21 July 2017

Nigeria: E-Commerce in Nigeria - Konga Weathers the Recession and Rolls Out a Grocery Service to Build Deeper Relationship With Its Customers

London — African e-commerce may have suffered growing pains but there's no doubt it's at the beginning of a long journey to growth. Russell Southwood spoke to Shola Adekoya, CEO, Konga about surviving the Nigerian recession and the launch of its new groceries service, Konga Daily.

Konga.com was founded in July 2012 and started purely as an online retailer selling baby and beauty products. In 2014, Konga opened Seller HQ - Konga's Marketplace. Its current CEO Shola Adekoya (who was then on the budget team at Etisalat) was bought in as Chief Financial Officer in July 2013, and later moved to become the Chief Operating Officer at the company before becoming CEO.

"I was bought in to beef up the financial team just before Naspers came in as a shareholder". Other shareholders include Kinnevik, the founder Sim Shagaya and the employees.

Currently there are 200,000 active users:"This number goes up and down depending on the season and a number of other factors." The total customer pool is 750,000 and it has to exclude 150,000 customers for "unacceptable behavior." It has 500 people on the payroll and has 250-300 contracted staff.

The top three selling items are in descending order: phones, electronics (including computers) and white goods (which it describes as home and kitchen). Average delivery from the warehouse has come down from 42 hours to three hours. It has a single warehouse in Lagos and a transport network. The service is available throughout Nigeria and Adekoya told me that it has had a customer from Maiduguri in the North-East.

90% of its turnover comes from its Marketplace where individual merchants hold the inventory and 10% from direct sales.

Because customers have been buying high-value, one-off items, Konga has looked at how it can build a more continuous relationship with its customers. So it has launched Konga Daily, a groceries service, which warehouses everything except fresh produce which is then bought in. Early signs are looking positive. The service is only available in Lagos at the moment:"We have plans to roll it out. We'd like to follow the market and look to serve cities outside Lagos."

According to Adekoya, the buyers are "not from the top of society". It's the middle class in Lagos, Port Harcourt and Abuja which accounts for 60% of the orders. A further 30% comes from other 10% from rural areas. The latter are able to get something at approximately "Lagos price" without the usual stiff mark-ups. 50% are in the 28-45 age range and there is an equal split between men and women.

So who are your competitors for these services?:"99% of the competition is analogue: people physically going to the market or a shop". Jumia is its biggerst digital competitor:"It has slightly different approaches to the market. For example, it's only just started a marketplace. We've done that for three years. It's also a blend of offline and digital. But if you compare their online turnover to our online turnover, I reckon we're neck and neck." There's also sites like Supermart.com.ng and Gloo.ng, both online supermarket sites.

Will Konga expand into other African countries?:"For us it's the size of Nigeria, it's one of Africa's largest economies. Even though the rest (of Africa) looks interesting, what business model do you take there? What's becoming clear to us is that buying for the whole of Africa is impossible. It's more important to build a technology that is flexible enough to move to other countries.

Although Adekoya says that "the Nigerian story went south at the height of the recession", it has weathered the storm in large part because it gets external investment in hard-to-get dollars. But downward movement of the Naira also affects its growth as customers pay in Naira:"We've come down 50% in size in dollar terms. But it's something you can't influence and consumers still consume the same. The three investors have been on this journey for quite a while and understand it's a long-term play."


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