How global trends redefine Nigerian start-ups
Oluwafemi Ajuola, chief executive officer of Jamar Limited, sells women dresses at the crowded Oshodi Market in Lagos.
Ajuola has three shops, from where he sells his products to customers. Two out of his five customers come from West and Central Africa. His biggest patrons are Cameroonians who sometimes pay higher than others as long as the goods meet certain standards.
Ajuola’s three-year-old Jamar Limited has grown from a N3 million enterprise to a N9.2 million business within three years before August 2016.
However, things are now beginning to change. Nearly half of his customers are no longer coming. They have not been to his shops for nearly nine weeks.
In late October, one of his customers dropped a bombshell: He has moved onto online purchase.
“Teddy from Mali told me that he now prefers to buy online,” said Ajuola, while speaking with Real Sector Watch on November 15.
“According to him, the online purchase affords him the opportunity of seeing the goods he wants to buy and saves him the cost of coming to Nigeria,” Ajuola said, agonisingly.
Online sales are gaining a lot of attraction globally and are putting a number of people out of jobs. A report entitled, ‘Death of a (B2B) Salesman’ compiled by Forrester e-business analyst Andy Hoar estimates that one million sales representatives or 22 per cent of the 4.5 million business-to-business (B2B) sales agents now in the United States will lose their jobs to e-commerce by 2020.
The bigger picture is that businesses are leveraging technology globally for growth, and start-ups or small businesses in Nigeria that are not technology-savvy could lose margins and market positions.
At a forum organised by the Professional Practice Group (PPG) of the Lagos Chamber of Commerce and Industry (LCCI) entitled, ‘ICT as an Enabling Tool for Professional Services: New Frontiers and Opportunities’, IT experts said technology was now right in the middle of every business, stressing that those who refused to key into it would be displaced or forced to go out of business.
According to Tunji Adeyinka, managing director, Connect Marketing, 94 per cent of certain accounting practices would be done fully on the computer within the shortest possible time, adding that digital acceleration was already redefining the way the world did its business.
The China effect is also one key factor in the global space that is redefining the way Nigerian start-ups do business. Obinna Uruedengo, a shoe maker in Aba, sells a pair of men’s shoes for N4, 000. However, close to him is a retailer of Chinese shoes, who sells a pair of men’s shoes for N3, 000.
“Even when I exported my shoes to Mali, Chinese shoes were still cheaper,” Uruedengo said in reminiscence. China is world’s leader in virtually all Fast-Moving Consumer Goods (FMCGs). Even with dollar challenge in Nigeria, Chinese products are still cheaper than locally produced ones. The reason is that production costs in world’s second fastest growing economy are low and the government of China has a number of one to three per cent loan packages for exporters.
China has cut the price of its tomato pastes by half to attract Nigerian importers, a situation that makes manufacturers such as Erisco Foods and Dangote Tomato un-competitive.
“China is coming too hard, but start-ups with better quality products, sourcing inputs locally will outshine them,” said Ike Ibeabuchi, a manufacturer and CEO of MD Services Limited, a services and manufacturing firm.
“Let people know you as someone who doesn’t compromise quality. Whether you are a manufacturer, fashion designer or importer, make sure that people do not have any need to leave your place of business for your competitor’s. Be known for a line of products and have all the products relating to that area so as to be a reference point,” Ibeabuchi admonished.
Apart from China effect, crash in energy prices are redefining Nigerian start-ups. Oil price has crashed by over a half, cutting dollar inflows in the last 18 months.
Fuel price is N145 now as against less than N100 eight months ago. Most start-ups cannot find dollar to import. For an import-dependent economy like Nigeria, high dollar-naira exchange rate has forced the inflation rate to hit 18.3 per cent. The situation has led to recession, reducing consumer income and spending. This, according to experts, means start-ups must have better pricing and marketing techniques.
Tonye Cole, co-founder of Sahara Group, advised businesses to cut costs and remove redundancies now.
There is also an increased need for border tightening. The European Union has banned some of Nigeria’s goods because they did not meet standards.
Experts want start-up exporters to first study rules and regulations of the country which they plan to export to, before shipping their goods out.
ODINAKA ANUDU