Word of Mouth

The formal economy is not creating enough jobs, and the jobs it does create are often inaccessible to most. The result is a national unemployment rate of nearly 30% across South Africa, with one in four living below the food poverty line. Word of Mouth (WOM) wants to change this and has built the first marketplace made with, by and for the informal economy. Whether a resident from an informal settlement wants to paint their house or paint their nails, they can find a local micro-enterprise (Member) they can trust. As Members, micro-enterprises gain access to the marketplace, formal supply chains, group discounts and training so they grow as their businesses do. But we don’t want to stop in South Africa, our solution could provide opportunity, choice, and sustainable incomes for informal micro-enterprises currently locked out of and left behind by the formal economy across the globe.

The formal economy is not creating enough jobs, and the jobs it does create are often inaccessible to most. Those unable to find employment are often reliant on the informal economy to survive, and become further marginalised and excluded from opportunities to reach their potential. This is a problem facing major cities across the world, where rapid rural to urban migration has created an ever greater need for income opportunities in urban informal settlements. In fact, one in three South African’s currently live in informal settlements, where unemployment rates are as high as 60%. Without formal work, skilled individuals often find themselves starting or working for local informal micro-enterprises. These individuals and micro-enterprises face a myriad of challenges, including: lack of access to middle-income markets and supply chains, poorly organised local markets, and low levels of business acumen. Furthermore, with transactions paid in cash they have no proof of income, making access to finance and capital to grow their mico-enterprises impossible. These challenges create a cycle of poverty, with as much as 70% of disposable income estimated to leave informal settlements.

WOM is dedicated to meaningfully improve the lives of residents of informal settlements. They can be defined in two groups, the WOM Members and the WOM Users (Customers). The WOM Members are typically previously unemployed, between 20-40, have anything from 2-15 years experience, and rely on ad-hoc jobs and work referred through their social network of friends and family. WOM’s solution addresses many of their needs through the benefits of membership, additional income, group discounts made possible through collective bargaining and access to supply chain through our network of converted shipping containers. The latter two initiatives were suggested by many Members in our monthly training sessions or in discussions when renewing their monthly memberships.

The second group benefiting are WOM’s Users. WOM Users are typically women, between the ages of 18-50, living in households with an annual income between 18,000 - 75,000 ZAR (1K USD - 5.5K USD). The Users face many problems when purchasing services in the informal economy, such as: lack of choice, lengthy search times, poor workmanship, theft, scams and even sometimes assault. These challenges are addressed by the choice the marketplace creates and our internal quality controls, such as reviews and background checks.

WOM has created the first online marketplace built with, by and for the informal economy. This marketplace ensures that informal micro-enterprises (Members) no longer just survive but have the opportunity to thrive. 

Potential Members sign-up to be part of the platform online, and are then invited for a face-to-face interview, during the interview process they complete a registration form and WOM conducts background checks and internal technical skills assessments. These assessments ensure all Members are competent to complete the services they are signing-up for. This is critical as most Members do not have formal qualifications, and have either taught themselves or learnt by shadowing other service providers. Once approved the Members pay their monthly membership fee and they are loaded onto the online marketplace where Users (customers) from their community who previously could not find or trust them can book their services. The product (marketplace) is effective at facilitating new trade as it is built for the community it serves. It is data light, mobile responsive, available in local dialects, and cash-based ensuring that Users do not need to be banked, and Members set their own rates making the platform affordable.

As Members, the micro-enterprises also gain access to additional benefits. Members can use our network of converted shipping containers, “Containers of Change”. These shipping containers act as community hubs and have many benefits for our Members. Members can rent tools they can’t afford to hold, and access materials (the supply chain) that aren’t available in informal settlements. This saves them time and money. By buying stock in bulk on the Members behalf WOM is also able to secure discounts from suppliers at rates the informal micro-businesses are not able to achieve due to their status as unregistered businesses and small trading volumes. In addition to the containers, Members can also attend monthly business acumen training sessions so that they are able to grow as their businesses do.

Our digital product also allows WOM to capture valuable and widely sought-after data insights on the cash economy. This data can be leveraged to support WOM Members access finance and help inform policy to create further economic and financial inclusion.

It is through this innovative business model and ecosystem that WOM is able to create and keep income, value and opportunity where it is needed most, in the informal settlements across South Africa.

Previous approaches to create economic opportunity in informal settlements have focused on formalising the informal economy through policy and legislative changes or by connecting low-income actors with middle-income groups outside these settings. WOM is different as it creates capacity, trust and connections locally to stimulate the informal economy from within and ensure less income leaves (The World Bank estimates as much as 70% of disposable income currently leaves). WOM achieves this through an architectural innovation. We have taken an existing business model and technology, and tailored it to an entirely new market, with both sides living at the base of the pyramid. For example, our online marketplace is cash only, available in local vernaculars, and data light. Our operational processes include tools that can rapidly assess the technical skills of potential service providers to ensure quality and trust in the absence of formal qualifications, and our network of converted shipping containers has created an entirely new distribution model for a chronically underserved market.

Through this approach we have managed to disrupt the way the informal economy trades. Not just changing the way that consumers residing in the townships purchase services, but also creating an entirely new model for income and livelihoods for some of South Africa’s most marginalised entrepreneurs. But we don’t want to stop here, we also want to use our unique data insights on our Members, income reliability and professionalism to create a new form of credit score that further improves their financial inclusion and access to capital.

Appropriate technology is at the heart of our solution and this impact. Firstly, our mobile responsive marketplace organises local networks, connecting local township micro-enterprises and local township customers who could not previously find each other through informal social networks. This provides additional income to help informal economy actors grow their businesses, while also stimulating local economic opportunity, with the value created staying and circulating in the township. Secondly, every WOM Member has a digital IDs, where User reviews are stored after each job. This creates trust between actors from different social networks, crucial in the absence of formal qualifications/certifications or personal referrals. Thirdly, WOM recently piloted digital Membership cards that Members can use in our network of containers to rent tools and to purchase materials. These cards have allowed WOM to transition from paper to a more scalable digital inventory management system. Finally, through the platform, WOM is able to collect data on the informal and cash economy that is currently limited and highly sought after. This can be leveraged to support WOM Service Providers access finance, develop training packages to meet their needs, and help inform policy to create further economic and financial inclusion. 

In addition to the current solution we are also exploring other technology we can integrate into our service offering. Examples include, VR solutions for training and certification of our Members, and vernacular chatbots for User support and bookings.

Since our launch we have signed-up over 4,500 Users, completed over a thousand bookings to double and/or treble our many of our Member’s income. However, our Members explain our impact best, Julius, a WOM Member, and appliance repairmen said, “This year with WOM, I plan to save. From the work already, I have bought land to build a home for my family. Before I was paid cents and could barely afford food. Now I am building a home for my future.”

We have achieved this by employing DFID’s Sustainable Livelihoods Framework to improve the residents of informal settlements financial, human, social, and physical capital.

Our digital marketplace provides a platform where informal economy actors can register their micro-enterprises, and local customers can book them. By verifying skills, and organising the local market and network online, we create social and financial capital for both our Users and Members. Our Members are connected with more jobs, improving their financial capital, and have access to training and community hubs. The training increases their human capital, providing them with the skills to grow their micro-enterprises. The community hubs improve Members physical and financial capital, as they can rent tools they don’t have the capital to own and purchase discounted materials not available locally.

The Users also benefit as they are no longer reliant on their immediate social network to find services, improving their choice, reducing their search costs, and reducing their risk to scams with all Members vetted before joining the platform.

We currently have over 4,500 Users and over 40 micro-enterprises (Members) signed-up for the platform. This has created over 1,000 paid for bookings for our micro-enterprises, and for the last seven month’s WOM has now been growing at over 35% month-on-month. In the next year we want to continue to build on this success and grow the platform. If we were to hit our high growth targets by next July we will have signed-up another 700 Members and trebled the number of Users on the platform to 35,000. Over the next five years we want to have scaled the platform to support over 15,000 Members and connecting over 700,000 Users with trusted services. 

In the next year WOM will build the foundations that are critical for the organisation to scale its services. Firstly, we will refine our product offering, testing new service lines, with a focus on adding services that are led by women and adolescents. The new services we have identified are: hairdressing, tutoring, or tailoring. Secondly, we will launch the first loyalty programme for the informal economy, while developing key relationships with corporate partners, civil society organisations and government institutions that will help the platform scale more rapidly and cost efficiently. Thirdly we will expand geographically, to more informal settlements in Cape Town and further afield to informal settlements in the City of Johannesburg. Finally we will refine and standardise our operational playbook, including but not limited to, User and Member Acquisition, Training, User Support, and Onboarding.

In the next five years we will apply the lessons and learnings from the first three years of operation and aim to replicate the platform across South Africa to become the digital marketplace of choice for all residents of informal settlements. We will have made millions of connections, supporting tens of thousands of micro-enterprises while also piloting the platform in key expansion countries, such as Nigeria and Kenya, to provide micro-enterprises and communities across Africa with the opportunity to reach their potential on a platform that is built with them, by them, and for them.

Now we have found market-fit and have a proof of concept, capital for growth is one of the key barriers to achieve our goals in the short-term (next year). In addition to capital constraints, WOM will need to build trust and community buy-in, to overcome risk averse consumer behaviour and concerns that customers have, due to their prior experiences, often being repeatedly scammed or subject to poor workmanship previously. The trust and value will be critical as we look to reduce platform churn, a common problem facing online marketplaces, where Members or Users take work off the platform. Trust will also play an important role in reducing our cost-per-acquisition, as it increases non-paid traffic rates and lifetime value of customers, which will be important in our cost recovery at scale. 

In the long run, WOM will need to overcome the following challenges. We will need to ensure that the platform stays in line with developments in labour law that affects similar business models. We anticipate that as we scale we will need to look at ways to make the platform increasingly accessible, reducing the cost of use, such as data (although currently data use has not been a problem). Finally, as WOM grows and the exposure of our work increases, there are risks presented by new ventures entering into the market and absorbing market share.

WOM will address the issues of trust in the following ways. Firstly, we will continue to build key relationships with trusted organisations in the location, such as churches, stokvels and clinics and key opinion leaders. Secondly, we will build trust by continuing to strengthen and expand our Member onboarding process, and add additional features to our customer feedback loop.

WOM will address the risks of Member churn by creating value for its Members beyond the marketplace, such as through access to training, tools, and group discounts. It will address the challenges faced by User dropout (where services are taken offline) through improvements in technology that will limit sharing of contact details, and also through launching a loyalty programme which will incentivise repeat purchases. This loyalty programme will also provide some benefits for the Members, further encouraging long-term membership.

We will mitigate longer term challenges related to data use by exploring the opportunity to zero-rate the platform (so Users do not require data), building dumb technology options, and setting-up third party sponsorship where WOM covers the data use for the domain. We will ensure that we keep on top of legal developments through our board composition and through relationships with pro-bono legal organisations. 

WOM cannot stop new entrants entering into the market, however, the risk can be mitigated if WOM can take advantage of its first mover advantage and grow the platform rapidly, building a strong brand, and a platform that benefits network effects, creating high switching for Members and Users.

WOM has four directors leading the strategic direction of the organisation, and four full-time staff, four part-time staff, and two contractors running the day-to-day operations.

Over the last 18 months we have built a team with the perfect mix of industry expertise and local knowledge and ownership. We have a board of Directors who are responsible for setting the strategic direction, and have over 45 years of experience developing scaling programmes for low-income groups in Africa. Sonja Kotze is a CFO, and South African national, with a wealth of experience in finance, governance and IT systems. Robrecht Vanrijkel, originally from Benoni, joined to help us build and facilitate our training programmes, utilising his 15 years spent experience in the training space. Thuleka Duze (pending board resolution) is an experienced entrepreneur and influential figure from Gugulethu, an informal settlement outside The City of Cape Town. In addition to her work at WOM, she runs a successful design and fashion boutique and logistics company. Simon Barson is a specialist in start-up and strategic planning with over eight years working with the senior management team of global health organisations and Rehema Kahurananga is a Kenyan national who joined the Board of Directors to provide marketing and communication leadership. 

These directors are supported by a small operational team. All operational staff hired for the roles have lived or are still living in the informal settlements. A hiring strategy has been critical to our success to date. It has provided the organisation with local ownership, connections, partners and product insights that have ensured that we meet the needs of the community and the micro-enterprises we support.

WOM has built partnerships with local and national institutions. At a local level, we have built strong relationships in the informal settlements with churches, stokvel’s (community saving groups), and clinics. These local institutions have been critical in raising awareness of the platform with potential Users and Members, while also building trust and local ownership of the brand. At a national level, we have built relationships with other civil society players and corporate partners. Examples include implementing partnerships with Harambee (a youth unemployment accelerator), Barneschone a legal firm, who provide pro-bono legal support and Tescoreco and Planet Nails who provide us with preferential rates on supplies for our Members. In addition to these corporate partnerships, WOM is currently in discussions with Buco (a large South African retailer), to launch between one and three additional co-branded containers in the community. 

In addition to these partnerships WOM has also built a community of technical experts who provide insights, advice, and connections as we explore new technologies further. Our technology experts include Shaun Conway, a serial entrepreneur and blockchain expert, Monique Holden, Product Director at The Training Room Online, and Owen Smith, Product Director at Spotify.

As an online marketplace WOM provides value for both sides of the market, the User (customer) and Member (micro-enterprise). Both sides of the marketplace we target reside in informal settlements. The value we bring our Users is that we save them time, money, and provide them with trusted services they couldn’t otherwise find. Whether they need to paint their house or their nails. The other side of the marketplace, the Members, benefit as they gain extra income through the platform, group discounts made possible through collective bargaining, access to the formal supply chain and training so they can grow with their businesses.

The key activities involved in providing the above value are: User and Member acquisition, platform and booking management, Member screening and onboarding, platform development, partnership and supply chain management, and container management. We currently acquire Members and Users through a mixture of offline and online acquisition. Our online activities are focused on two key channels Facebook and Whatsapp. Our offline acquisition is led by a sales team (previously unemployed youth) who sign-up Users at offline events held at churches, stokvel’s, clinics, and malls. These partnerships have been critical to our success, as have partnerships with key suppliers (who provide materials and tools for our network of offline containers), and other non-profit organisations who will provide training services for our micro-enterprises as we grow the platform. A growth that will be dependant on resources such as the organisations brand, technology, and relationships with donors, investors and stakeholders.

WOM is a hybrid social enterprise, with a for-profit based in the UK and non-profit based in South Africa. The UK company has been set-up as a vehicle to raise funds from social impact investors, with a focus on the technology development and innovation. The non-profit based in South Africa leads on operational delivery and will continue to raise funds from traditional philanthropic funding, such as corporate partners, foundations and individual donors. Funding raised through external sources will fuel growth until the platform is fully sustained by the revenue it generates (currently projected for 2022). The platform currently generates revenue through a monthly Membership fee (the equivalent of approximately 20% of total earnings in the given month) and a mark-up on parts sold through the “Containers of Change” (converted shipping containers). As the platform grows, it will also look to explore additional commercialisation opportunities presented by the consumer data* collected through the platform and online advertising opportunities that could be sold to corporate partners, and/or through paid for features sold to Members, such as profile boosting.

Note: *WOM is committed to the data protection of our Members and Users, and would never sell-on data to third parties.

I am applying to Solve, as I believe that becoming a Solver Team could be pivotal for WOM and for me personally, as it would come at a critical time for us both. For the organisation it would be invaluable to associated with such a prestigious network and brand, while also creating an unparalleled opportunity to raise funds, build partnerships and raise awareness of our success and work-to-date. These benefits will be crucial for WOM to take the next step in our journey and move from proof of concept through growth to scale.

For me, as a relatively young sole Founder, leading an organisation for the first time, it has been a challenging journey and I would relish the opportunity to have additional support and mentorship. Mentorship that would be particularly impactful as we move into a new phase of the business cycle. I would also be excited to be connected and collaborate with like-minded entrepreneurs across the globe, as my network is limited to the South African context, and I believe I could learn and grow from being exposed to ideas from other Solver team’s entrepreneurial efforts in differing geographies and cultures.

As a mobile technology solution, working with low-income groups, one key partner that Solve could connect us with to accelerate our growth and maximise our impact would be mobile phone operators in South Africa, such as Vodafone. A relationship with a mobile phone operator like Vodacom would provide an unparalleled distribution channel for WOM, while also providing a value add for Vodacom’s customer base, helping them further penetrate low-income markets. Beyond distribution, mobile phone operators are a key stakeholder as we explore zero rating our various product offerings, such as our website. Zero-rating would be invaluable as it would reduce the barriers to entry for new Users. 

In addition to mobile phone operators, we would love to partner with national South African retailers such as Pick n Pay and Shoprite. The benefit of partnering with such institutions would be two fold. Firstly, they would make ideal partners for our loyalty programme, with the potential of providing exclusive benefits for our Members and Users in exchange for WOM Points. Secondly, they typically are one of the largest employers of our target User demographic, women between the ages of 20-40 living in informal settlements. Partnerships could therefore open up a new channel of User acquisition for WOM while also providing a great employee value proposition for their staff. 

Beyond retailers WOM would also like to build partnerships with wholesalers and distributors of parts and materials used by our Members, so that we can provide them with better prices and group discounts.

Word of Mouth (WOM) recently added additional service lines to the platform, with a focus on unemployed women and female adolescents in informal settlements. Since launching these lines, we have seen a rapid increase in female membership with female led service lines account for over 70% of jobs completed on the platform. Although our impact is probably best represented by our Members, Zimkitha, a self taught Nail Technician says, “It is like I now have an everyday job….WOM feels like my mother, they help support me and help me grow.”

If we were to win the prize, we would want to empower more women to “have an everyday job” like Zimkitha. We would do this by launching at least two new service lines focused on women, and have already identified high demand lines such as: tailoring, nanny services, and hairdressing services. In addition to the service lines, we would 

launch another Container of Change (converted shipping container), to provide female entrepreneurs with a physical space to work from and supply point for materials not readily available in informal settlements.

Finally, we would also launch a peer-based learning programme and leadership group, called Abafazi Abazimeleyo (the women who own who they are). A programme where female micro-enterprises come together once a month to share learnings and experiences. As part of these fora, we would provide our Members with the opportunity to meet key business leaders and key stakeholders to raise up their voices.