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5 issues Konga needs to deal with, as it scales

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“Konga.com is Nigeria’s largest online mall. We launched in July 2012 and our mission is to become the engine of commerce and trade in Africa.” Source: https://www.konga.com/about-us/

Konga’s claims about itself can be debatable, but one thing is clear, Konga’s business is to facilitate commerce and trade in Africa (well, starting with Nigeria I guess). But, on whose cost should Konga do this facilitation? Is it wise for Konga to facilitate trade at its own expense? Shouldn’t Konga figure out a way to facilitate trade in an efficient way for its business. Guys, don’t forget, Konga wants “to become the engine of commerce and trade in Africa”.

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The African dream might just remain a dream if the business does not survive in Nigeria. So, it is imperative for all of us to figure out a way to ensure that Konga first survives, then become sustainable before thinking of Conquering other territories.

Please don’t get me wrong, I have not started talking about profitability. I know the response to that will be that Amazon and Alibaba didn’t turn a profit in their first 10 years. But 1 thing is sure, the grow at an unbelievable rate. Notice that I used the word rate. I am not talking about absolute numbers, I am talking in percentages. A company growing revenues at an annual rate of 150% but still unprofitable cannot be compared to another business within the same industry growing at 10% per annum with similar cost profile.

I understand the pushback, Nigeria is tough, infrastructure is bad, security and power etc. But guess what, so was China. Every territory requires tailored strategy to win or survive. The model that worked in China might not survive in Nigeria. So, Go-Jek vs Uber (or other car hailing/sharing businesses) is an example. When everyone appears to be replicating the Uber model across different territories, Go-Jek understood the Indonesian market and launched a Motorbike sharing/hailing business. So, you will expect that a bicycle sharing play in china will be a no brainer, however, the market is teaching them a big lesson. Save for Ofo and Mobike (with stash of cash), most other players are struggling. In fact, Wukong Bike has shut down just five months after launching, with US$147,000 in losses. The Chongqing-based company claims that it was forced to wrap up as it could locate only 10 percent of its bikes, with the remainder presumed lost or stolen.

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That said, for Konga to achieve its dream, it needs to rethink its Nigerian operations. I believe Konga needs to scale back its operations, fix the inefficiencies within its valuechain, then scale up. I believe Konga needs to deal with the following specific issues;

  1. Stop trying to be Nigeria’s largest online mall: What is the point of being the Nigerian Civil Service? The largest employer of labour with so much inefficiencies. The idea of being the largest online mall is one of Konga’s biggest problems. Konga should rather focus on providing value to its customers and stakeholders. Being the biggest means nothing if you are not providing value!
  2. Focus on Quality Control – Sack Merchants with poor quality products: If Konga rethinks its target customers, it would realize that one of the reasons people purchase products online (especially from platforms like Konga) is the mark of quality the product might have. I will rather buy something online if I don’t know where (or have time) to get the original product. I will assume that Konga is a stamp of authenticity on the product. But if Konga then sells me substandard or outright fake product, I won’t care about the merchant, I will say, I bought this terrible product from Konga, simple! Konga needs to clean out its merchants. Only verified and trusted merchants should be allowed to sell on the platform. Konga does not need to sell everything. No, you don’t. If you can’t find a good quality source for a product, you don’t have to sell it. The sacked merchants can go on olx.com or jiji.ng, but on Konga, only verified merchants with quality products should be permitted. This then feeds to my next point –
  3. You don’t have to incur a customer acquisition cost (“CAC”) on the same customer over again: Once the Konga platform is known for good quality products, then the platform will enjoy repeat customers. Then loyalty schemes can be built on top of that. If Konga continues to allow these merchants (with substandard products) to ruin its business, then the business will have no choice than to always entice customers with low prices and deals – like it does now. This will continue to drive up its CAC. I will rather spend to keep my customers more loyal than spend to acquire them over again.
  4. Scrap Pay on Delivery (“POD”): Who pays for the cost of a failed or returned order? Once you can assure your customers that they will always get great quality product on the Konga platform, the next step is to scrap the POD option. This will ensure that only serious buyers come on the platform, and orders are only returned for genuine reasons. This will no doubt reduce the order volumes at the beginning, however you are sure that you only attempt to fulfil profitable orders. One director at a certain ecommerce platform claims that the biggest lesson he has learnt from the business is that “Nigerians like to travel!”. He explained that each time their delivery men brings the product to the customer’s house, the customers often claim to have travelled! Scraping POD will help reduce the travel frequency of Nigerians I believe.
  5. Forget Nationwide Delivery, Focus on Profitable Cities Clusters: There is no point delivering a pack of singlet to my village if the cost of delivering the product is higher than the benefit of doing such. There is a reason Uber will only operate in Lagos and Abuja. I reckon that Konga focuses on Tier 1 (Lagos, Abuja, PH I guess) and maybe Tier 2 (Ibadan, Uyo, Kaduna, Enugu, Abeokuta etc) city clusters. However, to scale this model efficiently, Konga should match merchants with orders within their clusters. So, I I am loging in from Gboko in Benue State for instance, the products I will be able to order are products by merchants around me, so that the delivery charge will at least cover the cost of delivery. If I want to order products outside my delivery zone, I should nominate a delivery address in the products’ delivery zone

Once these strategies are properly executed, I believe Konga will be in a better position to scale a more efficient operation and truly achieve its mission of becoming “the engine of commerce and trade in Africa.”

Happy Entrepreneuring

Fisayo Durojaye

@AremoFisayo

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Business News

DEAL: Tomato Jos secures over N1.8billion series A funding

Tomato Jos secured Series A round funding through a consortium of investment firms

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Fear among tomato farmers as Dangote Farms suspends seedlings distribution  

The local production of tomato paste in the country received a huge boost when Tomato Jos, an African agricultural production company, secured Series A round funding of EUR 3.9 million (N1.83 billion) through a consortium of investment firms, who are focused on providing support for small and growing businesses in Africa.

This series A funding is to help position Tomato Jos to further improve the lives and incomes of smallholder farmers and increase the sustainability and stability of food supply in Nigeria.

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The funding round was led by Goodwell Investments, through its West Africa partner, Aliyheia Capital with participation from Acumen Capital Partners and VestedWorld.

Tomato Jos was founded by Mira Mehta in 2014 with the vision to create and retain local value add to the tomato value chain, reduce post-harvest losses, and improve the lives of smallholder farmers. Since its inception, Tomato Jos has focused on securing its supply chain through primary production.

(READ MORE: Nigeria’s food security, GDP growth hinge on financial inclusion of farmers)

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The secured EUR 3.9 million Series A funding boosts the transition to its next stage of growth i.e. the processing and distribution of tomato products. The agricultural firm will work with thousands of smallholder farmers on over 2,600 hectares of land, putting more than $1 million of direct income into the local economy each year

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According to the founder and CEO of Tomato Jos, Mira Mehta, ‘’Processing has always been the plan for Tomato Jos, but to get there, we spent a long five years working only on farming and primary production to make sure that we had a really solid foundation in place’’. 

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‘’Everyone at the company is extremely excited to take this big step forward into the world of food processing and value-add production’’.

Although Nigeria is the second-largest producer of tomatoes in Africa, farming inefficiencies create a demand-supply gap resulting in Nigeria also being one of the biggest importers of tomato paste in the world.

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A partner at Alitheia, Mobola da-Silva, ‘’Tomato Jos has chosen the right market, business model, and management to succeed as a truly inclusive business within this management. As an agro-processing company that sources from local smallholder farmers and provides access to finance in the form of farming inputs to farmers, Tomato Jos is a good fit for uMunyhu’s inclusive strategy of investing in agribusiness’’. 

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Tomato Jos, through its initiatives and connecting local farmers to domestic consumers, has helped smallholder farmers’ average yield to grow by over 340% from 5 to 22 metric tons per hectare, while their average income increased by 455%.

(READ MORE: Emefiele insists CBN will not sell forex for importation of items produced in Nigeria)

CrossBoundary provided advisory support to this transaction through USAID’s INVEST program, funded by USAID Southern and Eastern Africa Regional Missions in support of the US Government’s Prosper Africa initiative.

The MD of Acumen Capital Partners said, ‘’Acumen Capital Partners is thrilled to join Tomato Jos’ Investors to help the company continue to develop a world-class vertically integrated tomato processing operation in Nigeria. Tomato Jos is positioned not only to locally produce tomato paste, which is mainly imported into Nigeria but to help Nigerian smallholder farmers increase their income by increasing their yield by 3-4x’’.

This is a huge boost to the country achieving self-sufficiency in tomato paste production as although Nigeria is one of the biggest producers of tomato in the continent, it is still one of the largest importers of tomato paste in the world.

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It can also be recalled that in February 2020, Dangote Tomato Processing Company officially resumed the production of tomato paste after initial hiccups and suspension of operations. This was due to the inadequacy of raw materials.

 

 

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Business News

FG grants new MSMEs 80% discount on NAFDAC registration

“It is quite clear that the President is committed to supporting existing MSMEs and encouraging the rise of new ones, as a sure way energizing and sustaining our economy through these times.” –Osinbajo

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FG grants new MSMEs 80% discount on NAFDAC registration

The Federal Government has announced that new Micro Small and Medium Enterprises (MSMEs) will access National Agency for Food and Drugs Administration and Control (NAFDAC) registration of their products at an 80% discount, over the next 6 months.

Eligibility: This concession covers MSMEs that are into production of foods, drugs, and related consumables.

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Vice President and Head of the Economic Sustainability Committee, Professor Yemi Osinbajo, announced this on his Instagram handle on Friday night.

READ ALSO: LSETF suspends loan repayment for SMEs, startups amidst lockdown

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Starting today, our MSMEs can now process the registration of their products with NAFDAC from the comfort of their homes, and at an 80% discounted rate over a period of six months. This is thanks to NAFDAC's e-Registration assistance for MSMEs through the Automated Product Administration and Monitoring System (NAPAMS). . Also, in recognition of the current economic challenges, we also commissioned additional NAFDAC palliatives for Micro/Small businesses, which includes zero tariffs for the first 200 micro and small businesses to register on the e-platform, and waiver on administrative charges for overdue/late renewal of expired licenses of products for a period 90 days. . It is quite clear that the President is committed to supporting existing MSMEs and encouraging the rise of new ones, as a sure way energizing and sustaining our economy through these times. . We reserve special commendation to the DG of NAFDAC and her team for this thoughtful and strategic response to the devastation that the COvid 19 pandemic has caused to businesses, especially MSMEs.

A post shared by Professor Yemi Osinbajo (@profosinbajo) on

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“Of importance to government response, therefore, was not just to find a way of giving succour and assistance to existing MSMEs, but also ensuring that there is practical and active palliatives to new MSMEs so that the growth of the sector is not discouraged by the current economic trauma,” he said.

The new businesses will also be able to process product registration remotely, using the NAFDAC’s e-Registration assistance for MSMEs through the Automated Product Administration and Monitoring System NAPAMS.

READ ALSO: FG to disburse N97.3 billion to tech innovators, agric enterprises

Other palliatives: As an added incentive, the first 200 micro and small businesses to register on the e-platforms will be allowed to do it at no cost – zero tariffs.

In view of current economic challenges faced by businesses due to the pandemic, the government has also authorised NAFDAC to grant waiver on administrative charges for overdue/late renewal of expired licenses of products for a period 90 days.

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It is quite clear that the President is committed to supporting existing MSMEs and encouraging the rise of new ones, as a sure way energizing and sustaining our economy through these times” Osinbajo noted.

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He thanked the Director General of NAFDAC and the team for their thoughtful and strategic response to the economic devastation caused by the pandemic, especially on small businesses in Nigeria.

The Vice President also assured business owners that the government of Nigeria and its regulatory agencies are “prepared to back MSMEs and businesses that are prepared for the innovative and interesting times that lie ahead of us.”

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Coronavirus

Steps SMEs must take to survive post COVID-19

As the business owners try to hedge their businesses with investments, they must look out for risks, returns on investments, time-frame of investments, and background of the issuers

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SMEs, business, COVID-19: Here’s how to manage remote teams for your startup

For every Small and Medium Enterprises (SMEs) that want to survive the coronavirus pandemic, it is essential for them to source raw materials locally, Ugodre Obi-Chukwu, the founder of Nairametrics, has advised.

This is particularly essential as the foreign exchange will remain volatile for a long while after the pandemic, affecting businesses that depend on imported materials for their productions.

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Ugodre suggested this while speaking during an Instagram live session with Ore Ajayi of United Capital Plc, themed “Hedging your business with the right investments post-COVID-19.”

According to Ugodre, the volatility of the foreign exchange could lead to increased costs of productions for businesses, making it even more difficult for them to retain their market share in an economy that is battling a COVID-19 induced depression.

“Before COVID-19, we were in a difficult position as a country. Government revenue was down. Oil prices had started falling from late 2019. We had an economy where the government could not fund the budget and had to resort to borrowing,” he explained.

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(READ MORE:“Crises also create opportunities” –Chapel Hill Denham’s CEO on COVID-19)

Steps for SMEs to take in order to survive post COVID-19  

Ugodre suggested that the purchase of foreign exchange could be explored, but investment in dollar assets, foreign stocks and bonds would be better options to help businesses cushion the impact of rising inflation and depreciation of the naira. Ugodre, however, placed a caveat:

“While keeping a healthy mix of dollar and naira assets, try not to buy foreign exchange above 20% premium of the official price. This gives you enough room to protect your funds and reduce risks.” 

 

Renegotiate loans and stay liquid

As things get tougher in post-COVID-19, it will become expedient for businesses to stay liquid and set aside some funds for emergencies.

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Ugodre advised SMEs to consider renegotiating loan repayment terms with bank partners so that the facilities are not repaid at the expense of staying afloat.

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He also suggested that SMEs could approach commercial banks, or the Bank of Industry for loans to keep them afloat, at reduced interest rates.

(READ MORE:Local investors push Nigerian Stocks to post best monthly gains in over 2 years)

Use tech-driven investment platforms

At a time when the world is gravitating towards technology, SMEs must consider tech-driven investment platforms to run and manage their investments.

Steps for SMEs to take in order to survive post COVID-19

Responding to the question of platforms to explore, Ore Ajayi, the session host, noted that SMEs and individual investors have to move from looking for walk-in investment platforms and explore digitally-driven platforms.

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“You must leverage technology for your investment needs. Platforms such as Invest now, which is powered by United Capital, could be a great one to leverage on at this time,” he said.

Investments to look out for

Ugodre emphasized also that as the business owners try to hedge their businesses with investments, they must look out for risks, returns on investments, time-frame of investments, and background of the issuers.

“Tread carefully in your investments. Picture the world 10 years from now, and imagine what businesses would look like then. Let that guide your investments. Those who identify this are those who will win,” he stated.

 

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