The process of digitizing mom and pop store operations in Nigeria is serious business right now. In fact, it might be the second best thing after fintech at the moment.
Today’s news comes from Alerzo, a little-known B2B e-commerce startup based in Ibadan, Nigeria. The company announces a $10.5 million Series A funding round led by London-based Nosara Capital. FJ Labs and several family offices from the United States, Europe and Asia, including that of Michael Novogratz, participated in the round.
In total, Alerzo has raised over $20 million since launch. Early investors include Baobab Network, a London-based Africa-focused accelerator, and Signal Hill, a Singapore-based fund manager that participated in its $5.5m seed round last year.. The company also said it closed a $2.5 million working capital facility to serve its customers.
Adewale Opaleye founded Alerzo in 2018 as a last mile distribution platform that helps retailers stock their inventory directly manufacturers. His job, officially launched in 2019, is centered to help street vendors and shops in towns in southwestern Nigeria gain quicker and more efficient access to household supplies.
Speaking to TechCrunch, Opaleye said he started Alerzo to empower the millions of women who are the backbone of consumer commerce in Nigeria’s $100 billion informal retail sector..
The need to solve this problem arose from direct observation of the challenges her mother faced while operating two mom-and-pop stores..
“Growing up in Ibadan, I saw my mother running two informal retail stores for raise my three brothers and me. Seeing the many challenges she faced running her stores, I decided to start a business that uniquely meet the needs of merchants fair like her,” he told TechCrunch in an interview..
These retailers are beholden to an inefficient distribution system that results in inconsistent stock availability, opaque pricing, and limited access to formal financial and banking services..
The founder says Ibadan was the perfect market to establish his headquarters as informal retailers in the region face these challenges more than those in Lagos..
Alerzo’s core business is distributing FMCG products using a first party relationship platform that allows suppliers to clear inventory faster and allows Alerzo to control the supply chain and delivery.
Given the lack of confidence in the market and the requirement pay on delivery, Opaleye says it was the most inclusive business model where saving made sense for the business.
Alerzo claims to have built a network of nearly 100,000 small businesses, 90% of which are run by women. The company serves exclusively the country’s tier 2 to 4 cities in southwestern Nigeria – Ibadan, Ekiti and Abeokuta, to name a few. It connects retailers to local and multinational distributors of consumer brands, such as Unilever, Nestlé, Procter & Gamble, Dangote and PZ.
“Without Alerzo, these retailers have to take the day off to visit a central market, pay for transportation, and bring a large amount of inventory back to the store.. Alerzo replaces this stressful experience by not only reducing costs and time spent running a retail store, but also improving the livelihoods of these working women,” the founder said of the company’s growth. ..
About a third of Alerzo’s total number of retailers use the platform monthly. According to its website, retailers can order products via SMS, voice and WhatsApp and have them delivered to their stores in less than 10 hours. The company says it processed more than a million orders last year.
Alerzo owns and operates its fully technology-driven supply chain and logistics to fulfill these orders. The company provides warehousing and fulfillment solutions to suppliers and in-store delivery to informal retailers. It currently has over 200 vehicles and 20 warehouses to serve its thousands of customers.
The past two years have seen an increase in last mile delivery and distribution businesses with a strong increase in on-demand services in many sectors. While most Nigerian players tend to focus on Lagos and the Nigerian capital Abuja, Alerzo’s approach to covering other cities has apparently paid off so far.
But although Alerzo has enjoyed an almost first-mover advantage in less crowded markets, fierce competition will play out as other key players seek entry.. Omnibiz, for example, is targeting Ibadan, and TradeDepot is expanding into 10-15 cities, aiming to cover all major cities in the country by the end of the year.
HoweverAlerzo investors remain optimistic about the company’s potential.
“We have studied informal retail markets globally over the past two years and Alerzo really stood out for us thanks to a strong management team led by a founder with a unique understanding of his client and an attractive business model with exceptional unit economics,said Ian Loizeaux, managing partner of Nosara Capital, in a statement. “The company is at the start of a compelling decades-long opportunity to streamline and digitize Nigeria’s retail supply chain.”
Startup investor Kevin Jung of Signal Hill cites Alerzo’s focus on the informal retail market outside of Lagos as one of the reasons he backed Alerzo earlier. He also cited the company’s focus on Asia (a playbook adopted by Opaleye when he went to China for studies in 2016), as the best reference point for the emerging business model of digitizing markets. informal details..
Alerzo has an office in Singapore which, according to the CEO, serves as a regional hub to identify best practices among similar high-growth companies operating in Southeast Asia and India and adapt them to the Nigerian market.. Also, for expanding its digital footprint, the company recently opened an office in Lagos.
The product of this Series A round will be to be used to expand geographically in northern Nigeria. Alerzo also plans to launch AlerzoPay, the company’s cashless payments and lending platform, as well as a portfolio of new business support services..