I have written extensively on my admiration of B2B Ecommerce in Africa. I have also been consistent that I do not like B2C ecommerce business models like the type run by Jumia. Africa’s B2C ecommerce has a marginal cost problem and if you examine the cost, you will realize that there is nothing “electronic” in the model.
That noted, I have made the case that a new generation of ecommerce companies will rise and they are going to be B2B. By Q1 2023, they would have larger market capitalizations than Jumia which is the largest in the continent now.
Today, we are reading that TradeDepot has raised $110 million: “TradeDepot, a Nigeria- and U.S.-based company that connects consumer goods brands to thousands of retailers and helps with distribution, has raised $110 million in new equity and debt funding as it looks to bring in more retail stores and expand its buy now, pay later service across the continent.”
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`In this business are Supplias, Omnibiz, Alerzo, and Mintyn. All these firms are just focusing on Lagos, Port Harcourt and Abuja and have growth ahead. They are yet to get to Ovim, my village in Abia state. It would take time to digitize African retails and I see this to be decades-long!
I am also bullish on the B2B business model that we invested in Africa’s largest downstream digital tech in the oil and gas. TradeGrid is growing in triple digits quarter by quarter. Tekedia Capital members who invested in it are smiling. We also pushed that business model for a new startup that we’re unveiling in January. Again, Tekedia Capital members came really big on it.
Good people, it is about marginal cost. B2B solves that problem at scale. That is why these companies are raising millions of dollars. Pay attention because what these companies are doing will make our banks very irrelevant in the near future: “just as any B2B e-commerce platform offering BNPL services, TradeDepot does not provide these merchants with cash advances. Instead, it sends the products directly to them while they pay in installments. The monthly effective interest rate stands at almost 5%.” Yes, that is 5% monthly and every retailer wants it because there is no paperwork since it is Buy Now Pay Later.
Depending on how you look at it, that is a 60% annual interest on trade financing – and the company has $110m to take more traditional bank customers.
Do Not Waste Time Starting B2C Ecommerce Business in Nigeria
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If we want to deepen commence across board, then we have to invest in creating systems, and not the disparate and disjointed approach currently in play.
What happens here most times is believing that we can operate a business that requires $100 million to properly take off with just $5 million, so when it’s not clicking, we blame it on the market, not minding that the investment made was grossly insufficient.
If we restrict a sector’s operations to few big cities, then we cannot really claim to be doing anything great, anyone can do same, without much thinking.
Why is it difficult for B2C e-commerce to thrive here? We need to answer that question properly. And how can we integrate both B2B and B2C in ways that can improve efficient utilization of assets? They are all possibilities, and the more we can answer these questions convincingly, the more we can bring many people and cities to participate.
It will not cost too much fortune, just organise the supply chain and stores/warehouses properly, then there wouldn’t be need to send items ordered in PH from Lagos, it will be sourced locally.
What percentage of products on sale via e-commerce are produced locally? There’s a limit to what you can do with rented economy.