Iya Beji is a popular retail trader on the mainland axis of Lagos, Africa’s most populous city. Whenever she went to get new supplies from the market the whole neighbourhood would be aware-she usually would ask the young men in the area to help offload and carry her goods to the shop.
It’s been over three weeks since anyone was approached by the middle-aged trader. What has changed? Her neighbours are curious as her shop is filled with new supplies.
She got introduced to one of the eCommerce platforms that are riding on technology to redefine the sector. The technology and services platforms are transforming how informal retail stores operate. She was enabled by one of the players to order goods and get them delivered to her shop. She has been quick to show anyone who cares to see the app through which she made the order.
“Our mission is to empower these informal retailers through our ecosystem of digital products, so they are equipped to run profitable and sustainable businesses. We strongly believe that technology has the potential to transform the way informal retailers conduct their businesses, by using it to facilitate – with just a click of a button – fast and easy access to a wide assortment of consumer products at zero delivery cost to the retailers,” Alerzo CEO, Adewale Opaleye said in a statement.
Some of the eCommerce platforms that are leveraging technology to empower the entire value chain- manufacturers, distributors and retailers include TradeDepot; enables Factory-to-Retail distribution for Consumer Goods companies, Omnibiz; a unified distribution platform, digitizing the chain from distributors to retailers and Alerzo; an all-in-one technology partners for informal retail store operators.
Checks by BusinessDay shows that through the tech-driven eCommerce platforms, retailers can order products via SMS, voice and WhatsApp and deliver them to their stores in less than 10 hours. Many of the companies who recently entered the sector to close the industry gaps own and operate full-stack tech-driven supply chain and logistics to process these orders. Some of the companies provide warehousing and fulfilment solutions to suppliers and storefront delivery to informal retailers.
While the new ‘guys on the block’ are seen as disruptors and competition to already established distributors, checks by BusinessDay shows that, on the contrary, the value offering of the tech-driven players is a win for all.
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The eCommerce platforms do not only improve and upgrades the informal market and drive the digital economy goal, but they also help manufacturers and distributors to become more efficient. They are helping to include all players in the informal retail market worth $100 million on board. Among other things, they also drive financial inclusion.
Narrating the story behind Alerzo, the company CEO, Opaleye said growing up, he watched his mother burn both ends of the candle to provide for both him and his siblings. She owned one informal retail outlet. Like everyone who owned similar outlets, she went through many challenges including inconsistent inventory availability, limited access to financial aid and unreliable market pricing trends.
“While studying at a university in China, I saw firsthand how technology could transform and empower communities. Seeing the challenges my mother went through spurred me to drop out of school and create a similar solution for the Nigerian informal retail community. Since 2019, Alerzo has continued to grow and expand into most of the states in the South West, and more recently, North West & Central,” he said.
According to Opaleye, the e-commerce sector holds so much potential, and Alerzo operates where it matters: the informal retail sector.
“In Nigeria, the informal sector is classified into micro, small and medium enterprises (MSMEs). The sector makes up 50 percent of the nation’s gross domestic product (GDP), making it the major source of economic growth, productivity, and competitiveness. Moreover, 90 percent of Nigeria’s retail market transactions happen in the informal channels, and the Food & Consumer Goods-retail market is worth (estimated) over $40bn,” he explained.
While there are a plethora of challenges within the informal retail sector, the eCommerce platforms say they also see opportunities. They aim to solve the challenges by creating digital products that will make the lives of informal retailers easier.
Nigerian retailers usually take a day off from the store to visit a central market, pay for transportation and haul a large amount of inventory back to the store, avoidable stress, the players replace this stressful experience by not only reducing costs and time spent running a retail shop but also improve the livelihood of these working women.
The informal retail market is characterized by challenges such as limited inventory due to high demands (the market is underserved); retailers have less access to finance which sometimes lead them to buy adulterated products; the market is clustered and products are often overpriced because prices are largely unregulated; distance to market; opportunity costs; dangers of travel; inadequate transport for purchased goods – all of these are some of the challenges impacting informal retailers. But the good news is that the eCommerce players are helping to solve these challenges one after the other.
Alerzo for example created a marketplace, ‘Alerzoshop’ to distribute FMCG goods using a first-party relationship platform which allows suppliers to clear inventory faster and lets Alerzo control the supply chain and delivery. The platform connects retailers to local and multinational distributors of consumer brands, like Unilever, Nestlé, Procter & Gamble, Dangote, and PZ.
As the eCommerce platforms did with Iya Beji, the technology-driven companies have huge potential to create value and support for players in the entire value chain, that is why market players that are familiar with the companies describe them as a new marketplace that allows manufacturers and distributors to sell directly to retailers.
With the business models of some of the players, their partnership with industry players in the manufacturing and distribution value chain could increase inclusion, particularly with the informal retailers in the sub-urban and rural areas.
A PwC MSME Survey conducted in 2020 showed that Nigeria’s informal retail sector comprises widely-spread open markets, where commodities such as, food, clothes, electronics, building materials, furniture, and so on are sold; and they include neighbourhood stores ranging from large to small operators as well as kiosks, roadside food sellers, and street hawkers.
The mission of the eCommerce platforms as gathered from their website is to empower informal retailers through its ecosystem of digital products, so they are equipped to run profitable and sustainable businesses.
“We strongly believe that technology has the potential to transform the way informal retailers conduct their businesses, by using it to facilitate – with just a click of a button – fast & easy access to a wide assortment of consumer products at zero delivery cost to the retailers. With our digital platform, retailers are now saving money on the cost of products because it’s cheaper on our platform versus the open markets – and on delivery fees, these savings, in turn, provide the needed boosts for their businesses and widen their profit margins,” an executive of one of the eCommerce platforms said in a statement.
Acknowledging the potentials of the industry players and following the growth in Nigeria’s eCommerce market, many of the young companies redefining the retail have been attracting investment from both local and foreign investors.
For example, Alerzo in 2020 announced a $10.5 million Series A round led by London-based Nosara Capital. FJ Labs and several family offices from the U.S., Europe and Asia, including Michael Novogratz’s.
In total, the young company has raised more than $20 million since its launch. Early investors include the Baobab Network, an Africa-focused accelerator based in London, and Signal Hill, a Singapore-based fund manager that participated in its $5.5 million seed round last year. The company also said it closed a $2.5 million working capital facility to serve its customers.
The core business of these b2b platforms is to distribute FMCG goods using a first-party relationship platform which allows suppliers to clear inventory faster and lets the platforms control the supply chain and delivery using their technology network.
Given the lack of trust in the marketplace and the requirement to pay on delivery, Opaleye says this was the most inclusive business model where the economics made sense for the companies involved.
From all indications, the efforts of these digital platforms will further open the Nigerian informal retail market to more possibilities. In the long run, it would be a win-win situation for the sellers, manufacturers, distributors and buyers. And ultimately help drive a virile digital economy for Nigeria.
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