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Millions To Be Made In Shopping’s Bermuda Triangle

A start-up led by a doctor is banking on trust to build Nigeria’s largest online supermarket.

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Out of a desire to ease the burden on his beloved wife, who had to juggle a career as a business technology consultant with the demands of managing her home, an entrepreneur decided to start his own online retail business.

Olumide Olusanya, established Gloo.ng – initially buycommonthings.com – to enable his better half, Seyin, to shop from the comfort of home and not have to spend what ought to be quality time with her family in grocery stores.

Olusanya, a medical doctor turned technology solutions developer, was in the middle of his third act as a value investor after a successful career as an e-payment expert where he led the team that deployed West Africa’s first locally issued and processed international payment card – Ecobank MasterCard. The idea to establish an online supermarket that would offer same-day delivery of groceries and essential homecare products came to him on a routine work day.

“I was doing my investment management from my home office; I would jog in the mornings and spend the rest of my day working from my study. When the idea came to me, I wrote the plans and tested it. I took out all the settees in my house and had a carpenter build the shelves then set up a small team initially, but all of them ran away after one month because they couldn’t stand the heat. So I was left with my co-founder, my wife, and we continued developing the idea. We had built the product and were operational, so with the traction we saw, I decided we had to do this.”

Progress over the next few months meant the business had to be expanded. Tapping into his personal savings, Olusanya moved to a bigger facility and hired two more people to join the team.

“For the first three months, of course it was just me alone. I was doing deliveries and as the demand started growing, we had to increase capacity. So I asked my wife to leave her job and she also started doing deliveries as well. Then we got the facility in Lekki (a middle class suburb in Lagos). Once we moved to Lekki that was the moment we burned the bridge and the only way we were coming out of this was at the other side. We had two people join us later and for 10 months, four of us ran the business.”

Nigeria’s retail sector has seen explosive growth since the middle of the last decade. A recent report by Euromonitor estimated the annual value of the market for supermarket products in 2012 at $33 billion.

Groceries and household essentials are mostly sold in open air markets and convenience stores, but recently, there has been a revival in the development of large shopping malls and superstores. South African retailer Shoprite entered the market in 2005, while Dutch brand, Spar, also entered the market operating in partnership with the Artee Group, a local player. Both brands are leading the market in terms of the number of stores with a combined total of eight. But as they seek to expand – Shoprite and Spar aim to have 40 outlets nationwide over the next three years – online retailers such as group buying site DealDey, as well as Jumia and Konga, have experienced rapid growth in the last three years.

Gloo.ng aims to ride this wave to challenge the brick and mortar players and capture the largest share of the market.

“Our vision it to be the biggest supermarket in Nigeria and our mission is to change the way Nigeria shops for living essentials or supermarket goods. There’s something driving everything we do. Our values derive from the Spartan culture, which is a very well knit culture where our sense is there’s nothing we set out to achieve that we will not.”

Eschewing the marketing-led approach to creating awareness for the brand, Gloo.ng chose to grow organically, allowing its customers to spread the word about its service. This has seen the company build an army of loyal customers, something that often eludes e-commerce firms. Olusanya reveals that 75% of the company’s business comes from repeat buyers, where most e-commerce firms have return rates below 10%.

“I was the one doing deliveries, and then Seyin joined me so she started doing deliveries as well. The early customers knew Seyin and me, but they didn’t realize we were the co-founders. Someone found out and that was something they liked about the story. So the business started growing; we hardly spent money on marketing, we grew largely on word of mouth.”

Impressively, the firm is also surmounting challenges that have often held back online retail companies in Nigeria. Payment has been a significant problem in a market where a lack of trust means customers prefer to pay for products with cash rather than using bank cards.

Gloo.ng is bucking this trend.

“What we end up building with our customers is a relationship. Our customers know us and once they do one or two transactions with cash, for the next transaction, they start using the electronic means which is obviously more cost effective for us. The new trend we are seeing is that customers are actually leaving money with us because using your card in Nigeria is a pain, unlike abroad where it’s just a click once your details are stored. So I think the whole idea, because of the nature of the repeat business that our customers do with us, is the trust they have built with us.”

Expectedly, the company’s early success has not gone unnoticed. Olusanya previously received offers from savvy investors but thought it was premature to raise major funds to grow the business. Feeling that the time is now right, Gloo.ng just secured Series A funding from an investment firm in Nigeria.

“We just signed a $1million funding agreement with IRM Limited. We’ve had investors calling us from all over, locally and internationally, but we have a type of entity that we’ve chosen to work with because we have to have people who are aligned with our vision. IRM understand what we are trying to achieve.”

Selling groceries online is notoriously tough and several worldwide start-ups have failed, most notably that of United States-based Webvan in 2001. Scaling Gloo.ng in Nigeria, a country renowned for the hostile nature of its business environment, promises to be a sizeable task but Olusanya is confident that they will succeed.

“The experience of the team we have and the research we have done are some of the things that put us in good stead to deal with the risk. Anything involving groceries online has been the Bermuda Triangle of e-commerce worldwide, but some companies like FreshDirect, Tesco.com, Ocado and Peapod have shown that it can be done. But we are not chasing any of those models; there is no single model that has been proven to work in that regard, and that’s why Gloo.ng has a multi-faceted model. We have various models, each with its own strategic objective that we are executing at the same time and we’ve been growing well quarter on quarter, so we are confident that we will get it right.”

Their loyal customers seem to agree.

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