What does Nigerian online retailer, Konga.com, have in common with Africa’s largest media company?
VENTURES AFRICA – At 10, Nigerian-born Sim Shagaya began writing computer codes. At Christmas, he would program his basic computer, run syntaxes, and connect it to a TV set to display ‘Merry Christmas’ and a digital xmas tree. Many years later, upon graduating as an Electrical Engineer from George Washington University, and bagging his MBA at Harvard Business School, he became the Vice President of Rand Merchant Bank (West Africa), after which he led Google Africa. Over the years, he has founded several tech startups – iNollywood, E-motion, DealDey, and Konga - the latest of which is Konga.com, a Nigerian online shopping mall launched July 2012 with 7 workers, which currently has grown to 130.
Along this eventful career, the tech geek has learnt that the key to enterprise success isn’t necessarily superior technological solution but people and relationships. “Business is transaction with individuals not machines or assets. Business, is people,” he says.
“And I sincerely want to make them happy.’
This people-centred philosophy has fundamentally shaped Shagaya’s leadership and company strategy at Konga Shopping Company. During the entire course of interviewing him, he addresses his Vice President, Marketing Onyeka Akumah (who was also present) as a ‘brother,’ not like a subordinate. A substantial 10 percent stake of his multi million dollar e-commerce company is shared among some members of his staff. He discloses, “even junior officers in customer service have ownership stake in this company.”
Notably, in an hour of discussing with Sim, he mentioned ‘customer service’ 9 times. Externally, Sim is bent on ensuring customers derive the deepest satisfaction on orders placed from his online store. “We would even install your ordered TV set for free,” he points out.
“Customer service is our North star. That’s the prime reason Naspers MIH found Konga and invested in us. We had knocked on countless doors in Mayfair and London for months, seeking funding.”
But the investors kept telling them: “We are not looking at Nigeria. Nigeria is too early. We are looking at India and Indonesia.”
Meanwhile, Konga’s efficiency at logistics systems and focus on consumer experience had helped the retailer garner customer loyalty and brand equity. Unknown to Sim and his team, while foreign investors turned down Konga’s investment proposal, South Africa’s media giant Naspers MIH Internet Africa, came across several tweets and blog posts testifying of Konga’s good customer service. The testimonials were overwhelming; they riveted the South African media giant’s attention. Two years earlier, Naspers MIH had operated an e-commerce business in Nigeria, Kalahari.com.ng. But a discouraging performance and inability to make near-term profit forced the multinational to shutdown operations. Konga’s impressive performance presented Naspers MIH an opportunity for a comeback into Africa’s largest market.
“We think they(Naspers MIH) did some test orders at Konga.com that went well,” Sim shares.
“But they(Naspers MIH) wouldn’t admit to it.” Sim had us all laughing!
Eventually, Naspers invested cash for equity in Konga under a non-disclosure term that makes it illegal for both parties to reveal specific facts about the deal. Reports have inaccurately put the size of equity acquired by Naspers at 50 percent. Sim discloses it is “significantly less.” What is not in doubt is that the serial South African online business investor poured an 8-digit million dollar cash into Konga. The business of online retailing for a market as large as Nigeria is capitally intensive.
According to Sim, “online retail is not really a tech business.” It is more of massive retail with DHL-like proportions of logistics.
Konga has its central distribution centre in Lagos warehousing all its inventory, with two sorting centres in Abuja and Port Harcourt which act as regional depots. From Lagos, products are transported to the sorting centres to meet orders coming in from around the regions, before being delivered to consumers. With Naspers’ investment, the retailer plans to engage in a plethora of offline marketing, improve logistics systems with better people, IT and working capital, and push out more sorting centres across Nigeria to deliver orders faster and more precisely.
“And this is the super-complex part. The decisions of what these distribution centres would look like in 2016, have to be taken now. Also you don’t want to stock a mobile phone the market wouldn’t want, in 6 months.”
In China, where arguably everything is manufactured, online stores can be run literarily in a sitting room with the orders supplied from the numerous manufacturers around. Because Nigeria is not a manufacturing country, the market is at the edge of global supply chain. Consequently, all-in-one retailers in the country need thousands of square feet of land to adequately stock supply for its 160 million peoples.
“Even Amazon’s total warehousing land area would cover from here(Ilupeju) to FESTAC,” Sim states.
Massive warehousing of this magnitude cost millions of dollars to acquire and millions to insure too. Last year, Actis reportedly raised over $200 million to construct new facilities to accommodate expansion plans for Shoprite in Nigeria. According to Sim, who’s from Plateau state in North-Central Nigeria, the country lacks this kind of facilities and the few available ones are deployed by major corporations like Nigerian Breweries. Konga would have to acquire land and start constructing its warehouses, he quips.
“Building a nationwide retail infrastructure is tough. It is even harder to secure funds. I don’t know how our entrepreneurs are surviving,” Sim frankly tells.
Being a pioneer has its disadvantage. With no prior online retail experience or template to follow in Nigeria, Africa’s second-largest economy, the Konga team has had to learn as the business grew, making mistakes, and relearning, in the middle of fierce competition. Konga’s uncompleted story is like the first human flight to the moon; a thoroughly calculated risk into the unknown.
The task may be daunting, but Sim Shagaya is a man who knows his onions. The 6 feet tall serial entrepreneur projects preparedness and confidence.
“This thing will take 10 years to build. Even Russia and China are still rated as early e-commerce markets. So don’t judge us yet. Konga is a bet on Nigeria. E-commerce in Nigeria will grow not on internet penetration but if the disposable income of the average resident increases!” Sim affirms.
When asked which product Nigerians ordered most, Sim’s reply was “the mobile phone… with clothing following strongly.” I tried to trick him to divulge confidential information: “I think the Blackberry sells most. What do you think? Is it the Blackberry? Samsung? iPhone? The amiable man burst out laughing.