partnerships & collabs

Is another non-competing company talking to your market? Maybe thereā€™s a chance for synergy or some other reason to collaborate. Striking a deal where you share or cross-promote products is one way to access more of the right people at a lower cost.

Got a CAC insight to share? Hit reply and let us knowā€¦

THE RESULTS

We asked when was the last time you were in a Pep store, and would you believe Pep Home is rocking itā€¦

šŸŸØšŸŸØšŸŸØšŸŸØšŸŸØā¬œļø šŸ‘ All the time, baby (20%)

šŸŸØā¬œļøā¬œļøā¬œļøā¬œļøā¬œļø šŸ‘” Just for kidsā€™ school clothes (7%)

šŸŸ©šŸŸ©šŸŸ©šŸŸ©šŸŸ©šŸŸ© šŸ  Some good deals at Pep Home, though (22%)

šŸŸØā¬œļøā¬œļøā¬œļøā¬œļøā¬œļø šŸ“± Buying business phones cash at Pep Cell (5%)

šŸŸØšŸŸØšŸŸØā¬œļøā¬œļøā¬œļø šŸ›ļø Kids clothes at A.C.Kermans (13%)

šŸŸØšŸŸØšŸŸØšŸŸØā¬œļøā¬œļø šŸ’» Just HiFi Corp and Incredible Connection (15%)

šŸŸØšŸŸØšŸŸØšŸŸØā¬œļøā¬œļø šŸ™… Never have I ever (18%)

ā¬œļøā¬œļøā¬œļøā¬œļøā¬œļøā¬œļø šŸ˜† Iā€™m there right now! (0)

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