Embracing the barriers to market entry.

Running or managing a business in Africa is not for the faint-hearted, it’s a lot like digging for gold.  To put this in context, Nigeria Africa’s largest market is ranked 131 in the ease of doing business, according to World Bank’s Doing Business 2020 index. It is a market that even the bravest of entrepreneurs and investors still struggle to understand or navigate.

Today we’ll share an insight we’ve shared with some of our clients, this insight has enabled them to navigate difficult times.

So let’s begin. Have you ever wondered why we have so many airtime recharge voucher sellers but only 4 major telecoms companies?  Or why it is easier to import and market cell phones than it is to set up a phone manufacturing company?

Think about it, if it was easy, everyone would have done it, but the reality is that for every industry, there will always be a barrier to entry.

UNDERSTANDING THE BARRIERS TO MARKET ENTRY

Barriers to entry in any market are the major obstacles that make it difficult for entrepreneurs to start or grow their business in a given market.

  • A barrier may be securing the necessary certification or navigating your way through complex government regulation such as tax policies or raising enough startup capital for your business to launch and thrive. It could even be that you need to build or acquire a certain type of technology or secure a patent to bring your product to market.
  • For some businesses, it may be that the economies of scale apply significantly which means that they can only break even if they produce in large quantities.
  • For others, they need a reliable supply chain network that guarantees efficient access to suppliers and distribution channels from day one to succeed, or the industry they are in, is already so competitive that they require a stronger or unique selling point to be able to respond to the competition.
  • For some, it may be that they need to acquire top talent to power their business operation but they are operating in an industry with a shortage of skilled talent… the list can go on. 

In summary, there will always be barriers… and the reality is that the larger the market opportunity, the tougher the barriers and hurdles an entrepreneur will likely encounter. These hurdles are constant and they affect all players in any given market.

What this means is that whatever difficulty you may be experiencing in your business, you are not alone, your competitor is experiencing something similar or may have experienced something similar in the past.

What then is the winning formula to scale these barriers? 

STRATEGIC INSIGHT- IT IS ALL ABOUT PERSPECTIVE.

The principal strategic insight here is that you are not just competing in your industry for clients and customers or who can capture the largest market share, but you are actually competing on who can surmount the unique barriers to entry for your industry.

You are competing on who can raise more money before they run out of cash, who can get that government certification faster, who can grow their distribution channels faster, who can recruit the best talent etc.

In every market, there are those who succeed and those who don’t. Winners or losers in any market are decided by those who surmount the barriers unique in their industry better and faster than their competitors.

The key differentiating factor that separates winners and losers in any industry is perspective. It has a lot to do with how they see and react to these barriers to entry irrespective of their industries.

LOSERS see these barriers as a challenge, as a problem they have to surmount.

WINNERS, on the other hand, see these challenges as an opportunity, they understand that their success depends on their innovative ability to surmount these barriers better than their competitors. So they embrace the hard and turn these challenges into their competitive advantage.

Which category do you belong to?

Nigeria has been projected to be among the world’s top ten economies by 2050 with her GDP pegged at $3.3 trillion. Entrepreneurs who are able to brave the storm stand a chance to profit immensely from this market.

 

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Linkup app - leveraging technology to improve SRH outcomes for young people.

We have good news, finally, after a couple of months of working on a project for the amazing team at Education as a Vaccine a non-profit organization, we are happy to announce that an updated version of the linkup app is on the app store, you can go and download it here.

Young people are constantly faced with situations where they have to make life-changing decisions about their sexual and reproductive health (SRH), yet a majority of adolescents and young people lack access to the information and services required to make those decisions, leaving them vulnerable to coercion, sexual violence, sexually transmitted infections and unintended pregnancies.

So with funding from her partners, EVA came up with the idea to build a Youth-Friendly Services Finder App- Link Up, they reached out to Endgame to build this app.

And we delivered, the app connects users to youth-friendly health facilities closest to them, the app enables them to speak to trained counsellors on issues surrounding their Sexual Reproductive Health.

The key idea behind the updated version is simplicity and improved user-friendliness”.  

  • Users can find youth-friendly healthcare services centres by location and by the services they provide.
  • The app also allows users to speak to trained counsellors on issues surrounding their SRH remotely.
  • Users can also rate facilities/service providers. This puts them in control to be actively involved in the improvement of the quality of services rendered and received by them. Hence they are not just passive users but active contributors to the quality of services rendered at these health facilities.

Linkup app was developed to encourage the information-seeking behaviour among young people, while providing access to accurate and non-judgmental responses to SRHR issues to reduce high-risk behaviours that may lead to HIV, STIs, unplanned pregnancies and complications from unsafe abortion.

It was a rare privilege for Endgame. The Strategy Company to be entrusted with the task of developing this app for the team at EVA, The Linkup app is one amongst many others to come, the ultimate goal for the app by EVA is to leverage technology in their bid to achieve their mission to improve the health and development of children, adolescents, and young people.

 If you are a young person or adolescent, download the EVA app today, click here.

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Raising seed funding our experience and 5 tips to help you raise yours.

It was a very ordinary evening, I received a call from a potential angel investor to meet up, my heart was racing, I dusted out my pitch deck and dressed for the occasion. I arrived at the agreed meeting spot, delivered my pitch after I was done he asked a couple of questions which I answered, then this was his response

“Century, today I will invest in your business not just because of your business idea, but because I believe in you, I love your spirit, I am confident you are headed somewhere, it might not be very clear now where, but I am certain you are going somewhere and I want to be a part of that journey”. 

Here I was finally closing the deal after so many nos and making loads of mistakes I was successful, that is why today I will be sharing with you some lessons I learnt during my journey to raise funding to start Endgame. The Strategy Company, with the hope that it will be useful to anyone on the same journey as I was. The first lesson I learnt first-hand from this experience was that;

1. People Invest In People. 

People invest in people first before the business entity. If an investor does not believe in you as an individual or your capacity no matter how awesome your business idea is or plan, they will not invest.

Investors invest largely according to what they see in an entrepreneur.  Who are you, what are your values, what have you done in the past that prepared you to run that new business, “What’s your story? Who’s on your team? What partnerships have you established? Who believes in you, and why?” What is your experience in this market? What are your successes? Your failures?” “What momentum is behind your business? What are your goals? What progress have you made in reaching them?” It is important that you Leverage on your track record and networks and actively seek to build your credibility as an entrepreneur.

2. Your past clients, boss or businesses that may benefit from the success of your new venture can be your potential angel investor.

Typically, most people consider family, friends, well-wishers and mentors as potential Angel investors. An interesting fact that many fail to realize however is, your clients or businesses that stand to benefit from your success are also potential Angel investors. This is true especially if you have a track record in your industry or have provided services as a freelancer, employee or volunteer that is similar to the services that you intend to provide in your new business and due to your performance you can boast of a roster of satisfied clients who are affluent. Why do I say this?

 

You see, your past clients already understand your value proposition, the service you are offering and it’s market demand and opportunity, they are also aware of your track record. This in itself, relieves you greatly from the challenge of trying to convince them of your market value. Another way you can tilt the odds in your favour is making them understand that they will always need your services and chances are that having you grow or scale will be to their advantage because it enhances your ability to solve more problems for them at a larger scale or open up new markets for them.

 

For example, it is much easier for a former bank manager who has led the bank’s payment solutions team and delivered tangible results to secure investment from either the bank or fund managers he has worked with in the past for his new Fintech company on a mission to provide insurance solution targeted at young people, undergraduates etc especially if that business opportunity is not something the bank is willing to pursue at that time.

So, reach out to your past and even present clients, be good to your boss and the people you meet in your place of work, they are all potential investors.  

3. Have a working product, validate your business idea, and secure pre-orders or traction if possible.

It’s much easier to pitch to an investor when you have 10 people willing to pay x amount of money for your product when you launch. If possible try to get pre-orders from family friends, past clients etc. There is nothing that validates an idea than paying customers. Generally, a working product stands a higher chance when pitching to an investor. It is important to have a working product/prototype or service that clearly delivers on your business proposition. 

4. Make a business case as opposed to an emotional one.

Don’t fall into the trap of trying to solely leverage on your relationship and choosing to act familiar when pitching or trying to obtain funding from an investor, even if he is your father or best friend, or boss. You must be prepared when speaking to an investor. Ensure you have a strong understanding of your market, competitive advantage and a clear value proposition before pitching. It is also highly recommended that your financials need to be clearly articulated.

 

Lastly, just like with every other journey or experience, there are highs and lows. Be prepared for both approvals and declines alike. I think that one defining characteristic of any entrepreneur worth his/her salt is tenacity/resilience. It’s a badge you would earn on this journey to raise funding for your venture.

5. Do. Not. Give. Up!

Keep reaching out to potential investors till you get a yes!

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Is your new business idea a hit or miss? - Predict the success rate of your new business idea with this simple checklist

And so it hits you, you’ve just stumbled on a brilliant idea for a new business or startup, you can’t wait to launch it, you’ve started daydreaming about how it will “settle you for life, “you can’t wait to hammer”. The reality is that starting a business is quite easy when compared with running one.

Financial experts say that about 80 per cent of Small and Medium Enterprises, SMEs, in Nigeria fail within the first five years of their existence and the failure rate for startups in Nigeria has averaged 61 per cent from 2010 – 2018. There is a myriad of reasons why startups and businesses fail. 

It can be an unpleasant experience as an entrepreneur to invest your time, finance and resources into starting a business only to watch it fade into obscurity and eventually shut down after a couple of months or years. 

To reduce the failure rate of businesses, we’ve compiled a list of 10 critical questions that’ll enable you to make an informed decision on if you need to invest your time, finance and resources towards launching that business idea you’ve been thinking about. The goal of this article is to help you improve the overall success rate of your new venture. 

1. Demand:

Is there a real demand?

At the crux of it all, startups and businesses generate revenue by providing solutions to the needs of their customers in exchange for money. To survive a business or startup needs to be addressing a real problem satisfactorily and, there needs to be a group of customers willing to purchase their solution at their proposed asking price. There’s a real risk of a business becoming “just another cool idea” if there is no demand for it. To ensure the long term success, you will need to validate your business idea, by experimenting, to test if there is a demand for your solution, before investing your resources to start that business or startup.

 

There are several ways to conducts these experiments, you can build a Minimum Viable Product like a prototype, conduct interviews and surveys, get pre-orders, conduct a feasibility study etc. the goal of the entire process of demand validation is to gather feedback and data from potential paying customers on if there is a demand for your solution.

2. Total Available Market.  

Is there a high demand for your solution, what is the size of the total available market? 

For a business or startups to be deemed feasible, the demand for its solution must be large enough to justify the necessary investment needed to make it operational. To buttress this, imagine spending N10m (ten million naira) to open a gas filling station in a community, only to realize that there are only 50(fifty) homes that use gas cookers, and, the average amount they spend monthly to fill up their cylinders is N5000 (Five thousand naira) as a result the maximum revenue you can generate per month if they all diligently patronize your business every month, without going to your competitors is N250,000 (two hundred and fifty thousand naira); but, you spend roughly N500,000 (five hundred thousand naira) every month on running expenses. What the above scenario suggests is that, not only will you not recoup you 10million naira investment, you will certainly operate at a loss of not less than N250,000 (two hundred and fifty thousand naira) every month. The reason is that your TAM is not large enough. TAM is an abbreviation for Total addressable market it’s the maximum revenue a product or service can accrue in a given market if there were no competitors.

Having a strong grasp of the TAM size for your business or startup solution before launching is crucial; because it will provide you with clarity on the revenue potential of your business, and enable you to decide if it is worth pursuing; it will also be useful in convincing investors to invest in your business.

3. Timing.

Is the timing right, does your idea meet the moment?

 Idealab’s founder Bill Gross analyzed several hundred startups, from big successes to failures in a bid to figure out the most important keys to startup success. He considered idea, team, business model, funding, and timing; he realized that timing accounted for 42 per cent of the difference between success and failure. To explore the concept of timing a significant reason for the current traction experienced by most fintech companies today can be attributed several factors but most importantly to the fact that in the past 10 years, internet penetration and smartphone adoption has seen an increase. If you had an idea to start a fintech company that needed to run on smartphones 40 years ago during the era of NITEL, your timing, would probably be wrong because the market at that point will not be ready for your product.  

The reality is that, if you put yourself out there too early, the market may not be ready for you and you’ll struggle to gain traction. If you open the business too late, somebody else may beat you to market and steal or render your business dead in the water before it even gets going. 

4. Execution, Experience, Expertise and Team.

What is your level of knowledge and experience in the industry you will be operating in, and do you have the capacity to assemble a competent team?

As a startup or business, your ability to execute your business idea can make the difference between successfully getting your product to market and running out of money before you gain traction. The experience and expertise of the founder and the founding team is a crucial component in deciding the ability to execute on a brilliant idea. To provide context, a former bank or tech lead in a bank trying to start a fin-tech company will probably do better in that industry than if they decided to start a healthcare company because they have significant experience in finance than in healthcare. A brilliant idea executed poorly will fail.  It is advisable to launch a business in a sector you are familiar with and have adequate experience in, with a team with the necessary expertise to execute the idea

5. Passion & Motivation.

What’s the main motivation guiding your decision to launch this business idea?

Are you setting out to solve a problem you are passionate about or is your new venture a means of survival? A good way to know if you are passionate is by asking the question, “is this business something I will gladly work on for free?” The reason you will need to be passionate about your business is because, entrepreneurship is hard and it entails delaying gratification, the returns might take years to accrue, the only fuel capable of keeping you going during tough times is passion. Without passion you will not be able to inspire others to believe in your ideas, passion drives you forward, it will give you the courage to leave your comfort zone and give the business everything you’ve got. Passion will play a critical role in deciding the success of your business.

6. Government Policy & Regulation.

Do you have the necessary certifications to run your business and is the current government policy in your advantage? 

The effect of government policies on business and startups cannot be understated, for example if the government impose more taxes & duties or adverse polices on a particular sector then the profit margin of this sector will go down, this in turn will have adverse effect on business operating in that sector and vice versa. A very good example is the ban of motorcycle hailing companies in Lagos in 2019 and the adverse effect it had on motorcycle hailing companies, another is the shutting down of Nigeria’s land borders in other to curb smuggling and the adverse effect it had on importers. To operate in some sectors you may need certain permits, certificates or licenses. Some sectors are currently receiving a lot of attention from the government compared to others. It is very crucial for to you analyze the current government policy and regulatory requirement in your target industry before you launch to avoid swimming against the tide.   

7. Competitive Positioning and Advantage.

Will you be launching in a crowded market, if yes do you have a unique selling point and strategic positioning that differentiates your business or startup from other players in the market?

Launching just another generic business is a sure route to bankruptcy in the long term, you might succeed depending on the industry you operate in and forces at play, but gain traction and become a market leader, in a crowded marketplace you will need to have an advantage over competitors by offering consumers greater value, you’ll also need to “differentiate” your offering and win mindshare in the marketplace – you need to be known for a certain “something.” Figuring out your competitive positioning and advantage before you launch is critical.

8. The threat of Substitute, Competitors and ease of copying.

How easily can your unique selling point be replicated by competitors are there better substitutes for your solution?

Is your business solution a direct copy of an already existing business idea that has proven successful and even if it is, is it a 50x improvement of what is already existing? Can the unique differentiating factor of your business be easily copied by competitors? The fact is that if your unique value proposition is very easy to duplicate what that means is that, it will be a lot more difficult to stand out in a crowded marketplace.  You also need to factor the threat of substitutes in your industry, as you design your value proposition.  The availability of a substitution threat affects the profitability of an industry because consumers can choose to purchase the substitute instead of the industry’s product. The availability of close substitute products can make an industry more competitive and decrease profit potential for the firms in the industry.

9. Business model.

How will you generate revenue?

A business model is a company’s plan for making a profit. It identifies the products or services the business will sell, the target market it has identified, and the expenses it anticipates. You will need a proper business model to figure out elements such as: Your business concept – what problem are you solving for whom; how you will create customer value; how your product or service will get to customers; how your business will stay competitive; and all revenue and costs you can anticipate.

The business model canvas is a very useful tool to help you figure out your business model.

 

10. Funding strategy.

How much do you need and how do you intend to raise money to fund the business?

A primary reason why businesses fail is a lack of funding or working capital. … When the costs of production, marketing, and delivery outweigh the revenue generated from new sales, the business has little choice but to close down. Before you launch it is critical to have a plan that factors in the financial requirements your business will need over time and how you are going to raise money and resources in order to carry out the objectives of your business. There several ways to raise money, from bootstrapping, angel and venture capital, loans, convertible credit, grants and many more.

 

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Leveraging customer retention & loyalty to drive growth.

Interestingly a majority of strategies deployed by most businesses are geared towards acquiring new customers with less focus on retaining acquired customers.  Some businesses are losing clients as much as they are acquiring new clients. Their sales funnel can be likened to a basket that no matter how much water is poured into it, it’ll always be empty.

Here are 4 key reasons why customer retention is a very important objective for any entrepreneur interested in growing their venture.

1. Save Money On Marketing

It costs significantly more to acquire a new customer than it does to retain an existing one. For new clients, you have to deploy a barrage of marketing campaigns whilst spending more money trying to reach them to convince them to patronize your business. If you do not retain them once you acquire them, it means you need to always spend money on marketing to stay afloat. So to save your money and reduce your marketing expenses it is important you deploy efforts to keep your old customers who are already familiar with your products and services.

2. Get more Repeat Purchases from Customers.  

Loyal customers will use your business regularly for purchases and tend to spend more money. Existing customers are 3 to 10x more likely to buy than a cold lead. A valued customer trusts your business and believes that you offer a superior service compared to competitors.

3. Free Word-Of-Mouth Advertising 

Repeat customers are more likely to tell their friends and family about your business and its products, and customers respect the opinion of those close to them. Customers are happy to tell people about the excellent service they received or a product that they enjoyed. A successfully retained customer is much more likely to refer to other customers. These referees cost less to acquire and have a higher lifetime value than customers gained from other ways.

4. Retained Customers Will Provide Valuable Feedback 

Customers that you retain provide valuable feedback. 97% of consumers said they are somewhat likely to become more loyal to a company that implements their feedback, while 55% of consumers said they are not likely to continue being a customer of a company that ignores their feedback.

Customers who make frequent purchases from your business will know which areas of your business could be improved.

LEVERAGING CUSTOMER LOYALTY

There is significant potential for expansion and revenue growth in cultivating consistent client-satisfaction that will build a level of customer loyalty that can translate to third-party promotion for your business. These redirects focus from only pursuing client acquisition to ensuring that you have in place the right client retention strategies.

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8 factors to consider, before launching an e-commerce venture.

1. The Goldrush: The Market is Growing. 

Despite the pandemic, in the first quarter of 2020 Jumia, an e-commerce Company operating in 11 African countries gained $31.79 million in revenue from 6.4 million e-commerce orders. According to Statista, it estimated that Africa’s e-commerce market size will grow to $29 billion by 2022. The market is growing.

But that’s one side of the story, around 2012-2015 the news of multimillion dollars investments rounds closed by e-commerce companies was everywhere, as a result, several entrepreneurs were motivated to start an e-commerce business, today a number of these companies have shut down their operations and Jumia is still operating at a loss, despite posting large numbers and securing millions in investments. This trend is as a result of the barriers to market entry. 

2. Barriers to Market Entry.

Accessibility, infrastructure, finance and cultural factors prevent e-commerce businesses from scaling in Nigeria and across the continent. According to a Statista, the smartphone penetration rate is around 10-20% of the Nigerian population have a smartphone device (this number is improving for the better), these devices are a crucial component needed to seamlessly access e-commerce services.  A majority of those with smartphones have trust issues when ordering from e-commerce companies. The logistics and delivery industry is still in its infancy, and depending on the scale of the business, there may be a need to secure significant investment to successfully run an e-commerce business. To succeed, you will need to develop a strategy to surmount these barriers and a host of other odds.

3. Start with a niche. 

This is important during the early phase of a business, for example, Amazon the most valuable e-commerce company in the world started by selling books before expanding into other product categories. Start with a single product category, it will enable you to figure out your operational processes and test the market with leaner resources. 

4. Marketplace or Direct to customer storefront model.

You will need a business model for your store, do you want a marketplace where other sellers can sell their products or a direct to consumer storefront that enables you to sell directly to your customers. Each model has its pro and cons, choose wisely. 

5. Choose the right platform.

If you’re a small business, it is advisable to start small, by leveraging Facebook, Whatsapp, Instagram and twitter shopping functionality, you can also list your products on existing online market places like Jumia and Konga. For medium-sized businesses or businesses with a large inventory and significant resources they can opt to build an e-commerce site with Shopify, Woocommerce, Magneto and other solutions, these platforms provide access to customer data and a host of other functionalities. 

6. Sourcing, logistics, delivery and customer experience.

Some entrepreneurs spend their resources focusing on the look and feel of their e-commerce website, the products in their store and marketing to the extent that they end up putting less emphasis on figuring out the logistics and delivery framework of their business. Sorting orders, ensuring your customers get their products on time is a crucial component of your business that you’ll need to figure out. 

7. Competitive Positioning.

Unlike offline stores where customers have to drive or walk in to get to a new store, if they are not satisfied with your service offering, with online your competition is one click away. The competition is fierce online, to thrive, you need to define your competitive advantage and position. 

8. Marketing and Advertising. 

You will need an effective eCommerce advertising strategy that leverages offline and online channels to gain traction. Paid advertising will make up a significant part of your eCommerce marketing strategy and significant resources will need to be allocated to consumer education and trust build depending on the scale of your proposed operation. It is also important to figure out a way to reduce your customer acquisition cost and create top of mind awareness for your brand. 

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Post Covid-19 Lockdowns : Is the Hustle online or offline?

Before the Covid-19 lockdowns, have you ever wondered why the spare parts dealer at Oshodi, who doesn’t have an online presence or understand the internet, still manages to take in huge sums every day from his shop?

Have you ever wondered why the trader who sells dresses from her vehicle in the evening at car parks and junctions, generates more revenue than some Instagram fashion sellers?

Computer village, a computer and electronics market in Ikeja handles a significant volume of trade per month than most e-commerce marketplaces. Offline megastores and supermarkets accrue more in revenue than comparable online stores.

While you ponder on this, the goal of this article is to answer the following questions. 

Have the factors that have prevented the adoption of online shopping and digital channels in Nigeria and across the continent changed Post Covid-19 Lockdowns and if these factors have changed, is the hustle among Nigerian businesses for sales growth offline or online and what can businesses do about these changes to drive growth?  

 

Let’s take a little step back. 

THE ONLINE REVOLUTION –

The 21st century ushered in a huge technological disruption – the internet, with the push of a button, brands can promote their products and services, reach a large audience and gain visibility. With a small budget, a small business can compete for attention almost fairly with big brands; the internet is indeed gradually levelling the playing field. But despite this disruption, 3 major factors seem to slow down the adoption of digital solutions and online channels in Nigeria.

 

FACTOR 1. Accessibility – A Majority of the Market is still Offline? 

Despite the exponential growth in internet penetration, a large number of Nigerians are not yet online. For those online, they are still trying to understand the online system. Out of a population of 200m people, only 26 million Nigerians are on Facebook, the number is even lower for twitter. According to The Global Findex Database 2017, only 40% of Nigerian adults have an account with a financial institution or a mobile money provider. 

 

FACTOR 2. Culture – Instant Gratification – “Buy, Pay Cash and carry” is still King? 

People are in a hurry and crave instant gratification but online channels are yet to keep up with the instant gratification that offline channels present: “I see it, I like it, I buy it and take it home with me” is still the norm. According to Google’s Consumer Barometer, 22% of global consumers purchase products or services online, while the remaining 78% stick to offline. 

 

FACTOR 3. Trust – People are less trusting of online channels:

Issues such as poor infrastructure, security concerns, and the perceived risks that come with online transactions have led offline channels to still command more trust than online channels. A chunk of Nigerian consumers is still very distrustful of online payments and the authenticity of product quality displayed by online merchants on e-commerce sites. A typical example is a fact that Nigerians still prefer payment on delivery than paying out rightly for goods bought online.

Post Covid-19 Lockdowns – Have these factors improved for the better?

In Nigeria, Jumia reported some sales increase in Q1 2020. This is not the same for many SME and MSMEs who reported major losses during the 2-week – 1month lockdown period in Nigeria because they could not make their products available to customers online. As the Nigerian government begins to lift lockdown and movement restrictions, the increased relevance of e-commerce channels during the COVID-19 Lockdowns coupled with other tough lessons from the crisis is making it evident that to thrive in a Post Covid-19 Lockdown world, businesses will need to think critically about how to leverage online channels to thrive.

However, as businesses embark on this transition to adopt online channels to be resilient, it is very critical to ask a more prominent question and consider: how are the increased relevance of digital channels during the COVID-19 Lockdowns coupled with other tough lessons from the crisis affecting some factors that have long held the adoption of online shopping and e-commerce in Nigeria down.

Post Covid-19 Lockdowns effects on factors affecting online adoption in Nigeria-

1. Accessibility- Online engagement is rising, but the majority of the market is still Offline.

Internet usage during the Covid-19 lockdowns generally increased with a lot of consumer spending time on social media platforms such as Instagram and Facebook and even TikTok. MTN Nigeria reported a rise in mobile data users. While data on the percentage of purchases made through social media channels in Nigeria is still unavailable, it is safe to conclude that these channels can be promising avenues to recruit customers into e-commerce since the more consumers spend time and get comfortable with digital platforms, the more they understand and trust the platforms.

2. Culture – Instant Gratification remains unchanged –

“Buy, Pay Cash and carry” is still King: The COVID-19 lockdowns has had little impact on this especially for grocery items and essential homecare products. During the lockdown, consumers were still found visiting open markets to purchase essential items rather than wait long delivery times as is custom with Nigerian e-retailing.

 

3. Trust – Low trust in online channels remains unchanged:  

The perceived risk of online has not reduced significantly post COVID-19 lockdowns. There has not been any major improvement in infrastructure and security concerns have instead increased with many users reporting a rise in cybercriminals trying to gain access to their bank accounts through BVN scams.

What does this mean for businesses?

Should the hustle among businesses for sales growth be directed offline or online and what can businesses do about these changes to drive business growth?  

 

There is no one answer, the hustle for sales growth is both offline and online. Businesses will need to adopt a multi-pronged approach that leverages the benefits of both online and offline channels to grow their business. 

 

Some businesses will benefit from investing their resources toward an online-centric strategy, this means for such businesses it would be beneficial to optimize their online sales and marketing channels, while some will achieve success with a more active offline centric channel strategy, they might need to allocate resources to offline or traditional channels to drive traction.

 

 

FINDING THE RIGHT BALANCE BETWEEN ONLINE AND OFFLINE CHANNELS. 

One thing is certain post-COVID-19 lockdowns businesses will need a combination of both online and offline channels to thrive, they will need to find the right balance to leverage the benefits of both channels to their advantage. To find the right balance businesses will need to take a critical look at their business model, where their customers are, their buying behaviour, the market and environmental forces at play in their industry. Finding the right balance is very important, the COVID-19 lockdowns was just a wakeup call.

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Growth readiness: Crucial for long term sustainability.

So after receiving a barrage of text messages urging me to patronize this eatery I usually go to for launch, I decided to do so, I walked in and there was this long queue, I shrugged it off and decided to wait my turn, but sadly the queue was not moving, I could see that the sales attendants were struggling to deal with the high influx of customers, they were botching several orders and therefore had a lot of angry customers to deal with. I was one of those angry customers, I had to wait for over an hour for an order that should have taken me just 10 mins. I doubt I will likely go back in the nearest future to patronize this eatery whenever I see a large queue.
Having patronized this eatery before I could testify to the fact that they were doing very well when they had fewer customers, but sadly it was evident that they were struggling to cope with the high influx of customers they got after their latest marketing campaign.

Of what use was their marketing campaign? given that not only have they lost my trust and that of hundreds of their old customers, their inability to meet up with the demand from their new customers meant that the new customers they’ve just acquired may not likely return, as result of their first interaction with the brand. So what this meant was that the marketing effort that was designed to help them grow is slowly destroying their business.

This narrative sounds familiar, yes? Unfortunately, there are too many businesses that go down this road, If you asked 10 entrepreneurs what they wanted most importantly as business owners, it’s highly likely that 6-7 out of 10 would state that they want more clients  but the question that many of them fail to ask is – ‘’Is my business positioned for the growth?’’

THE COST OF GROWTH

 

When most people think about growth what comes mind is growth in revenue, number of customers or sales but here’s what growth also means – It means if you are a team of 20, you may need to increase to a team of 100. If you were running inefficiently you might need to improve. 
To begin the journey of seeking growth by thinking that growth comes with profit alone is a false premise because growth comes with more responsibilities. The profit comes only when you have effectively been able to handle the demand for your services. If you can only handle 100 clients, it might come off as a hard pill if you are told: “do not seek for more clients till you have figured a way to handle a large influx of clients”. In essence, to be qualified for growth, you must first be prepared to put in place the necessary structure that will enable you efficiently manage the projected increase in demand that will come with your new growth target.

GETTING READY FOR GROWTH.

 

So what do I mean? It means that before embarking on that marketing campaign and trying to increase your customer base, you must ask very critical questions.
Is my business ready for growth? Do I have the necessary structure I need to deal with the new influx in demand for my services? Core elements like the strength of your human capital both in quantity and quality and the presence of processes and systems in place that ensure operational efficiency cannot be underestimated.

  •  On a scale of 1-10, how well do you manage the clients you currently have?
  • Do your clients complain about your services and at what frequency?
  •  Is your business efficiently serving the demands of your current clients?
  • What can you do better?

It’s is important that you are brutally honest in answering the questions above.

At Endgame – The Strategy Company one of the things we do before deploying our growth service package is to ensure that we measure our client’s growth readiness through;

  • A rigorous review of the businesses capabilities.
  • A dispassionate assessment of where they stand against these capabilities on two fronts- their level of operational efficiency and customer satisfaction.
  • An action plan to scale back in the less-critical areas, and a corresponding plan to redirect resources from these areas to more critical ones.
  • A series of targeted organizational interventions to increase speed and quality of decision making and delivery in the enterprise.
  • In the event, however, that the business is not ready for growth, a strategic plan is devised to position the venture for growth.

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Post COVID-19 Lockdowns : Asking the right questions.

On April 13th, 2020 the Nigerian government announced another 14 days lock-down, the dire reality is that after this extension there is no certainty that the lockdown will not be extended because the variables that led us to this point are still unchanged. For most business managers this is causing a lot of uncertainty, they understand that how they respond to the crises will decide the continued existence of their company and their position in the market place.

To develop and execute a cohesive strategy to survive the impact of the pandemic, business managers will need to change their approach and ask the right questions.

Instead of approaching the crisis from “it is all bleak and dark, what do we do to survive”, they will need to approach it from the perspective of opportunity, “the business environment is changing rapidly can we leverage this crisis to become dominant players in our market or increase our market share”.

As cliché as it might sound, in every crisis, there is an opportunity, the team at 54 Gene a biotech company based in Nigeria are a poster child for this school of thought, amidst the economic slowdown they raised $500,000 for a fund aimed at improving Nigeria’s capacity to carry out tests for COVID-19.

To thrive amidst this crisis business managers will need to ask the right questions such as.

1. What are the new market opportunities that we should pay attention to?

The market is changing rapidly, new business models are emerging, especially in sectors such as health, logistics, automation, entertainment, retail, and education; there is a rising demand for big data solutions for public well-being, especially for tracking, analyzing, and supporting timely public decision-making. Offline-driven businesses are realizing that they need to shift online completely or partially. There are new demands across different sectors that will need to be met, will you respond to them or continue business as usual.

2. Are there changes in consumer behaviour that we can leverage?

There is an increase in the adoption of online shopping and Digital platforms that aid brand engagement and interaction. There is heightened price sensitivity and increase in health and hygiene consciousness, brand trust and loyalty is being defined by new variables, there is a rise in survival shopping and consumers are choosing availability over brand loyalty. The reality is that millions of consumers are experiencing the impact of the crisis on their finances and way of life, this is leading to changes in consumer behaviour that smart business managers will need to leverage in other to stay ahead

3. Are there new capabilities in the market place that we can integrate into our operations to improve our competitive advantage or operational efficiency?

There has been a significant improvement in Logistics and delivery solutions, can it be integrated into your operations to reach more customers. There is an increase in the adoption of remote working technologies can it be leveraged to cut down on operational cost and hire top talent that was previously not geographical available. Webinars and e-Learning solutions can it be used in place of physical workshops to increase the number of attendance and reduce the cost of physically organizing training. Can video conferencing be used where possible instead of physical meetings? Can we use online consultation and scheduling apps to optimize client management?

COVID 19, is and will continue to lead to new innovations and increased adoption of existing innovation, businesses will need to constantly think about how they can leverage these innovations to improve their operational process and competitive advantage.

4. Do we need to pivot, if yes to what?

Recently hotels across the world are temporarily pivoting and converting their rooms to quarantine facilities, car manufactures are producing ventilators, some breweries are now producing disinfectants and sanitizers the list goes on. Due to COVID 19, some verticals are now obsolete or have or will experience a steep reduction in accounting profit temporarily or permanently. Business managers will need to access the value propositions of their firms and the market forces at play to decide to temporarily or permanently pivot and leverage new opportunities.

The reality is that while most business panic, some will thrive.

Will you panic or thrive?

The choice is yours.

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Why KONGA’s New Strategy Might Work.

A while ago while heading to a cool evening dinner, I happened upon a standard-sized KONGA offline store with a regular storefront inscription like any other retail store’s. This seemed novel to me and many who are familiar with the old KONGA e-commerce business model can attest to that. Most Nigerians who have noticed the new Konga offline stores, either in a suburb or commercial district are likely to do a double take for two reasons:

  1. the fact that the store is so conspicuously positioned and fully stocked with cutting-edge products for sale as is any other retail shop.
  2. the colour of the brand. The resplendent pink brand colour of the new KONGA is a polar opposite of it’s classic blue and this is sure to raise a couple of eyebrows.

I’d like to note here that I pride myself as being a tech enthusiast so even though, I was rooting enthusiastically for Konga’s platform and buying a few things online, most times I made purchases predominantly in offline traditional stores for the following reasons:

  • the fact that most products require about a 5-7 working day delivery window and on occasions where I needed the commodity immediately, Konga wasn’t a top choice.
  • Buying is often impulsive, so I felt there was a demerit of the long delivery window in the sense that when the product comes, you may have changed your mind as to if you really need it, or might have secured an alternative, or the money at hand to pay for the product may not be within reach because some other priority may have come up.

So, in spite of my tech inclination, my default buying pattern was more regularly offline.

In light of this, when I saw the physical Konga store for the first time, one thought that struck was the fact that this new strategy was going to be a winning strategy in the long term.

The Backstory

But first, let’s look at the Konga story. What is Konga and what were they about?

Konga is a Nigerian e-commerce company founded in 2012 by Sim Shagaya. Ranked as the largest online mall in Nigeria, it was created to offer a gamut of products ranging from electronic devices to household wares, clothing, computers and mobile phones, beauty products etc, purchased at the buyer’s convenience.

If you go back in time, Konga’s overarching vision was to be an engine that powers Africa’s commerce. I remember learning this from a Channels interview the founder once gave. Sim wanted Konga to be a platform that powered Africa’s commerce and he did a remarkable job of pursuing that vision. Working with the best developers and minds, KONGA built KongaPay, a remarkably strong and secure CBN-licensed payment platform, it built a solid delivery and logistics system; KOS-Express, it had one of the largest catalogues of products with large warehouses located in major cities across the country and it invested largely in marketing, trying to create awareness via traditional and new media outlets. Virtually, almost every Nigerian in one way or the other has heard about Konga.

Konga’s process was simple; you visit the website, place an order for a product, make your payment and it is delivered to you. The team’s novel strategy made e-commerce easy and convenient with you receiving your purchases at your doorstep, without you leaving your home. In no time, KONGA evolved into an online marketplace hub where the products of other merchants were hosted and it began facilitating the buyer-seller relationship between the merchants and consumers.

With its newly expanded market base, Konga encountered an interesting consumer behaviour challenge: most Nigerians were wary of online services and didn’t trust paying for products they couldn’t see. Also, they had to deal with the hassle of making complaints and seeking a refund if something went wrong. All these birthed their payment on delivery (POD) option and with this innovation in place,  it invariably seemed like KONGA was becoming the engine that will power e-commerce across Africa.

In early 2018, shock swept across the tech industry when the news of the sale of Konga to Zinox went public. Although it was a sad day for me because of my belief in their potential, it raised a couple of observations in my mind.

 

“At the point where Konga seemed to be going through a trying phase and eventually an acquisition by Zinox, it seemed like physical superstores like Shoprite, Next Cash ‘n’ Carry were becoming more viable, with new ones like Miniso Nigeria coming up. “

The Sociology Of Buying; Traditional & Modern Consumers

In trying to understand this surprising development, I got to thinking and I observed that, just like Zinox’s e-commerce platform, BuyRightAfrica.Com which was launched over 12 years ago didn’t perform so well owing to the absence of credit cards and an e-payment infrastructure, the market was not yet ready for Konga’s revolutionary idea in spite of their strong product and value proposition.

 

According to the Euromonitor-reports-on-nigeria-retail-market article published on Abbakin.com website, despite the economic recession the country experienced, at the end of their financial year in July 2017, Shoprite recorded a rise in profit with a 48.2% increase in sales and a 38.2% increase in customer base. In addition, Nigeria and Angola were key markets outside of South Africa reported tohave contributed to the group’s full-year earnings pegged at N3.86 trillion.This was also reported by the Businessdayonline.com website. Miniso Nigeria, a Japanese multinational lifestyle designer retail chain, with over 2,250 stores in 41 countries launched six stores in Nigeria in September 2017.

 

From an end user perspective, I realised that there were several factors preventing this remarkable commerce strategy from gaining traction.

According to the April edition of The Communicator, an online publication of The Nigerian Communications Commission, the number of internet users in Nigeria is about 98.3 million. For a country with an estimated population of over 190 million, that amounts to about 47% internet users in total, pointing to the fact that there are more people offline than online and so the default buying culture is offline. As at December 31st, 2017, the number of Facebook subscribers in Nigeria was pegged at 17million according to the Internet World Stats Website. Between then and May 23rd, 2018, an article on Techpoint.africa reported that Facebook’s Developer Programme Manager, Chukwuemeka Afigbo stated that about 26 million Nigerians are now active on Facebook. Although the increase in internet subscribers is encouraging, it’s still a far cry from the prevalent population realities of the country.

This explains why superstores like Shoprite, Ebeano and even the typical Igbo man’s shop in Alaba market and several other markets are gaining traction and expanding.

 

So a major element of our buying culture as Nigerians is trust, and so, even though technology is powerful, Cash and Carry is still king. I see a product, I like it, pay and take it home. No stories, no extended delivery window. If it’s faulty, it can be fixed right there or another, given in exchange. 

 

There is a major issue of trust embedded in the average Nigerian’s psyche. Trust is a significant factor that influences a brand’s acceptance and as such, crucial for business transactions. The absence or presence of trust contributes to consumer confidence in the medium of purchase.

In addition, the demography of internet users, tech-savvy individuals and their purchasing predilections are also influential factors.

First, online malls may only be attractive to the younger age bracket whose disposable income can easily be channelled to online shopping because their expenditure is limited and they don’t have the added responsibilities of children and dependants that those in the older age bracket do.

Secondly, individuals within the age bracket of 25-34 are typically young, working-class professionals and although they are tech-savvy and inclined to online shopping, they are located within the low-middle income bracket which in turn, affects their disposable income level in comparison to the disposable income of those individuals within the age bracket of 34-50 who may be tech-savvy but have years of offline buying behaviour ingrained in them and so prefer to buy from that friend that sells London wears brought from their Dubai trip or Turkey wears.

On the flip side, some of the individuals in this older age-bracket haven’t gained a strong grasp of technology and internet usage yet, they don’t make up the tech user demography. Most of them are only just beginning to appreciate WhatsApp, so this affected the adoption of the Konga product. These are prevalent realities.

 

The New: Foresight For Best Practice in E-Commerce

Now, looking at Konga’s new strategy which involves the combination of their strong online presence in addition to an investment in physical, offline convenience stores, I think that this acquisition of Konga by Zinox, now turned merger between Konga and Yudala, the e-commerce brainchild of Zinox will be more viable in the long run.

Why? What this new strategy does is that it creates a strong brand trust for the consumer.

 

“The concern of brand trust is addressed in that people feel like that they can visit the online store, check out the prices and walk into the offline store close to them to make purchases directly, for the same price. This gives room for a new kind of experience that puts into context where Nigerians are and where they should be. “

 

What this portends for the entrepreneur or innovator in the Nigerian business or tech space is that as an entrepreneur looking to revolutionise and disrupt the market, it is paramount that your business framework caters to the prevalent cultural realities of your target market, putting in context their unique peculiarities. In essence, introduce the unfamiliar with the familiar.

 

Strategic Hindsight

Imagine if Konga had started with physical franchises strategically positioned across the country while building their strong online presence, it would have formed the formidable conglomerate of a SHOPRITE-like and Amazon-like venture. It would inevitably get to the point where people would no longer visit the physical stores and would be comfortable making purchases online because they know they can easily walk into a physical store in the event of a defective product as opposed to waiting for a long-drawn-out response from a customer care rep. you can’t see physically. thus increasing the value of the Konga product.

Lessons For The E-Commerce Space

In light of this, I think entrepreneurs can learn from how this affects the dynamics of businesses in Nigeria. Whilst we are leveraging the power of technology to disrupt and cause change and advancement in any industry, whilst we advocate the merits of digital marketing and technology it is important to understand that Nigeria is still largely an offline powered economy, with limited internet usage. As such, whatever strategy you are building should factor into the question of how to reach the unreached, how to reach those who don’t use the internet or aren’t tech savvy.

Secondly, your strategy should take into the consideration the socio-cultural factors that affect buying or consumer behaviour and at every step of the way, your strategy is designed to consistently inspire trust in the buyer’s mind. It goes beyond you knowing this internally as a brand, you have to intentionally ensure that your strategy makes it very easy for your customer base to hold you accountable.

In addition, your strategy should address the challenge of instant gratification that is characteristic of most Nigerians; I want the product now, I buy it now, I get it now without waiting for too long a delivery period to access value.

In the end, in trying to create something new or pioneering a shift, its okay to begin with the normal.

For example, when Facebook began, it was pretty boring, just one page. Imagine if all the exciting features that Facebook currently has were introduced from the onset, most users would have found the experience daunting or wouldn’t have been engaged.

Sometimes starting old school and innovating your way up may be a viable strategy.

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