The New Year sure began bright at Konga, a Nigerian e-commerce startup which sells everything from mobile phones to washing machines, books, and refrigerators and deliver them within 24 hours. The big news was that Konga just raised 25 million US dollars – arguably the second biggest single raise by any startup in the whole continent.
Bootstrapped and launched in 2012 by serial entrepreneur Sim Shagaya, Konga is currently one of the two big e-commerce powerhouses in Nigeria with more than 100,000 visitors every day.
Quick Info: Nigeria has the largest internet population in Africa and it's 11th in the world. The average Nigerian netizen spends not less than 3 hours on the internet daily.
Within a few months of being bootstrapped, Konga had raised a seed fund of US$3.5 million from Kinnevik. This was followed by US$10 million series A round led by Kinnevik and Naspers. Once again, Kinnevik and Naspers were the investors in the series B round. The current US$25 million dollar round has set the record as the biggest single raise by any startup in Africa.
Sim Shagaya, Konga’s CEO has been tight-lipped about the current funding round. But the spokesperson has said the new cash injection will help the company invest in high quality talent acquisition, building tech infrastructure, and achieve operational excellence as they focus on solving the problems of retail, logistics and technology in Nigeria.
Born in Nigeria, Sim Shagaya pursued his MBA at the Harvard Business School in the US. He worked in South Africa at Rand Merchant investment bank before moving back to Nigeria as Google Africa head. He quit Google to venture into OOH ad business with his startup e-motion. After running it for six years (e-motion is still is a big player in the space), he founded DealDey in 2011, followed by Konga next year. Sim recently won the CNBC/All Africa Entrepreneur of the Year award, 2013.
Failures didn't stop him
Konga, DealDay and e-motion were successes but Sim has had his share of failures as well. He had started a dating site called Alarena which didn’t take off, and a job portal, JobClan that didn’t go anywhere. Gbogbo, a classified posting site, was another of his failed startups. Another one, iNollywood content streaming service was too early into the game and didn’t see any traction.
Now Sim Shagaya calls his current startup Konga “An Epic Journey”. He also said “American retail pioneer Sears, grew because it empowered rural Americans, we cannot simply target urban Africans and wealthy Africans and claim we have succeed.” Watch out, he is a man on grand mission of building something epic. Now, he is someone that building and motivating a strong team keeps him awake all night.
The secret weapon
When customers visit konga.com and place an order, they receive a confirmation call from the staff. At this infancy stage of e-commerce market such gestures build trust in people. It assures the customers that behind the .php and html codes, there are people trying to satisfy, delight and make their wishes come true with just a click of a button. This trend will change over time as online shopping matures.
Konga’s KPMG promise: We have several initiatives like the “Konga Price Match Guarantee” which ensures that in addition to fast delivery, pay on delivery, best quality of goods and other benefits of shopping on Konga.com, customers will always get the lowest prices for electronics anywhere online in Nigeria. If a customer buys a qualifying item on our site and finds an identical item on another retailer’s website for a lower price within 48 hours, we will match that price and refund the customer the difference. So we strive to always ensure the best price and quality of goods which customers may not always be guaranteed offline.
Konga also launched an online marketplace in Nigeria, a platform that enables local retailers to build their own stores online and connect with prospective buyers called Konga Mall. It is a place where third-party sellers can list their products and sell directly to customers via Konga platform, leveraging traffic of Konga and logistics infrastructure. Seller bring that merchandise to Konga’s warehouse, and then Konga can open up the retailers' merchandise nationwide, and take a commission on sales. It is a win-win-win for all the parties – customers will have more choices at their finger tips, sellers make money and are more discoverable and Konga acquires customers and cashes in LTV (Life Time Value).
Konga’s Lagos warehouses hold most of its inventories. They also have other two sorting centers in Abuja and Port Harcourt, where consumer goods are sent. Those serve as regional storehouses.
Pathetic road infrastructure is a big challenge for the company as it tries to be a 'customer-delighting' company. They even use auto rickshaws/tuk-tuks and motorcycles to sail through the huge traffic congestion in cities like Lagos and deliver orders in less than 24 hours.
Click and mortar future
Konga recently moved to a new 120,000 square-feet fulfillment center. As Konga scales, it will need more and more fulfillment centers and it’s not easy to set up one. It takes at least six months to locate a place and expand.
Konga’s roadmap for growth will involve taking competition by its horns and introducing customized solutions for the Nigerian and West African market.
Quick info: The other Nigerian e-commerce giant Jumia is a cousin of sorts for Konga because of multiple reasons. First, in the recent series B round Kinnevik was Konga's lead investor. Second, Kinnevik’s company Millicom and Rocket Internet controls 66.6% of Africa Internet Holding stakes. Third, Jumia is an Africa Internet Holding company. The bloodline can be traced from Jumia to AHI to Millicom to Kinnevik to Konga.
Nigeria is not a manufacturing country, so the market is at the mercy of the global supply chain. It might take five to ten years to build something as huge as Flipkart.com of India, 360Buy.com of China or Russia’s Ozon.ru. Even those markets are still considered as early stages of e-commerce. So you can’t compare Konga’s heavy lifting effort with America’s Amazon. Other markets have possibly everything manufactured stone's throw away. Anybody could run niche online stores from the bed room with orders supplied from numerous manufacturers.
But in Africa, the story has different narrative. It requires lots of blood, sweat and toil to make it work.
Increasing disposable incomes and internet penetration has resulted in more and more consumers trusting and accepting e-commerce as a good way to shop. As its middleclass is growing and consumption is rising, e-commerce is the future of shopping in Africa.
Here, if a company wants to nail online shopping, it needs to deliver streamlined mobile shopping experience on phone as more and more people’s first experience of the internet will be from their mobile phones. A good mobile shopping experience is not an option, but a must! Because out of 50 million plus Nigerians, 60.69% access the internet through telecoms networks as compared to 30.13% on desktops. When this is coupled with excellent customer service it would give a fighting chance to the company.
At present, no e-commerce pioneer at the scale of Konga is making a dime. With no online cookie-cutter retail experience or a prior template to piggy-back, it is a long term trial-and-error game, to innovate, iterate, fail, learn fast and innovate more. A few brave investors are writing cheques and showing how bullish they are about the region’s potential, Nigeria being the second largest economy in Africa.
Meanwhile, Konga is focused on investing in and building infrastructure and nationwide delivery network. Its founder has a bold ambition to raise between US$100 to150 million or more between now and 2020.
Good luck to the story that is still unfolding, for no one knows what the next page of e-commerce would say.