TradeDepot, a supplier to Nigeria’s informal retail stores, plans to expand from Lagos to achieve nationwide coverage this year, co-founder Onyekachi Izukanne tells The Africa Report.
The company will need to raise a mixture of debt and equity for the expansion, says Izukanne. He aims to attract strategic rather than financial investors and says he will know how much is needed by the end of the first half or sooner.
TradeDepot, set up in 2016, uses a digital platform to connect producers with an informal network of 40,000 micro retailers. Until now, its presence has been mostly in Lagos state and Abuja. The priority is setting up a presence in 10 to 15 major cities, with the aim of covering all Nigeria’s major cities by the end of 2021.
In July 2020, TradeDepot raised $10m in equity, with investors including Partech and the International Finance Corporation. Women stand to benefit the most from better access to retail supplies. Over 75% of the retailers in TradeDepot’s network are women.
COVID-19 is redefining Nigerian shopping habits. According to a survey from McKinsey, over 50% of shoppers have chosen new stores and websites, with prices and accessibility the main criteria. TradeDepot has seen a “significant jump” in demand during the pandemic as traditional retail supply chains have ceased to function, says Izukanne.
Planning, route optimisation and fully loaded trucks are the keys to navigating traffic jams in Lagos, says Izukanne. “You have to figure out how to live with it.”
Delivery logistics will be a major hurdle in going nationwide.
According to the National Planning Commission, roads account for over 90% of freight movement. But researchers at the University of Ibadan have found that Nigeria has the lowest road-to-population ratio in Africa, and the ratio is still getting worse not better.
Many of the roads that do exist are “decrepit and dilapidated,” the research finds.
Research from Patience Chinyelu Onokala at the University of Nigeria finds that roads are often bearing truckloads of well beyond the 9 tonnes maximum for which they were designed.
Inventory finance
Nigeria has one of Africa’s largest informal economies. Izukanne estimates that 97% of Nigerian retailers are in the informal sector. He is seeking to address the issue of their access to capital.
Since July, TradeDepot has branched out into inventory finance, with the historical data it has gathered on retailers being used for credit scoring. Izukanne also aims to role out inventory finance nationwide this year.
According to PwC, 55% of small and medium-sized businesses in the country are in wholesale and retail. A survey of SMEs by PwC in 2020 found that 22% said that obtaining finance was their most pressing problem.
The company has been running pilots in Ghana and South Africa to gauge the potential for expansion there. The pilots have started with retail supply, but Izukanne hopes that it will be possible to offer retail finance in those countries.
In two years, inventory finance will be a “very significant” part of the business, compared with a minimal share now, says Izukanne.
Bottom line
Retail supply chains in Nigeria will face an uphill battle until the road network is improved.
Culled from Theafricareport
