The Chief Executive Officer of PricePointe Wholesale Club, a new entrant in the Nigerian retail space, Tayo Williams, in this interview speaks on the challenges and opportunities in the retail segment of the market. Omolabake Fasogbon presents the excerpts:
The Nigerian economy has been projected to grow at about two per cent in 2019, according to the International Monetary Fund (IMF). What do you think will become of the retail sector during the year?
Nigerian retail holds a huge opportunity and that is why we have more investors coming to explore the space. With a population of about 200 million of which, arguably, 10 per cent or 20 million of those people are middle class and above, as well as the increasing purchasing power of the middle class, the industry no doubt is driving a huge part of the country’s Gross Domestic Product (GDP). Therefore, I see it growing beyond IMF’s projected growth level. Recently, we have seen some level of stability in the naira and if this trend continues, this would translate to an increased spending for Nigerians and ultimately, more growth in retail. However, the business can do pretty much more than its present 16.4 per cent contributions to the GDP if government and other stakeholders can see some of the mitigating factors in the sector.
Can you identify some of these challenges?
Some of these barriers are what we are already familiar with. For example, there is the problem with power, infrastructure, multiple taxation supply chain and access to fund. More importantly, we notice that there is also the problem where retailers are forced to buy quantities they don’t necessarily need from wholesale stores in order to get the price that they required. For instance, there are situations whereby retailers will go to Ojuwoye or Oke-Arin wholesale market to buy items in bulk because they want to get carton price when ordinarily, they need few of those items to sell in a day or two and make their profit. Another thing is the need to formalise the sector where consumers can be comfortable and confident about their purchases, while government can equally harness more gains in the sector. A lot of abnormalities exist in the conventional market, such as counterfeiting, date changing on expired products and abuse of products. This can actually be surmounted with sector formalisation like what is done in South Africa and other developed economies.
Do you think formalising retail is possible in this clime and how do you think government can go about this?
Absolutely! It is possible. This is exactly what PricePointe intends to achieve with its model. PricePointe modus operandi is similar to that of Costco in the US. Costco is the second largest retailer in the world with a turnover of $160 billion annually and a membership base of about 66 million. Ours is a formal wholesale store, it’s like taking the Oke Arin wholesale market in Lagos and putting it in a formal setting. Our goal is to solve problems for the retailers and to get the best deal for our members. If you look at the chain, the retailers are the ones doing most of the work and the real problem solvers, yet, they are underserved, while the distributors and wholesalers, (middle men) are the ones reaping the fortune of the business. Report states that about five million retailers are doing around N50,000 turnover on the average per day. If you do the math, you will realise that they are the ones that are actually driving the GDP, they are the ones breaking the bulks, selling piece by piece, the Mallam on the road, the neighbourhood store, kiosk and the market women, they are the people that are the real volume drivers in the sector. Our solution is such that allows a retailer buy less than a carton and still get it at a carton price, even much lower than Oke Arin or Ojuwoye prices. As we are selling to retailers, we are equally selling to individual and families at the same wholesale price so far as they are registered member of the club. Our first store is opening at Ilupeju, Lagos on 20th of April, However, we plan having six locations in Lagos by the middle of next year, namely: Lekki, Festac, Ikorodu,Ikeja and Surulere. Thereafter, we would move to other states in Nigeria and major cities across East and West Africa. With six locations targeted at centre points within Lagos, we become a drop point for the manufacturers. When we replicate this model across Nigeria, we begin to see goods move directly from manufacturers straight to the drop point. On our own part, we are getting to formalise the industry. We shall be providing jobs for over 200 Nigerians in every location and by the middle of next year, we would have employed almost 2,000. We are able to boast of this achievement because of the innovations we are bringing to the space. The Lagos State Government is also working in the direction of formalising the Mile 12 market but this has been pushed back by traders who feel they will be losing their jobs, but it’s actually an opportunity to create more jobs.
Do you mean customers have to register on your platform before shopping?
Like I said, we are determined to change the landscape of retail in Nigeria. As a wholesale market, we have entered into partnership with the big manufacturers, for most of whom we are a distributor and for those we are not, we partner with the distributors to get the same thing that distributors are getting from manufacturers. We eventually sell to the retailers the same price we are getting from the manufacturers. We are not in the business to make a margin from sales, rather, we are negotiating to make the best price. Hence, for customers to enjoy this benefits of cheap pricing, they have to register to become our members. It is from this membership fee that both retailers, individuals or families that are buying in bulk that we make our money. So, rather than a customer saying that I am paying to shop, he should say that I paying to join a lifestyle club where there are people whose primary role is to find me the best deal that they can find on what I love. In addition to the price attraction, the market is equally convenient and accessible. Just like the usual open market, the market boasts of all items ranging from grocery, consumables, bakery, butchery, electronics, fabrics, frozen foods e.t.c. We are also promoting our own entrepreneurs whereby 60 per cent of our products are simply local while we intend to push more of Nigerian products as soon as we find quality substitute. It’s a fully air-conditioned space, standing on 8000 square meter, and that is just the warehouse. We are open as early as 6am for the retailers, so they can quickly buy what they will sell for the day while for family members who buy in bulk, we are opened from 10 am.
Can you explain the modalities of becoming a member?
We have three classes of membership – the silver member which is for family, the gold which is for businesses and the VIP black card holder. The elites and the gold member pays an annual due of N25,000 and VIP member pays N50,000 annually. For each class of membership, there are additional benefits which definitely offers more value than the payment.
Do you see this model working in Nigeria?
We believe very strongly that it will work here, although we don’t expect everyone to buy the idea so easily, not until they are convinced. Like I have been saying, we are in the business for our members to get them the best possible price that they can get. The model is such that is 25 percent cheaper than any other formal chain store for family shoppers. We are more of a cooperative, but a cooperative for the cooperatives. For one to be a member of a cooperative, you have to pay an annual due, where the cooperative in turn negotiate the best deal for members based on their membership base. We are targeting to represent easily 150,000 people for the families, then, when we represent the retailers combined with families, then we are a force to reckon with for manufacturers or distributors. We fought a lot of battles and negotiations with manufacturers to get good prices, as manufacturers will say that modern retail account for five per cent of their turnover, and as such cannot give us what are asking for. But we are about to change the game, because we are not modern retail, but a modern wholesale company. If modern wholesale at Oke Arin market is doing like N400 million to N1 billion every day, then, we are intending to play a serious ball there because we are company, with the advantage of having everything under our roof. If you come to our store and you can’t get a choice product, be rest assured that it is not that we didn’t try to get it but because we couldn’t give you price advantage.
Don’t you think this model would threaten the conventional market style and displace the middle men?
Change is the only constant thing in life. A few years ago, shopping was done prominently in the traditional market but today, everyone is going to the supermarket to buy stuff. I mean, this can also be the same for the wholesale market. As a matter of fact, we have also discovered that market women leave the open market and run to the supermarket when there is a good price at the supermarket. So, we are here to change the face of shopping, to get it more western and developed. Like I have reiterated earlier, our goal is to make retailers who are actually doing the work get rewarded for their efforts.
What are some of the challenges you envisage in the future?
One of the problems we foresee and presently experiencing is how to find a location of the right size. The property at Ilupeju is over three to four acres. Finding such in major cities is a challenge as we have to compete with religious institutions and others. Another drawback we saw is how to get to convince people to buy the model whereby they need to pay to shop. This will require us to embark on heavy education and enlightenment of the people so as to convince them to become a member. Another is consistency of manufacturers. We expect to be pushing a lot of volume and so we hope manufacturers will consider us as priority customers so we will never have to run out of stock. Finance is also a major setback to setting up a business of this size. Surprisingly, we couldn’t get support from any banks because they don’t want to go down the route of start-ups even though that’s what government want them to do.