CEO & Co-Founder, TradeDepot
Technology as a tool to aid Nigeria’s Commerce - CEO, Trade Depot
ONYEKACHI IZUKANNE CEO, TRADE DEPOT
Subscribe to our Channel for high profile interviews. Follow us on Twitter at / arisetv |
and Instagram: / arisenewsofficial |
and Facebook: / arisetvnews |
About Onyekachi Izukanne
Onyekachi Izukanne, CEO and co-founder of TradeDepot, has described the Nigerian retail market as largely offline, with modern stores accounting for only two to three percent of sales. He stated that the company’s goal is to use technology to reduce supply-chain inefficiencies for informal retailers, who he said represent the majority of the market. Izukanne noted that TradeDepot provides a mobile B2B platform that allows retailers to order goods via an app, WhatsApp, toll-free lines, or USSD, and that the company also offers working capital financing based on transaction histories, reporting a 97% repayment rate in pilots. Izukanne said TradeDepot began operations in August 2015, initially focusing on milk distribution with a large dairy distributor. He added that the company has since worked with organizations such as PSI and is building relationships with consumer goods companies including Coca-Cola. He described the company’s vision as becoming the default B2B supply platform for retailers in the consumer goods space, with a focus on creating APIs to enable direct manufacturer-to-retailer supply.
Transcript (35 segments)
N
Narrator0:10
Nigeria is the most populous country in Africa, no doubt, and the seventh most populous country in the world. As a result, Nigeria has the largest consumer goods market on the continent. With these numbers, it goes without saying that there is a massive market of opportunities for profit and growth. For manufacturers, however, success does not come easy, as operating conditions are equal to some of the most difficult in the world. Companies face an extremely daunting task trying to implement modern supply chain solutions in the market with a low maturity level and crumbling infrastructure, with informal retailers, street vendors, and open markets accounting for about 90% of all retail sales.
H
Host1:10
Our first guest, Onyekachi Izukanne, glad to have you join us.
O
Onyekachi Izukanne1:15
Yeah, thanks for having me.
H
Host1:19
Let's start this way. Just like I read there a while ago, the Nigerian retail market is estimated to be worth about 105 million dollars, but modern stores account for just a paltry 2% of that. Apparently there is a disconnect, or is it that the people, especially the middle class, are yet to really buy into it? What's your sense?
O
Onyekachi Izukanne1:45
I guess the first thing is, as far as the market is concerned, we are where we are. Where we are today is that of the volumes of retail sales that happen, as you already said, some could be cultural, some could be just a function of where investment has gone. Where we are today means that the typical person, most times when they are buying soap or milk or bread, they will more likely, 97% or so of the time, go to a neighborhood store or a small mom-and-pop than a supermarket.
H
Host2:37
I think that tells us more about TradeDepot itself. I know that the mission there is to somewhat put together a fragmented Nigerian retail chain supply. Tell us more, firstly about TradeDepot, and also about the state of the African retail space.
O
Onyekachi Izukanne3:13
Our focus is to put the power of e-commerce in the hands of these retailers and to make getting access to the goods they need for their stores as simple as a typical e-commerce transaction. To put that in context, according to Nielsen's latest retail sensors figures, you have somewhere between 1.1 and 1.2 million retail stores across the country, which are largely independent small stores. These are serviced by a very fragmented distribution layer, so many wholesalers, so many different open markets. In Lagos alone, you can count... The inefficiencies mean that products at those stores are bought at higher prices than they could be. So the direct problem is that the focus for us is to aggregate these manufacturers and connect them directly to these stores.
H
Host4:32
So many issues you've raised, but let me take you up first on e-commerce before I go down to talking about the fact of logistics and distribution, which your company is out to help solve. E-commerce spending in Nigeria is estimated at 12... An expert in financial technology, Tayo... says the future is still very bright. Is he being, if you like, overtly optimistic?
O
Onyekachi Izukanne5:26
No, I agree that the future is bright. I think it's always a good standpoint to have, but I think the conversation is beyond what you would traditionally define as e-commerce. Online commerce in the normal sense would account for not up to 1% of the commerce that happens across Africa. Nigeria is probably half of that. So the context for... To buy a beer, or probably you did before the world became what it is now, tells me that you drink another beer because you had to use beer to talk about what you wanted to talk about. Go ahead. In the broader context of commerce, which is largely 99% plus offline, how does this happen? It happens in brick-and-mortar stores. You and I walk into shops and buy stuff. That's the real commerce, 99% of commerce. So the question for us is: these brick-and-mortar stores that we walk into to get the products that we buy, how do they get the products that they buy? That's the market we're going after. If you look at that space and the complexities there, there is indeed an opportunity for the right type of technology.
H
Host7:12
Level is to build the largest retail distribution network in Africa, correct? Paint for us a picture of what's involved and how you intend to actualize this dream.
O
Onyekachi Izukanne7:22
Distribution is a two-sided play. You'll always have the supply side, the manufacturers who are making the products, and retail, which is where the product is ultimately bought by consumers. To be a useful retail distribution platform, the manufacturers have to see you as the best route to market, the best way for their products to end up in the market, and the retailers have to see you as the ideal supply partner. I guess these... To stick an app or a website in front of these retailers and they will suddenly start working with you? You need to understand them, figure out what channels they will work with. There will be folks that will use an app, folks that want to call a toll-free line, folks that want to be called, and folks that want to be visited. You need to be able to take all that on board. For the manufacturer, what does he need? He needs visibility. He doesn't just need to push product; he needs to know where his product is ending up. If you run an ad for any of the manufacturing brands, they are pushing out that ad for consumers like you and me to see it, but they're expecting us to walk into a shop next to us... Solving problems for both sides of the market positions you to be the ideal distribution partner.
H
Host9:10
I'm happy you talked about accessibility there, because one thing Nigeria has is a whole lot of people. If you're talking about the world's biggest brands only being represented in about 30% of stores here in Nigeria, that obviously isn't a huge amount. There is still so much more of a gap that needs to be plugged. How do you intend on stemming that gap?
O
Onyekachi Izukanne9:38
Aggregation plays a key role here because what you're doing is doing what everyone would have done independently. The different brands would have had to invest in trying to develop retail, find their retailers, and find a way of servicing them. If you're looking for how to get this into stores, the idea is that you can engage a partner like the platform we're building, make your product available, and we take responsibility for making sure that these products get into these stores.
H
Host10:26
I get what you're explaining, but maybe I missed you. I actually wanted to hear how TradeDepot will help actualize this dream. What practical things are you doing, have started doing, or that... What part is TradeDepot playing to help solve this particular problem of logistics, even the online retailers or e-commerce have this challenge?
O
Onyekachi Izukanne11:25
It's a couple of things. I'll simplify this to say: first is the platform, providing a platform to manage the flow of information. This platform enables the stores to place their orders. Today, that platform is available as an Android app, an app over WhatsApp, toll-free lines, USSD-based interactions. Providing that platform, which on the supply side also gives the supplier access to the data. The platform is one thing; the infrastructure is another. Having people out there, our people are on the streets, kissing the streets, visiting stores, onboarding them, helping them develop. These three things work together: providing the platform, having the infrastructure to do the work, and investing in the people that go out there to get the stores on board and get them using the tools.
H
Host12:34
From a manufacturer, for example, and I'm one of those people you're talking about in business, how do I connect with you?
O
Onyekachi Izukanne12:40
Manufacturers can just visit our website, it's tradedepot.com. Don't mind the plug, but it's straight there. You just get on there, indicate that you want to do this, and we will...
H
Host13:16
Welcome back to The Morning Show here on Arise News. We are still joined by the CEO and Co-Founder of TradeDepot, Onyekachi Izukanne. Good morning to you. Thank you for staying with us. I wanted to switch the conversation a little bit to look at credit and financing. I'm sure it's no secret to you, but we've become aware of your Series B round of funding, which raised up to $10 million. If you could tell us more about this side of your business that seeks to extend credit to businesses, we'd love to hear more about that.
O
Onyekachi Izukanne13:53
The more you work with these retailers, you realize that they don't have access to credit from traditional commercial lenders. They are excluded. But they are running serious, profitable businesses, turning over meaningful values every month. This constraint makes it very difficult for these parties to grow their businesses. You would have someone who is in a position to do 10 or 20 times the amount of business he's actually doing, but he's constrained because he can only buy so much based on the cash he has. What we're focusing on now is to use the fact that we've been doing business with these guys, we have data on them, to provide inventory financing that'll allow them to buy what they need and then pay us as they sell the product off, or pay back after a month or two, depending on how we rate the risk from that user.
H
Host15:27
Thank you. I wanted to find out a bit more about those risks. In your first round of funding as opposed to the second, have there been any difficulties? Has there been any type of surge in the amount of people who might have defaulted on those lines of credit that you've extended to them? How successful has the program been?
O
Onyekachi Izukanne15:44
Interestingly enough, the default rate is really low. For the pilots we've been running, we've done a 97% repayment rate. The reasoning is very simple: no one is looking to change their... to take off simply because they have that small ticket. Small as that ticket is, it goes a long way in helping that business. Also, we've built relationships with these parties, we know them. We are not giving loans as a business; we are focused on providing inventory financing to our customers based on how well we understand them.
H
Host16:38
How do you get the finance to finance the people that you're financing? That's the question I wanted to ask.
O
Onyekachi Izukanne16:50
It's a mixed bag. We are able to source debt that they are not able to because of our... A whole cocktail of sources provide the required working capital that we then extend to the retailers.
H
Host17:20
Now let me go back to e-commerce again. What's the place of e-commerce in a growing economy like ours? And do you think our leaders are positioning the country well enough for e-commerce?
O
Onyekachi Izukanne17:41
I would like to make a slight distinction between B2B e-commerce and B2C e-commerce. In general, I reckon that e-commerce is always an opportunity because it could be one of the most efficient ways of driving distribution. There are a couple of hurdles that need to be scaled. The availability of the right infrastructure would make things easier. Having better identity and trust systems, and I believe both go together, will make things easier. By identity, I mean knowing who someone is. There are more infrastructural things that would make the process easier. But trade is the oldest business that man has done. Even if... We find that our people, for the most part, prefer to buy in the middle of a conversation. You're more likely to find a customer willing to buy stuff off you when they can chat with you than going somewhere where there is no one, just clicking and adding stuff. You'll notice sometimes when you travel out of the country, you go to a store and people are going about picking stuff and putting in their carts and going out. You have the urge to find someone to talk to and say, 'Look, this pair of trousers, true?' We've seen quite a bit of that even in the interactions we have with these retailers.
H
Host20:11
If you were to look at this being a year that none of us were expecting, this pandemic has obviously had an effect on all areas of life and business. How have you been affected? How has the pandemic affected TradeDepot, and ultimately what is next for your company?
O
Onyekachi Izukanne20:27
This year was unprecedented. The biggest impacts have been the way the curveball threw everyone, creating a lot of uncertainty, and the fact that the way we work as a team, having more than 60% of the business working from home, creates a need for a whole different type of... Today, we are in three states in the country, and we are on an aggressive expansion drive to be in most of the commercial centers across Nigeria over the next nine months. That will be taking quite a bit of our focus, in addition to the credit services we earlier discussed.
H
Host21:35
Onyekachi Izukanne, thank you for your time. That's all.
O
Onyekachi Izukanne21:41
Oh, okay. Well, I can still take one quick question.
H
Host21:45
What has been or are your greatest challenges in terms of environment, in terms of getting the consumers or the people to buy into... Isn't that what they are used to working with? You have challenges along those lines?
O
Onyekachi Izukanne22:15
We found that a lot of engagement also helps you begin to scale those hurdles.
H
Host22:21
I think that is a nice way for us to end. Thank you very much.
O
Onyekachi Izukanne22:26
Thank you so much.
H
Host22:27
I can only wish you the best with TradeDepot.
O
Onyekachi Izukanne22:30
Thank you so much. Thanks a lot for having me.