A Very Nigerian Opinion on E-Commerce and Online Fashion Startups

Folake Shoga shares her opinion on the recent spate of tech startups and apps mean to serve Nigeria’s fashion and fabric industry.

Two recent articles in Techpoint, the Nigerian online technology magazine, feature initiatives dealing with aspects of the clothing business. One is a startup letting studio space and equipment to makers, 360 Creative Hub; and one is an internet based fabric selling business, Fabricsphere. Reading up on the feasibility of these two initiatives has been an interesting experience, very much encouraged by the richness of Techpoint’s coverage of Nigeria’s tech and business ecosystem.

Having said that, as just a humble, occasional and above all provincial Nigerian, I’ll start by paraphrasing L P Hartley: “Lagos is another country; they do things differently there.” Sometimes, reading official accounts, reports etc of events in Nigeria really jarrs with one’s lived experience of the country (even though being as the standard of written professional journalism is generally excellent, this hardly every happens when reading the actual quality newspapers, Punch and The Guardian and their ilk.) In the aforementioned Techpoint articles some of the prices quoted for goods and services seem steep to me, which surely militates against takeup, but I am, as I said, provincial, and moreover brought up by Ijebu people. No doubt everything costs more in Lagos.

Startup culture is a thing in itself; current, progressive, innovative, aiming to breach new ground or disrupt! received conventions – although strictly speaking away from the comfortable global North there may already be more disruption going on than we are entirely comfortable with. But the term itself, startup, comes surrounded by an effervescence of aspiration, floating on an expectation of the power of a tech-determined state change in human affairs. “First we’ll click here, then we’ll be in tomorrow today already! Yay!!”

As recently as 12 years ago it was impossible to prejudge which casual, frivolous digital activity would end up as an engine of massive social change. Nobody could possibly have foretold, for instance, how a site for rating the comparative attractiveness of your female fellow students could have morphed into a giant data-gatherer, news disseminator and influencer of global public opinion. Or how a site for online shopping could evolve to be at the forefront of research into the logistics of drone technology and other automated delivery systems. So there is a hope and a hype around web-based startup culture, an eye for the next big thing, the next new system that will prove that from small beginnings come big changes. Nigeria, as a vast untapped market, has the potential to be a hive of new technology activity, and Techpoint in it’s many articles provides an interesting and thorough overview of the local scene, though concentrating almost entirely on Lagos.

Read On…

Launching Our Digital Documentation Project: Ibadan’s Tailors, Traders, and Textiles by Nigerian/British artist Folake Shoga

After months of hard work, I am very honoured and proud to announced our new digital documentation project by my friend Folake Shoga, a Nigerian/British multidisciplinary artist with more than three decades of experience.

She went on a journey of discovery through the twists and turns of the informal value web that holds together West Africa’s famed textiles and fashionably styled culture.

Her window to this world is centered around Ibadan, Nigeria, and she takes us through an illustrated, personally narrated documentary that spans the experience of getting a new dress, from choosing the right fabric, all the way through building a fashion brand.

Come and join us for this fascinating peek behind the scenes! You can also find this unique photo-documentary again on my portfolio page.

African E-Commerce: Successfully Leapfrogging The Metrics of Fail

Postal networks are critical elements of the e-commerce chain, a UN report said, including home postal delivery as an indicator in a new global index to measure countries’ readiness to carry out business-to-consumer (B2C) e-commerce. ~ source

By these metrics, countries on the African continent such as Nigeria rank 101st on the global index, far below South Africa at 67th place, and Cote d’Ivoire isn’t even on the readiness list. Why should this matter?

Jumia, one of the rising giants of pan African e-commerce, just opened 6 new hubs across the Cote d’Ivoire, and happens to be headquartered in Nigeria. On the other hand, South Africa has been struggling to get its e-commerce industry off the ground to meet its full potential.

While the reports such as these may indeed be organized collections of tastefully analyzed data and well presented charts and graphs, are they able to offer any meaningful insight? This report presents The UNCTAD B2C E-commerce Index as a means for countries to assess their readiness for e-commerce and identify the areas that need further development and investment.

Konga Warehouse, Lagos, Nigeria

Yet, on the ground, the “least ready” countries seem to be leaping forward, building brands and developing ecosystems for the emergence of supporting services, employment opportunities and even, niche platforms. How does all the hard work that may have gone into the creation of such reports help them?

Metrics – the attributes by which to rank or measure – may not always be universally appropriate, nor will they always represent the real world operating environment. As African economies emerge onto the global platform – both real and virtual – they may require new ways to measure opportunity and success.

Metrics that can realistically reflect their unconventional characteristics of cutting edge communications commingled with undeveloped infrastructure. Else the growth opportunities such as those in Cote d’Ivoire, which isn’t even listed in the UNCTAD B2C E-commerce Index may pass under the nose of international players.

Yes, Africa is starting from a very low base, but early investors like Rocket Internet’s Jumia know that its only here that one can show results like 900% growth in sales in as many months.

Navigating the African Informal Retail Sector

Nigeria’s consumer market has captured global attention. A significant proportion of this emerging market opportunity is in the FMCG category. Due to historical reasons, 87% of this retail trade happens in the “unorganized” or “informal sector”. The market is highly fragmented and inefficient.

Yet due to the nature of the informal economy, most of this economic activity has been overlooked or not captured by conventional market analysis and research.

CPG companies wishing to enter this market need a map of the landscape in order to navigate the opportunity successfully or to design the most appropriate and relevant business model for their needs.

Situation Analysis

Nigeria’s informal retail trade can be segmented into three major categories – Tier 1 (approx 5%), Tier 2 (approx 30~35%) and Tier 3 (approx 60~65%) of which Tier 1 is the most formalized with some amount of business processes in place.

The real challenge in addressing the market commercially is the unorganized nature of the bulk of the trade – Tier 3 – who tend to be market women buying and selling goods in open air markets and street corners without any business infrastructure. There is no feedback loop in place for manufacturers and distributors who have little idea on how to plan and estimate their product pipeline.

Yet, the methods and tools available in the formal economy with its information, communication and financial services infrastructure cannot be directly implemented either due to the informal, flexible, unstructured nature of the sector.

There is a gap in knowledge and in understanding of the business practices in the cash based informal economy. In order to bridge this gap, we need to begin by understanding the informal retail business from the ground up. Then we need to figure out how to use smartphone technology to map retail locations and keep a finger on the pulse of consumer demand and product sales flow.

Framework required for optimizing informal retail market research for CPG distribution

Landscape of informal retail in FMCG
1. Market survey of FMCG retail distribution space – trends in etail, ecommerce, business models, distribution models, startups and apps.
2. Insights on demand creation, market development, consumer behaviour – loyalty, relationships, purchasing patterns, choice of location.
Identifying touchpoints for intervention – with and without technology – to improve efficiency of system with respect to: Data gathering, inventory management and forecasting
1. Identifying attributes by which to segment and cluster retailers – Volume and/or Frequency, location, density, product categories, profitability

The basis of the optimal solution for maximizing distribution of consumer products across the vast, undocumented and fragmented informal retail sector, such as in Nigeria, would be using Pareto’s Law to cluster and identify the retail outlets to be reached for a particular product category’s target audience and thus, crafting the most cost efficient reach strategy.

Using technology to optimize data collection

ITC in India has already implemented the use of GPS in a tablet based inventory management solution which sales officers use in the remotest areas to send real time data on inventory, demand and sales back to the company headquarters using ubiquitous mobile connectivity in the remotest rural area.

With the right list of outlets and channel clusters, manufacturers are better able to offer the right product format and size to meet the particular needs of the consumers who visit those particular outlets.

Crucial details such as store location, type of store, trading days, opening hours, access to power and water, the presence of a storeroom, categories stocked, and a long, long list of other characteristics should be captured during the survey. Simply knowing which stores have refrigeration can transform the business of a Guinness distributor in Nigeria, for example.

Clustering retail outlets by volume of sales as one of the attributes.

What’s missing?

While reasons for visiting different retail formats were documented what’s missing is the frequency of visits. Also required is a chart capturing purchasing patterns seen most commonly among the majority (the prepaid or kadogo economy) who manage on irregular incomes in informal markets where over 90% of all transactions are conducted in cash money.

Those need to be mapped against buyer behaviour for a true picture of the rhythms of the bazaar, without which the CPG firms will not have a finger on the pulse of the market, just reams of numbers without a contextual framework and foundation. One element, for instance, would be seasonality, the “high season” and “low” which are commonly seen in cash dependent markets.

Also, flexibility in this context does not simply mean variety in packaging and SKU sizes or branding the product container. Flexibility refers to the flow of cash – the time and money – that allows for the management of volatility between outgoing expenses and incoming cash flow. In the retailer’s context, this would be the interplay of credit and cash, inventory and demand and of course, “fast moving goods”.

Lets see how this research initiative proceeds to understand and grapple with that critical characteristic of the operating environment and retail ecosystem that distinguish the African consumer market.

Download the Neilsen Africa Retail Labyrinth report as a PDF. Contact me if you’re curious to know more about the original thinking behind the situation analysis and research plan.

How e-commerce leadership is driving innovative business in Nigeria

While it’s still under construction, there’s an unusual mall coming up in Nigeria. Reports say its aim is to combine the virtual and real shopping experience – retail outlets and shopping alongside with a bonded warehouse and ecommerce facilities.

Nigeria’s retail opportunity has been garnering international attention; its economy surpassed South Africa’s last year to rank #1 on the African continent.

The infographic above puts the development of the formal retail sector in Nigeria – from its infant stage in 2006 to its projected capacity this year, in greater perspective.

Less visible in the global media has been the rapid growth of Africa’s ecommerce sector. A recent report by market research firm Ipsos, on behalf of PayPal, puts the Nigerian ecommerce as the frontrunner on the continent. 65 % of the country’s 50 million internet users having at one time or the other shopped online, surpassing the usual contenders – South Africa and Kenya.

Infrastructure and delivery channels will be make or break for up and coming ecommerce players hoping to succeed outside of the urban markets such as Lagos. Of note will be ambitious initiatives like this recently funded startup focused on e-commerce logistics – Africa Courier Express:

Eksin said the startup filled an important gap as logistics in Sub-Saharan Africa is difficult given the lack of infrastructure and poor addressing across the continent.

“These, coupled with the fact that most logistics businesses today need expertise in pay-on-delivery services, and this makes our job quite difficult,” he said.

“Another challenge is the poor road infrastructure we encounter across the markets we operate in. However, the opportunity in Africa is so much larger than the challenges and we are excited to tackle all challenges and help our customers grow and move their goods across the continent.”

All of this seems very exciting, stay tuned as I keep my eye out for more insights on how this will play out in an operating environment (Nigeria’s) where the vast majority of retail is still informal and cash transactions dominate.

Nigeria pursuing deeper understanding of informal sector; now estimated at 57% of rebased GDP

From the BusinessDay article dated June 25th 2014

Nigeria’s informal sector accounts for as much as an estimated 57.9 percent of the nation’s rebased Gross Domestic Product (GDP), Daouda Toure, United Nations resident coordinator/representative of the United Nations Development Programme (UNDP) in Nigeria, disclosed on Tuesday.

This, perhaps, makes the country the largest destination for informal activities in Africa.
[…]
Toure said the study identified lack of access to credit; poor technical know-how; inadequate training opportunities, infrastructure deficit, and incoherence of the formal and informal sectors, amongst many others, as factors which inhibit the growth of the informal sector in the country.

He noted that although the informal sector has been expanding rapidly in the 21st century, its specific role in the economic development of many countries is yet to be fully documented while relationships between it, economic growth, and poverty are not fully clear.
[…]
In his opening address at the workshop, Bashir Yuguda, supervising minister of the National Planning Commission, said the comprehensive study was the first on the informal sector of the nation’s economy in the last ten years.

He also observed that the potential of the sector in providing employment for the teeming population, reducing poverty and contributing to the nation’s GDP growth aspirations cannot be overemphasised.

He, however, raised the concern that despite these anticipated benefits, there are still knowledge gaps about the character and appropriate role of the informal sector in Nigeria.

He said it was in realisation of this that the study has not only assessed the contribution of the informal sector to the Nigeria’s economic development, but has also undertaken an in-depth appraisal of the characteristics of the sector, including issues of size, structure, processes and practices, while exploring the prospects for integrating it into formal economy.

I’m looking forward to seeing this research.