Traditional, informal retailers account for around 70% of African consumers’ food, beverage and personal care purchases. Nigeria had around 600,000 smallscale retailers, primarily grocers, accounting for 97% of national retail transactions according to a June 2022 report by international consultancy Boston Consulting Group. While modern malls populated by international brands have gained traction in recent years, macroeconomic constraints and prevailing market dynamics suggest that the public preference for traditional stores and vendors is likely to continue into the next decade.
The start of the Covid-19 pandemic and the subsequent restrictions on physical interaction necessitated a shift in retail dynamics. In Nigeria, e-commerce sites such as Jumia, Konga and PayPorte had existed even before the health crisis with their well-established online marketplaces and logistics services. After the start of the pandemic many Nigerians shifted to such platforms to secure not only traditionally popular e-commerce goods such as electronics and fashion but also essential supplies. The platforms provided vital services for consumers and also offered third parties a platform from which to advertise and sell stock.
Digital Solutions
Broadly speaking, to replenish stock informal traders must close their stores and stalls, and travel to wholesalers and central markets. Business-to-business e-commerce platforms Alerzo and Omnibiz began operations in 2019 with the aim of digitising supply chains for informal retailers – especially those residing in smaller cities. By establishing a digital marketplace for wholesalers and manufacturers, these companies connect informal retailers with suppliers, while their last-mile delivery services enable the former to avoid business closures by having stock delivered to their premises. As of August 2021 Alerzo provided services to more than 100,000 informal retailers, and in August of that year the company announced that it had secured $10.5m in a Series A funding round, with London-based Nosara Capital one of the key investors.
Given the size of the informal retail segment, digital platforms that connect international brands and venture capitalists with Nigeria’s rapidly expanding consumer population – forecast to grow from over 218.5m as of July 2022 to 400m in 2050 – hold real transformative potential. In the same June 2022 report by Boston Consulting Group, the firm assessed the prominence of informal retail in Africa through a sample of 4500 traders in Nigeria, Morocco, Kenya, Egypt and South Africa. Their findings noted that the sample group tend to be young, educated, digitally savvy and financially included – and motivated to modernise the segment. Nigerian retailers for their part had an average age of 34, compared to the national average of 40, and 87% of those polled had passed secondary education levels, compared to the national average of 45%.
Financial Technology
In recent years the majority of start-ups were launched in the financial technology sector, according to the “Nigerian Start-up Ecosystem Report 2022” by Disrupt Africa, published in September of that year. That capacity was harnessed in response to pandemic-related restrictions. “Technology has a growing presence in the Nigerian retail space, driven largely by electronic payment solutions providers and e-commerce platforms,” Bolaji Edu, CEO of Broll Nigeria, told OBG. “Both formal and informal retailers now offer point-of-sales transaction facilities.” While the digital transformation of retail is being driven by e-commerce sites, formal retailers are offering consumers a range of digital solutions such as mobile airtime top-ups and mobile money solutions. Alerzo, for example, provides those services, plus its traditional business-to-business inventory- and revenue-tracking features. Tools such as these can help informal retailers diversify and modernise their offerings, as well as bolster their competitiveness. Nigeria’s digital platforms have an opportunity to facilitate partnerships, allowing mobile data and mobile money providers, formal retailers and others to extend their reach into an informal retail consumer market.
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