With the recent disconcertion happening in the eCommerce space in Nigeria, many have been forced to believe that eCommerce is no longer a profitable venture in Africa, except some frictions such as transport network, pricing, policies and securities are fixed. It’s no longer news that Konga was recently acquired by Zinox, Dealdey, Efritin and OLX have closed down their office and Gloo is shutting down in few weeks’ time. Konga’s inability to deliver expected returns on investments for Naspers and Kinnevik has proven that running a sole-eCommerce business in Nigeria can be a very wrong investment choice. This is because a wholly eCommerce currently sucks money and until you are ready to keep feeding the draining basket till the point of inflexion, you do not have a viable venture yet.
FoodLocker, a foodstuff and grocery eCommerce/ retail startup in Ibadan, Nigeria, seems to be getting the eCommerce business model that fits the Nigeria market right. Founded by Femi Aiki, an ex-Amazon and Jennifer Okoduwa, an ex-Bunnings Warehouse, U.K with over 10 years’ experience in Operations Management, Finance, Marketing, Sales and Engineering. The startup has a vision of providing a one-stop shop for grocery and consumer items in Nigeria. The idea is to use the e-commerce technology that drives retail, and delivery of products to connect the farmers to the market, eliminating middle men and thereby, cutting down costs. The start-up boast of her high quality products, good market prices, and short delivery time. How is FoodLocker, creating a new basis for competition? Below are two important elements that may be responsible for the high traction it is gaining:
- Hyper-localization of operations
Lagos is undeniable, the largest market in Nigeria, for startups and entrepreneurs. These huge potentials abundant in Lagos, have not been without challenges. When it comes to eCommerce, logistics have to compete with traffic and the busy environment of Lagos. The location of a business is very critical, as it goes a long way to determine its expenses, delivery time, and internal operations. Business have to make the decision, either to be sited close to the raw material (input) or close to the customers. The choice of FoodLocker, to be cited in the city of Ibadan, seems to be paying off. Ibadan city, offers a good proximity to farmers, who are the main producers of food items and also easy access to the huge population size of about 6 million. Ibadan also, offers a strategic geographical and population divide in the southwestern state, making it quite easy for the company to scale operations to Lagos, Osun, Ogun, Ondo state.
One of the challenges facing eCommerce operations is the poor transport network. This increase the cost of distribution, delivery time and overall operational expenses. By the hyper-localization strategy of FoodLocker, they are able to concentrate their efforts on key areas of the Ibadan city rather than trying to service the whole of Ibadan. They are able to deliver on their brand promise of a maximum of 2 hours delivery time. Attempting to focus on a large geographical scale by an eCommerce start up can lead to the dissipation of a whole lot of effort, time and money.
Their proximity with farmers and customers will also offer them the avenue to get honest feedbacks from them, make improvements to their value proposition and continue to iterate the loop, making it easier for their business model to be scaled to other geographical locations.
- Offline Strategy
As earlier noted, a wholly eCommerce strategy may not be successful in Nigeria at the moment. There must be a complementary product/service offering that fills the revenue-expenses gap. Amazon, despite being an eCommerce, recently acquired Whole Foods, a premium grocery chain, which now competes with Walmart on the basis of price. Alibaba, on the other hand, has been rapidly expanding its offline retail store, Hema, throughout china. Despite being an eCommerce, the tech giant has grown its brick-and-mortar supermarket to 65 stores over the last years, to merge online and offline retail. This makes it possible for them to deliver orders to customers within a 3km radius, in 30 minutes.
FoodLocker has, likewise been able to employ a massive offline strategy to drive her eCommerce sales. Rather than focusing on vanity metrics such as website page visitor, views, they focus on collecting primary data and honest feedback from customers, via physical interaction. Just like online adverts cannot substitute traditional marketing, eCommerce can’t equally do the same. The digital space can only bridge the gap created by traditional methods, to offer more convenience, increased service time and easy accessibility.
The employment of offline strategy by FoodLocker, is very critical to building the trust element, which seems to be a major hindrance to eCommerce deployment in Nigeria. As opposed to the popular belief, they do not operate an asset-light eCommerce. When a customer walks into the FoodLocker warehouse, sees the high quality items displayed, and interact with friendly operators, it gives such a boost to confidence, that the company will deliver to specifications, when orders are placed online. The physical presence of the store clears the doubt usually clouding the minds of customers. This is the reality in Nigeria. People want to see what they want to buy first before making payments. The assurance that they can easily walk into your store, to make complaints/ or return goods is very vital to developing that mutual relationship. No eCommerce that removes that human element of physical interaction, can find easy acceptability. Users are not going to transact on your online platform simply because of its wide array of products, or quality UX design. They want to imagine that “seen” human behind the screen as they place their orders, and make payments. FoodLocker, doesn’t offer payment on delivery, and there is an 100% money back guarantee, if they fail on quality.
Despite the challenges facing eCommerce in Nigeria, employing a product specialization approach, hyper-localization, plus an offline strategy will go a long way, to develop value creating strategies into the business model. FoodLocker, with over 1 year of operations, is growing her customer base, increasing returns on investment, and offering a high growth trajectory. Business is largely depended on the environment, it is situated. The western eCommerce model can’t fit into the Africa ecosystem. We must understand the culture, users’s demands, and develop a working model, that carefully caters for the customers’ needs and aspirations in Africa. The human judgment on the needs of customers, may not always be right, but can always be perfected via personal interaction, validated learning and emphatization of customers’ inexplicable ambitions.
This piece was written by Durotoluwa Olumide from Osun state. He offers advisory services on innovation, business strategies and developmental issues. You can contact him directly via: firstname.lastname@example.org