More than three-quarters of employment in Sub-Saharan Africa is in the informal sector and a colossal nine in ten businesses are run by micro retailers. The tens of thousands of micro-businesses that make up the $1trillion offline retail market are barely surviving, however, and conditions are even tougher than before. The ongoing pandemic has exacerbated the already challenging trading conditions informal retailers operate in, with the supply chain disrupted and a restricted flow of goods meaning low stock levels and price rises.
One of the biggest challenges for retailers in Africa is the fragmented distribution model in which retailers find themselves navigating an inefficient process to source supplies. In Nigeria alone, there are more than 500 distributors and more than 4,000 sub-distributors and wholesalers. This level of fragmentation presents a range of challenges. Market penetration is low as top-performing brands are only available at less than 30 per cent of retail outlets. Retailers, in turn, have to settle for lower margins after sourcing products from middlemen and sub-distributors. Manufacturers also find it difficult to gather data on informal retail operations to have a clear picture of demand levels of particular products at any given time.
The offline retail market in Africa presents a significant opportunity for both manufacturers and retailers and there remains so much that can be done to support the growth of this vital part of Africa’s economy. The sector is full of some of the most industrious and resilient entrepreneurs you will meet anywhere in the world. However, operating in a crowded market with a fragmented network means more time is spent thinking about how to stay afloat than on consolidation and expansion.
Another challenge is access to credit, with many retailers not having the collateral and documentation that traditional financial institutions demand. Additionally, a large proportion of retail store owners are female entrepreneurs who experience added social and cultural challenges. As a result, many of them are unable to access the funds, networks and other resources they need to buy more goods, scale their businesses and generate more revenue.
Using technology to drive real change
This is why we founded TradeDepot. To consolidate Nigeria’s fragmented informal retail supply chain, connect the world’s top consumer goods manufacturers to retailers on the streets of Africa’s cities and support the informal retail sector to reach its full potential. We started off with a mission to make milk distribution to small retailers on the continent better, using technology. Today, we are scaling out the same technology to distribute food, beverages and personal care products more efficiently and help more retailers access the goods they need for their stores.
Retailers order and pay for goods using our mobile apps (Android and Whatsapp), USSD or a toll-free number and have them delivered directly to their stores via our fleet of vans and tricycles. Our mobile agents work closely with the retailers to help them improve their planning and cash management processes, organise their working capital better to access supplier discounts, and to deliver better service to their customers. For consumer goods brands, our retail insights enable direct-to-retail distribution in some of Africa’s busiest cities.
The capacity to connect directly to manufacturers at the touch of a button has saved retailers time and money and helped grow their sales through better revenue margins and steady stock levels. This was definitely the case with one of our retailers, Uzoamaka Chukwu, a widow and mother of two who is the main income earner in her family. Her store, Divine Favour Stores, is essential to the family’s livelihood and prides itself on delivering a quality, consistent service to its highly-valued customers. Through TradeDepot’s ShopTopUp, the business has grown its weekly merchandise volume by more than 1500 percent. She can also order stock and manage her inventory online, which has enabled her to increase her weekly orders by 441 percent while her basket size has increased by 178 percent overall. Her dream is to scale and grow her operations so that she can live comfortably and we believe we are helping her to do that.
Another TradeDepot retailer, Iya Wale, a small neighbourhood retailer in Lagos who was barely breaking even month on month and had seen no real growth in 15 years, increased her net monthly margin by almost 100 percent monthly, has hired three new employees and is now considering expansion.
It is our dream to replicate this success for all informal retailers across Africa. This is why we are so excited to welcome new strategic investors and partners on board in a $10million round of pre-Series B funding led by Partech, International Finance Corporation, WorldBank’s Women Entrepreneurs Finance Initiative (We-FI) and MSA Capital. All the parties bring with them a wealth of experience in helping micro-SMEs grow in various similar markets in Africa and around the world, and we look forward to leveraging their experience and the funding to continue the work we’ve been doing to integrate Nigeria’s fragmented informal retail supply chain, expand into other African cities and launch a suite of financial products and credit facilities to support our retailers.
We have already recorded significant traction in Nigeria and we want to apply what we have learned to address the obstacles preventing retailers across the country and beyond from building successful businesses and leading fulfilling lives. From last-mile delivery and aggregation of supplier inventory to merchant digitization and access to credit, we want to change the status quo and support the African retail market to grow and access global opportunities.
Providing better deals for a hugely underserved sector of African economies
Working to transform the informal retail sector in Africa means negotiating better deals with our global manufacturing partners for greater margins and providing a better, faster route to market for suppliers. It also means connecting entrepreneurs to mentorship and opportunities to link with domestic and global markets, to further support our predominantly female customer base to grow and expand their own businesses. For retailers like Uzoamaka, the opportunity to get the best deals on all merchandise from the comfort of her shop, just using her mobile phone, means valuable money saved, some of which can be passed on to her beloved customers, helping her business grow.
These retailers have been underserved for too long, but we believe that by harnessing the power of technology, we can create new opportunities to drive real social and economic change across the continent.