The boom in Africa’s business-to-business e-commerce space is starting to lead to consolidation between potential competitors. One example is in west Africa where TradeDepot, a six-year-old Nigerian startup that uses a mobile app to help retailers order consumer goods from manufacturers, announced today (Feb. 23) that it has bought Green Lion, a Ghana-based company in the same line of business.
The deal terms are undisclosed except that it is a full ownership in which Green Lion’s business relationships (with suppliers and customers), staff, and assets will become TradeDepot’s. The latter had started a pilot in Ghana in 2021 to understand the landscape but opted to proceed with an acquisition instead of building from scratch because it was a more efficient expansion strategy, says its CEO Onyekachi Izukanne.
Ghana is a fifth the size of Nigeria in terms of national retail sales, though both are way behind Egypt’s $200 billion according to a global index that tracks retail sales in emerging markets.
But Ghana scores very highly in terms of being a low risk (70) and low market saturation environment (97) for companies interested in retail (for both metrics, 100 is the best score indicating low risk and low saturation.) And so for Izukanne, buying a would-be rival is an opportunity for TradeDepot to combine its “more extensive investments in technology to grow more aggressively and cover a larger footprint” in Ghana, before crossing into the rest of Africa.
How B2B e-commerce startups work
TradeDepot, Green Lion, and other African B2B e-commerce startups like Kenya-based Sokowatch and Capiter in Egypt, serve what are sometimes called mom and pop shops.
The sector is currently an attractive business prospect because about 90% of sales in many sub-Saharan African countries tend to happen through informal channels, according to a pwc study (pdf). At their core, these companies want to provide a better experience for retailers to order goods from the likes of Nestlé, Unilever or PZ Cussons, one where the retailers would not have to close their shops to travel long distances looking for new stock. ‘Order, we’ll buy and deliver to your shop’ is the pitch.
But beyond the promise of web-based convenient order placement, TradeDepot recently added a credit component that relies on the data it has of customers’ order activity to lend to them. Last year, it raised $110 million in a debt and equity round led by the International Finance Corporation (IFC) to scale ShopTopUp, its Buy Now Pay Later (BNPL) solution that would enable customers repay loans in small installments.
Integrating credit into B2B e-commerce in Africa seems to be appealing to investors. This week, Kenya-based Marketforce said it has raised $40 million precisely to drive this ambition, just seven months after closing a $2 million pre-series A round.
More African B2B consolidation ahead?
Marketforce, and Sokowatch are direct competitors in Kenya, and it would be interesting to see how they approach expansion as both (and other adjacent players like Twiga Foods, which raised $50 million last year) strive for the east African market.
In Nigeria, TradeDepot has VC-backed challengers too, from the Y Combinator-backed Suplias to Alerzo which raised $20 million last year and is seeking to raise up to $50 million for expansion, according to its CEO Adewale Opaleye. After finding their feet in Nigeria, will each of these aim for Ghana too?
“The customer profiles between Nigeria and Ghana are quite similar,” Izukanne of TradeDepot tells Quartz. “The value chains are similar and retailers face similar challenges.”
But he notes that Ghana is only a piece of his company’s pan-African puzzle. For similar companies with the same ambition, buying rivals to expand may be inevitable. “Our approach to execution is to do what we need sooner than later. Where we find the right fit and we see that [an acquisition] accelerates us, by all means that would be the direction we go.”
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