Mon, 28/10/2019 - 11:47
Having come under new ownership in 2018, Konga has stepped up its efforts to provide the perfect blend of physical and online shopping options to Nigerian consumers
Writer: Tom Wadlow | Project Manager: Josh Hyland
Street trading and small, independent shops have long dominated consumer shopping habits, with formal retail and ecommerce currently occupying around three percent of activity that is thought to be worth around $300-500 billion every year.
But while access to disposable income and low levels of internet penetration have helped to entrench the informal market, the picture is starting to change.
“What is important to note is the huge potential for growth,” comments Nnamdi Ekeh, Co-CEO of Nigerian ecommerce and retail store chain, Konga.
“Consumer spending in the country, driven by population growth and a growing middle class, is expected to hit a trillion dollars by 2025. A recent McKinsey report predicts that ecommerce will capture about eight percent of that market size, which is approximately $75 billion.
“Regardless of the current challenges we face today, we remain optimistic and try to keep our eyes on the future, by focusing on developing a great platform and distribution reach that will allow us to scale.”
The informality of Nigeria’s retail industry has always fascinated Ekeh.
Having studied in the UK and witnessed the opposite end of the shopping spectrum first-hand, the young CEO saw a massive gap in his home market and Africa as a whole, setting up multichannel retail brand Yudala on his return in 2014 before it merged with Konga in 2018.
“Basic things people outside Africa take for granted like retail credit, device insurance and product warranty were almost non-existent, which made shopping an increasingly frustrating experience for the average African,” Ekeh says.
“Shortly after moving back to Nigeria after my undergraduate studies, I launched Yudala with the support of my family and colleagues. We tasked ourselves with becoming the engine of commerce in Africa and this is what still drives us under the Konga brand.”
Increasing reach, both online and through physical stores, was the catalyst behind the operational merger.
At the time Yudala sold first party products alongside a select few products from merchant partners, while Konga had half a million traders on its platform and a formidable brand reputation to draw on. Konga had also invested heavily in proprietary technology and in-house applications, including a Central Bank of Nigeria-licensed mobile money company, in-built logistics management and tracking systems.
The marriage has already paid enormous dividends.
Since the operational merger, the newly formed company has been able to reduce costs by 65 percent and grow revenue by a factor of eight year-on-year.
“We have also added new business units to the family with the introduction of Konga Travels in February 2019, with Konga Health having launched in October 2019 and Konga Foods launching in December 2019,” adds Ekeh. “As we strive to be the contact point for whatever our customer needs, we will continue to come up with new ideas to meet them at every touch-point of their buying process.”
Recognising the need for both physical and online shopping options in a unified offering has been key to the success of Yudala and now Konga.
Indeed, global ecommerce giants Amazon and Alibaba followed suit in transforming themselves into genuine omnichannel retailers, the companies realising the benefits of establishing additional touch-points with consumers and generating further brand trust.
In Nigeria, the importance of trust cannot be understated.
“A physical store acts as a face for the brand,” Ekeh states. “With low internet penetration rates, it also acts as an ordering centre for customers. Since we launched order in-store functionality last year, we have seen a 2,000 percent increase in orders made from our physical locations.
“Furthermore, we keep a limited inventory of fast-selling items in our stores so our customers can make such purchases quicker.”
Perhaps the greatest benefit on offer, however, is the click and collect concept, what Konga calls Buy Online Pick in Store (BOPIS). This allows customers to pick up items at their convenience, a factor which has helped increase fulfilment rates while also providing opportunities for store staff to cross-sell in the process.
Konga currently offers this service across its network of 30 outlets in Nigeria, the company planning to hit 100 by the end of 2020.
“Our vision is to be the engine of commerce in Africa, and in five years we aim to be in 10 countries,” says Ekeh. “Having said that, however, we want to ensure we get it right and are able to provide customers with the same level of experience our customers in Nigeria have grown accustomed to.”
Beyond geographic expansion, the company is also expanding into the aforementioned areas of travel, food and health, while other important investments have come in warehousing infrastructure, with two new facilities in the north and southeast of Nigeria.
In the field of logistics, Konga has grown the operation of its delivery subsidiary Kxpress, a unit which manages 95 percent of Konga orders and transports orders via trucks, vans and motorcycles.
“Payment is another major investment area,” adds Ekeh. “Payment failure rates in Nigeria are as high as 70 percent, so to ensure our customers are able to transact with us, we continue to innovate around payment through our Central Bank of Nigeria-registered payment platform, Konga Pay.
“Over the last year, investments in these key levers have contributed to our current growth and will play a big part in our future trajectory.”
So too will Konga’s dedicated team of people, from management and IT experts through to customer-facing store personnel. Known as Konganians, Ekeh is quick to point to their role in the continuing success of the company, highlighting how the firm invests heavily in training and development.
“We strive to recruit only the best of the best and train them not only on their roles and internal processes, but also to be able to assimilate the Konga culture,” he explains.
“Our culture is something we have worked hard to build and will continue to develop, and because ecommerce is just a seven-year-old industry in Nigeria and brain drain remains a very difficult problem, we do our best to develop our people.
“For instance, we have a cadet programme where we bring in sharp minds across Nigeria within the fields of marketing, technology and production and bring our people up to industry standard. Those who are able to pass through our rigorous six-month training programme are then employed. In summary, we commit huge investments in developing our people and we ensure that we give our staff the best possible experience working for Konga.”
Another priority for the CEO is to continue utilising technology to navigate potential barriers to the development of Nigeria’s retail industry.
For example, its Buy Now, Pay as you Earn scheme has been extremely popular, offering customers generous payment terms so they don’t feel priced out of making a purchase. This, along with further penetration of its payment platform Konga Pay, are seen as big priorities for the company in the near future.
Ekeh’s final comments centre around rebuilding the reputation of technology and ecommerce. This is critical in view of recent unsavoury events surrounding a major competitor. Konga is determined to prove the value digital solutions can add to economies and societies across both Nigeria and the wider continent.
He concludes: “Our competition’s indiscretions have come to tarnish the image of credible African companies pushing to solve problems with technology.
“I implore people around the world to open their minds to the opportunities available in this fertile land and, most importantly, we must never discount Africa in any discussion about technology or growth.”