How a Nigerian tech startup is helping retailers make N300,000 monthly

If you’re new to the world of retailing then you’re welcome to continue reading along. In this piece, I will explain how a Nigerian tech startup is helping retailers make N300,000 monthly by connecting them to inventory at wholesale prices.

Eze and Kalu did not make the journey from Eastern Nigeria in search of greener pastures in the West. They were born and bred on the streets of Lagos. They are both armed with secondary school education which is enough for them to survive and make some money as sales boys in the markets of Lagos Island directing people to shops in the hope that they might earn a commission if a customer buys something from the shop owner.

The brothers will wake up very early in the morning and head straight to the markets to find customers who do not know their way around and direct them to shops where they will find products depending on their budgets. The brothers have the directory of the entire market in their heads and can tell you what products have the highest margins and are in high demand if you choose to stock them, resell or redistribute.

The Lagos Island market is home to the biggest FMCG distributors as well as wholesalers in other categories like fashion, electronics, household items, and pharmaceuticals. It is also home to the famous Idumota, Balogun, and Oke-Arin markets where transactions worth millions if not billions of naira are done daily. The markets are patronized by a lot of people and it is often chaotic finding your way around. To find your way around the market if it’s your first time you will need the help of market boys who will direct you the shops and earn commissions from the total amount of products you purchase. Competition among the market boys is very tight as they try to secure the attention of customers, pitching you the best prices so they can be your market guide.

Some of the market boys are getting smarter and are looking for innovative ways to secure new customers who do not want to come to the market themselves. The usual channels are Facebook groups, Instagram, WhatsApp, and Twitter. These platforms are filled with vendors selling all sorts of categories. They would ask that you select what you want from their profiles, pay and they would deliver. They simply display the products on their social media platforms, markup the prices so they can make enough profit and pay for delivery to the customer.

Kalu the younger of the brothers will soon learn of this way of finding new customers and will go-ahead to set up accounts on Facebook and Instagram. He will upload the pictures of products and attach their prices in the descriptions also telling his contacts to reshare so they can earn a commission if he makes a sale. He will soon build a network of other resellers who buy diverse products from him. Eze the elder brother isn’t as tech-savvy as Kalu and can barely use WhatsApp efficiently. With a little coaching, he will learn to use WhatsApp to send broadcast messages to his contacts and share status updates, his two main channels. Unlike his brother, he bought a delivery bike and is willing to deliver items to his customers for extra cash. Resellers like Kalu exist who operate like independent FMCG salesmen, motivated by the profit and the quick turnover from goods in high demand. It’s possible to enable more resellers like this and empower them with tech to make their jobs easier. The advantages to the supply chain are numerous, including the quick time to market and an asset-light delivery model which will favor distributors and wholesalers.

1 carton of Pure Bliss Wafers (45G x 72) costs ₦4,500 at wholesale price and ₦5,000 at retail with an average profit margin of N500. If you could sell 10 packs every day for a month (24 days) you could earn ₦150,000 monthly. Product selection skills are important to becoming a successful reseller or redistributor. Price and market demand are key to a product’s success and a reseller must know how to use it to his advantage. Startup capital for a reseller is next to zero, a mobile phone with an internet connection and good relationship with a distributor or wholesaler would be all that is needed.

Tech Startup Saya has been working with the brothers and other distributors to digitize this distribution model. First, they started manually, using spreadsheets and a WhatsApp group to teach would-be resellers how to use WhatsApp to reach customers digitally. They will list the products of distributors according to market demand and help the resellers decide which categories or products had more margins so they could turn in more profits. To automate this process, they had to find a way to manage orders, inventory, payment settlement between the distributor and reseller when a sale happens, and even logistics.

The global pandemic has taught us new ways of solving problems. I see how Saya could transform and formalize the informal supply chain by bringing more distributors and retailers online. A direct-to-consumer(DTC) channel can also be exploited by small scale FMCGs trying to bypass bigshot distributors who won’t move their products. They could reach resellers like Eze and Kalu easily and penetrate market categories that used to prove difficult.

The informal retail market in Nigeria is highly fragmented and difficult to penetrate by new entrants who cannot afford distribution assets and channels already built by legacy players. The margins reduce from the key distributor down to the wholesaler and depreciate further as it gets to the reseller. To bypass some of these players(such as the wholesalers) will mean better margins for the resellers and fewer distribution costs. It will create what looks like a DTC channel although not fully clear but small and medium scale manufacturers might be interested in giving it a try.

Street or traffic hawking is not economically scalable as a DTC channel for FMCG. Government policies forbid it, making it a dangerous sport for those who thrive from it. Taking a closer look at what Saya has to offer or could morph into, it could become the new way to hawk goods on digital channels reaching more consumers. Some of these channels already boast of hundreds of millions of daily active users (DAU), users that resellers, wholesalers, key distributors, and manufacturers could leverage.