March 23, 2015
Last year, when Tunde Adebayo needed three inflatable bouncy castles for KidzPlay, his event-planning business in Lagos, Nigeria, he turned to an online shopping service called MallforAfrica.
“In Nigeria we’re sometimes skeptical about online businesses,” Mr. Adebayo says. So he tested the service two years ago with an inexpensive purchase, and that transaction went smoothly. Now he says he frequently shops on MallforAfrica. His purchases have included the castles, which his company takes to parties for children to jump around in, and personal items.
“I buy most of my children’s clothing and my own clothing from there,” he says of the service.
Chris and Tope Folayan, two brothers who grew up in Nigeria and attended college in the United States, founded MallforAfrica in 2013. Tope earned an M.B.A. from the Kellogg School of Management at Northwestern. After graduating, he returned to Lagos, while Chris remained in the United States.
Their company makes it easier for Nigerians to place online orders for American and British products that are difficult to find in Nigerian stores and that online retailers don’t offer directly to most African consumers because of troublesome customs duties and paperwork, shipping costs and the fear of fraud.
MallforAfrica is part of a growing tech industry in Nigeria that is attracting foreign investors, including venture capital firms like Silicon Valley’s EchoVC Partners and the British private equity and venture capital firm Helios Investment Partners, which invested in MallforAfrica in 2013.
“Tech entrepreneurship in Lagos is emerging and blowing up rapidly,” says Henrietta Onwuegbuzie, academic director for the owner-manager program at Lagos Business School. E-commerce is “one of the most promising sectors,” she says. Nigeria’s two largest e-commerce players are the venture-backed firms Jumia and Konga.com.
As Nigeria’s middle and upper classes have grown, so has the appetite for foreign goods. But few stores sell them, and when they do, the selections are often paltry, Chris Folayan says. “When you go into a store, you might only find three colors of Ralph Lauren Polo shirts in three sizes.”
Items like Pulsar watches and Juicy Couture tracksuits aren’t any easier to come by. Many North American web merchants won’t ship to Nigeria or other African countries. (South Africa is an exception.)
“They get an order coming in from a Nigerian I.P. address and refuse to complete the order,” says Zia Daniell Wigder, who studies the globalization of e-commerce as a vice president and research director for Forrester Research.
Another barrier for American and European retailers is a lack of familiarity with Africa. “It’s just not a region that they’re comfortable with,” Mr. Folayan says. “They’ve never been there and they don’t have a sense of the economy.”
Mr. Folayan says he conceived of a service like MallforAfrica while working as an intern in Silicon Valley in the early 2000s. Whenever he was preparing to return to Nigeria to visit his family and friends, they would send him money to buy American products for them. He stuffed his suitcases with clothing, jewelry and electronics.
By 2010, when he founded a software application development and design company in Pleasanton, Calif., he could afford to fly back to Lagos five to eight times a year. Word of these journeys spread through his Nigerian network, and the number of courier requests ballooned.
“I was taking more than three bags,” he recalls of these trips. “It was getting ridiculously crazy. I’d get to the airport, and it was like, ‘Who in the world is this guy, and what is he doing?’ ”
In 2011, Mr. Folayan decided to begin formalizing his delivery service. He developed a web app for buying American and British products, and asked friends and family to test it. Then in 2013, he and Tope, who had been working as a telecom executive in Lagos, founded MallforAfrica.
The company now sells products from more than 120 online retailers, including Amazon, Barneys, Bloomingdale’s and J. Crew. Among the most popular vendors are Children’s Place, Macy’s and an online retailer called Perfume Junkie, according to Mr. Folayan. This year, they began shipping to customers in Kenya and Ghana as well. They hope to expand further in Africa and, eventually, to other continents.
MallforAfrica’s customers place and pay for their orders through the company’s web or mobile app. MallforAfrica then makes payments to other retailers on the customers’ behalf. The items are delivered to MallforAfrica’s warehouse in Portland, Ore. From there, the company ships the merchandise to Africa. Customers can opt for home delivery, but Mr. Folayan says most choose to pick up their products at MallforAfrica’s Nigerian depots, which resemble UPS Stores.
The entire process takes four to 15 days, Mr. Folayan says. He estimates that his company sends four and a half tons of products to Africa each week. Shipping orders together in large containers allows it to pay bulk rates and keep costs down.
MallforAfrica charges customers a fee of 3 to 5 percent of the cost of the product. Ordering a watch that sells for $100 in the United States, for instance, would cost a Nigerian customer $117 to $120, including taxes, customs duties, shipping and the company’s fee.
MallforAfrica’s annual sales for 2014 were $15 million to $20 million, according to Internet Retailer magazine. Mr. Folayan declined to comment on the company’s sales.
Perhaps one of the company’s biggest challenges is Nigeria’s reputation for rampant fraud schemes. “When the word Nigeria is mentioned, everyone stays alert, looking for a fraud angle,” he says. Some of the concerns are well founded — and aren’t limited to Nigeria, he adds. “There are a lot of knockoff items throughout Africa. You might buy one of those Ralph Lauren shirts and find out it’s not really Ralph Lauren.”
He says that American and British retailers are concerned that some African customers may use bogus credit cards or make false claims that their orders never arrived. To thwart fraudulent credit card charges, MallforAfrica issues its own debit cards. Customers load funds on the cards before they start shopping. And to prevent customers from claiming they did not receive their orders, MallforAfrica requires them to present identification and sign paperwork verifying receipt of the goods.
His goal, Mr. Folayan says, is a thriving business based on “zero fraud.
Source: New York Times