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Examining Konga-Yudala merger

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The year 2018 started with redesigns in the Nigerian and indeed, Africa’s broad e-commerce space. Earlier in the year Konga was acquired by Zinox Group.

Recently, the news space has been dominated by the merger between Yudala and Konga – a move that analysts believe has the potential to disrupt the sector in addition to many other positive effects it will have on e-commerce in Nigeria and beyond.

Truly, the newKONGA as we like to call it will be faced with both challenges and opportunities ahead.

Background

In March 2013, Evangeline Wiles, erstwhile Managing Director of Kaymu.com (now Jumia Market) described Nigeria’s e-commerce space as the fastest growing in Africa contributing a monthly spend of N1.3bn to the Nigerian retail sector.

The explosion of the e-commerce space in the around 2001 fuelled a massive consumer behavioural change.

Records show that e-commerce in Nigeria records over $2m worth of transactions per week and close to N1.3bn per month from the 38% of Nigerians who prefer to buy products through the internet, according to a survey conducted by the business management and consulting firm Philip Consulting.

Nigerians have a vast spending culture both locally and internationally. Recent statistics from Heathrow Airport show that Nigerian travellers – who patronize the service – spend an average of £1,059 per visit on luxury retail.

Furthermore, pioneer Minister of Communications Technology, Dr. Omobola Johnson was once reported as stating that e-commerce attracted over $200m foreign direct investment thereby expanding infrastructure, warehousing, advertising and logistics services industry.

Explaining how e-commerce had impacted the nation’s economy which is projected to have a market potential of over $10 billion, the Minister added that between 2012 and 2014, e-commerce spend had grown from a paltry $35m to $550 million and has moved from 1000 daily orders to about 15,000, adding that the sector has in the last two years created 15, 000 jobs.

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Events in the last 36 months, however, painted different picture for the industry with the likes of Lamudi (JumiaHouse) acquired by ToLet.com.ng (now PropertyPro.ng), Efritin exiting the market and OLX shutting down its Nigerian office and others seemingly on the verge of going bust.

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In all this, Zinox’s acquisition of Konga is the biggest news of the year so far. Why?

Commentaries

There are several schools of thoughts on why Zinox acquired Konga in the first place. When news of the merger between Konga and Yudala broke, some commentators referred to what they perceived as the Zinox agenda of utilizing Konga’s trademark which Yudala is effectively going to leverage to boost her brick-and-mortal retail business model.

In fact, there was an argument that buyers outside Lagos will be more comfortable visiting a Konga shop than a Yudala shop.

The other opinion is that Zinox acquired Konga to leverage its trademark and technology in a bid to make Yudala go online, and to expand its offline stores. “In the end, trademark and technology were the targets in the acquisition. This shows that local companies are already taking giant steps in leveraging IP and intangible assets. We look forward to more big news as these,” a commentator on social networking site Facebook argued.

Similar merger happened in 2017

Interestingly, Paytm ecommerce site, Paytm Mall and Snapdeal made a similar move in 2017. The sweet part of the deal was the ‘common factor’- Alibaba, the Chinese e-commerce giant. Alibaba marinated 40% stake in Paytm and around three per cent in Snapdeal. So, with the merger, Alibaba emerged as the new entity’s largest shareholder.

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The immediate gain was solidifying its position in India’s e-commerce market place, ready to compete with other top players Amazon and Flipkart. Earlier Alibaba had chosen Paytm as its trusted ally for a foray into the e-commerce space, which had been a loss-making industry before the merger.

Prelude to the acquisition

On January 3rd 2018, Vice President of Yudala, Prince Nnamdi Ekeh stated emphatically that the company is set to hit a path of profitability by 2020, thereby making it the first e-commerce company in Africa to return profits within its first five years of operations.

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“At Yudala, our strategy is clear and distinct from anything else on offer in the market today. Our fusion of online and offline is not only futuristic, but one that has being copied by other global e-commerce giants. On the back of this, we have seen a consistent growth trajectory that will see Yudala emerge as the first profitable Nigerian e-commerce company by 2020,” stated Prince Ekeh.

Could the merger with Konga be a bold move at achieving profitability before 2020?

The (new) Konga and expected impact on economy

An unprecedented development, the operational merger between Konga and Yudala is bound to open new vistas of hope for the Nigerian economy and Africa in general. Essentially, both Yudala and Konga have their strengths and weaknesses and this merger will bring out the best in them.

Before now, Yudala had brilliantly operated a unique online and offline model, a remarkable feat worth commending as it saw the business build up an impressive offline presence within the shortest period, opening over 50 offline stores across the country while also growing its online presence.

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Therefore, Prince Ekeh was stating the obvious when he declared that they were on the path to greatness.

In essence, Nigeria can now boast of a mega e-commerce platform capable of competing at the global level with the likes of Amazon and Alibaba.

By virtue of this landmark merger with Yudala, Konga has re-emerged as a reputable brand (though a private concern) for Nigeria to ride on. The new Konga’s impact will rest heavily on how it handles the logistics factor.

Yudala claimed competence in superior logistics and delivery timelines that have endeared them to shoppers. With Konga Express, there is a golden opportunity to take this even further by fulfilling orders in record time.

However, Nigerians want to see this reflect in service delivery outside Lagos. If Konga pulls this off, they will consistently see repeat purchases from customers.

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In some cases, they will be able to win over new shoppers, the majority of whom, having patronized other platforms, will not look back once they experience the seamless and swift delivery capabilities Konga has to offer.

The merger has been widely described as a partnership between two e-commerce giants, the scale of which has never been witnessed on this side of the Atlantic.

Aligned to the foregoing is the passionate, committed and highly professional human capital resources at the disposal of the new brand, all of whom appear ready to continuously display the hunger and capacity to deliver on the new mandate.It’s a new dawn for e-commerce in Nigeria.

Welcome on board (new) Konga!

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2 Comments

2 Comments

  1. Edward

    23 April 2018 at 4:58 PM

    Good write up. I believe the new Konga will be great without Pay-on-Delivery.

    I was following up their tweet thread today; seems they are gathering opinion on that. They should just put that behind. There is no place positive revolution has succeeded without price paid. It may delay they take up and 2020 target for revenue generation but will definitely pay off.

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