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Q&A: Ignatius Akpabio on TradeDepot’s $110m raise & Africa’s e-commerce surge

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2021 was a remarkable year for venture capital in Africa (well, everywhere, actually.) Startups in Africa raised $4.3 billion, which is more than two and a half times the amount raised in 2020, according to The Big Deal.

B2B e-commerce venture TradeDepot inked one of the last big deals of the year: a $110 million Series B equity and debt round that will enable the Nigerian startup to expand business and financial services to the continent’s small-scale shopkeepers.

TradeDepot got its start in 2016 as one of the few companies in Africa bringing tech services like inventory management and digital payments to Nigeria’s informal, mostly women-run retail businesses. Such retailers, most of which are one or two-person operations, sell an estimated 80% to 90% of food and consumer goods on the continent. Yet they have historically been run as unbanked, cash-based businesses.

That is now changing, as companies like TradeDepot work to improve supply-chain connections between retailers and fast moving consumer goods (FMCG) brands. In doing so, such startups are gathering troves of data on retailers’ inventory stocking and sales patterns – that allows them, in turn, to create an on-ramp to financial services.

AFN spoke to TradeDepot’s head of strategy and expansion Ignatius Akpabio (IA) about how tech and e-commerce are changing the face of Africa’s FMCG and retail sectors:

AFN: When TradeDepot started, you were one of the rare tech startups catering to the informal retail sector. Now there are so many. Why did you, and now so many other entrepreneurs and investors, tune into the digital needs of this business community?

IA: It is important to give the informal retailer a digital identity. Their challenges are pretty obvious: if you walk up to a store owner and ask them what their biggest headaches are, they will tell you “access to products” and “access to proper financing.” These are two things that we are solving.

Today, you have lots of investors coming in, and you see a lot of competition. Being able to see other players coming to the market, growing significantly and investors trooping in has been encouraging. When we started, it was a lot more difficult to convince investors because there was little or no understanding of the space at that time. It took a while for us to get here.

Back in the day, it was B2C plays driving traction in the logistics or e-commerce space [rather than B2B]. I think the lack of success within that space made investors apprehensive.

AFN: Explain what TradeDepot is doing for the micro and small retail sector.

We give our customers a digital identity that allows them to use digital platforms to aid their businesses. Our platform offers them products at [better] prices and allows them to buy more [inventory] than they otherwise could with their working capital.

We have more than 100,000 customers.

We made a conscious decision to go fully digital, and we made all of our incentives exclusively available digitally. For instance, we made products strictly available digitally but at better prices than elsewhere. It took us a while to get to a point where we were 100% confident that retailers would use smartphones. But customer acquisition is pretty simple if you give a retailer enough incentive to leverage your platform and you solve their problems for them.

AFN: It’s said that the opportunity in micro and small-B2B e-commerce is all about the data—that collecting data on shopkeepers’ spending and sales patterns is the key to building profitable and impactful products and services for this oft-ignored business segment. Tell us how that applies to TradeDepot’s business evolution.  

In time past, access to finance for retailers was very expensive. A structured credit bureau that could help in credit scoring was non-existent.

We generated transactions for all of these retailers, which we could build into a credit scoring algorithm, and off of that, we started financing because we had a track record that we could leverage to know whether the retailer was fit for credit. Being able to scientifically determine who should get credit and at what limits is the game-changer here.

Gender is a big part of the credit scoring, as we try to give as many women access to financing as possible. Eighty percent of the retailers on our platform are women.

Traditional financing methods do not naturally favor women, and that has been a downside for them in growing their businesses. But we see that they are the lowest defaulters on the platform, and they have been since we started offering inventory financing. That has encouraged us to channel more programs and more in-person “town halls” towards female education. We also sometimes do female-targeted incentives on the platform.

In our last funding round, we were financed by the Women Entrepreneurship Financing Initiative of the World Bank. That has given us a stronger female focus as well.

AFN: TradeDepot just raised $110 million in debt and equity. You have said that the plan is to accelerate your inventory financing activity, which you offer in the form of “buy now, pay later” financing. Retailers pay after they’ve sold their merchandise. Why have you chosen this model?  

We spent a lot of time trying to understand Southeast Asia, where buy now, pay later has [accelerated] over the last couple of years, and other buy now, pay later services that are consumer-facing. Some of those learnings helped us in pushing buy now, pay later in African markets. You’re not giving out cash loans to retailers—what you’re giving them is products on credit. You’re collateralizing their stock.

We’ve seen retailers 3X their purchasing frequency and 2-to-3X their purchase order values. Moving from a $200 transaction business to a $600 transaction business is significant for them. It has also accounted for growth in our overall gross merchandise value [the amount of merchandise sold].

There is a ripple effect from retailers’ being able to buy more. Digitizing retailers means consumers will have access to more products. That’s also the promise for the manufacturers we work with: that they’ll get their products on retailers’ shelves and their customers will be able to buy more.

AFN: And are your customers generally reliable in repaying their lines of credit? As you mentioned, these are customers who are often receiving credit and loans for the first time.

Our default rate has is low. Unrecoverable credit has been as low as 0.25%. Efforts to recover loans isn’t difficult because you need to have traded on the platform for awhile and done a minimum number of transactions before you can qualify for credit. That gives us confidence that you’re not going to run away or default on your payment. Most times that we have defaults, it’s because of reasons that customers cannot control.

As much as we’ve been able to digitize, you can’t completely take out human interaction. You need that build sustainable business relationships. For example, with our tech, we know when [owners] are in their store and when they’re not. We have a fair sense of when someone has been absent a lot. So then we have check-ins with these stores every two weeks where we have someone physically visit the stores and get regular updates.

Also, with our first iteration of buy now, pay later, we had instances where people did not know when it was time to pay back. [The customer interactions] helped us improve the tech a bit so they know when it is time to pay back.

AFN: What interesting innovations have you seen from your peers and competitors in other markets?

The most mature emerging markets for B2B e-commerce are in Southeast Asia. One thing to pick up from them is social commerce: leveraging the power of community to provide access to products and buy now pay later services. We’re keen to replicate that, because once you move out of tier one cities into tier two and tier three areas, the cost of logistics is significantly higher; you probably cannot do point-to-point deliveries every day. You have to leverage the power of communities in those places to get products to people.

AFN: What are your plans for 2022 with the capital you’ve raised, and what excites you about the opportunities ahead?

We have operations in Nigeria, South Africa and Ghana. In 2022, there will be expansion into more markets, but we also want to build our capabilities in the markets we are in and grow significantly in South Africa and Ghana.

[In terms of what’s exciting]: knowing that retailers are going to be better served moving into the future. That we are doing this and other players are doing this has gotten manufacturers thinking about how to leverage digital distribution. A lot of manufacturers are now setting up entire divisions within their businesses to figure out how products can be made available on digital. With manufacturers starting to take the [small retailer] distribution space more seriously, supply will start to catch up with demand, instead of the supply deficit that we have today.

The fact that retailers will get ready access to products and be able to grow their businesses is what excites us at TradeDepot. The more parties that come in, the more manufacturers will take them seriously, and the better everyday life will be for the average African retailer.



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