By Joseph Osemegbe Aito
Article originally published on LinkedIn, read here.
Chinedu Okorafor moved from his village in eastern Nigeria to Lagos in 2016. As soon as he could afford the night bus, he took it straight to the city of excellence. When he got to Lagos, he had N1,000 ($2.70), a Bagco sack housing two jean trousers and two shirts; all his belongings. It’s January 2020, four years in Lagos, and Chinedu makes a minimum of N1 million ($2,738) monthly solely from hawking. What started, for me, as a purchase of snacks from a seemingly regular hawker, turned into an in-depth discussion on the Nigerian direct-to-consumer business.
Every large metropolitan city has traffic, and this unarguably influences the daily habits and culture of these cities. For Lagos, Nigeria’s commercial headquarters, the heavy traffic determines sleep and wake times, and commute choice for most of the populace. The most amusing phenomena the Lagos traffic offers is the magical transition of a traffic situation into a shopping mall. The range of offers is wide, from the needful to the exquisite, from nylon-wrapped sausage rolls and carbonated drinks to chihuahuas and bulldogs. Thirty minutes in traffic and you could come out of it with a new inflatable bed and manual air-pump in your back seat and empty bowls from finished lunch in the passenger seat. The range of merchandise sold by the street vendors also includes household durables, electronics, apparel, accessories and book materials.
A study done by the Journal of Marketing and Consumer Research in 2015 shows that about 41% of street hawkers earn a monthly income of over N200,000 ($547) while the lowest earning hawkers earn about N20,000 ($55). This is particularly why Chinedu’s story is fascinating. How did he, in four years rise from the N20,000 income of the average starter to N1 million?
Chinedu, who made a point to tell me he is now a titled chief in his village, did a profit analysis with me. In his third month of hawking, he was making a N5 ($0.0137) profit on every unit of Gala (packaged sausage roll) he sold and made an average sale of 300 units daily, solely in the Mile 2 traffic. This roughly translates to N40,000 ($110) monthly because Chinedu, like many other hawkers work for limited hours on Sundays. They go to Mass, get some rest and return phone calls that have pended week-long.
In his sixth month in business, Chinedu had explored more than a few of the traffic hotspots across Lagos and decidedly moved to Oshodi. He started selling 10 cartons a day, more than tripling his previous average daily sales, and his monthly income jumped to N150,000 ($411).
Yet the major leap for Chinedu was born months later when he travelled down to eastern Nigeria for Christmas. With hundreds of young, able men in his village who weren’t gainfully employed, it was easy for his story to spread. He didn’t return with a convoy of cars or with freshly minted dollar notes, but young men and women fell in love with his Lagos story. He returned to Lagos with 12 young men and like the popular stories of disciples in twelves, these ones adored him, relied on him and let him lead them. With them, Chinedu unofficially started a crude distribution company. He bought sausage rolls, in cash, from wholesale points, and resold to the 12, making a 30% off their supposed profit. This relationship came with some cost. Apart from providing them a dream to aspire to, he paid for their accommodation and routinely organised dinner after a long day running to and fro Lagos roads.
Chinedu could have settled into his middle-man role and literally gotten off the streets but he didn’t. He was out there with his boys, carton of sausage rolls over his shoulders and a worn-out pair of slippers under his feet. By the end of 2018, about two years after coming to Lagos, he had over 100 young men and women who were buying consumer goods directly from him, at least, once in a week.
Chinedu still didn’t stop chasing after cars and sweating in the heat of the Lagos sun. He claims this is his secret; the knowledge of what works in traffic and what doesn’t. At this time, Chinedu earned a monthly average of N550,000 ($1,506) – about N3,000 ($8.2) from each of the hawkers buying from him, totalling N300,000 ($821), and N250,000 ($685) from his own direct sales.
It was around this period Chinedu diversified from sausage rolls and widened his portfolio, exploring newer products with better profit margins: Pure Bliss wafers, Bigi carbonated drinks, plantain chips, etc. His average profit per unit sale stared to average 38% of the unit cost. Managers from multinational companies started to seek him out. He provided a unique service to them. When they need a quick sales spurt, to end the month on a high, they visit him, offering a larger discount than is typical. In similar vein, when consumables are close to expiry, these companies offer him ridiculous discounts, sometimes as high as 60%, to sell off the stock. With his network of hawkers cum direct-to-consumer agents, he quickly sells to consumers who do not have to keep the products longer than a few minutes or hours.
Usually, companies withdraw close to expiry products from shelves in hypermarkets and neighbourhood stores, and try to resell them through faster channels, or may have to dispose them at huge loss to the company if they get expired. Chinedu’s organisation, one out of hundreds of similar ones across Lagos, solve a huge chunk of this problem for consumer goods companies.
Chinedu has also been instrumental for market entry of new products. Aside from marketing and brand-building efforts, a new product primarily needs distribution, and impactful presence. While display-and-win activities can drive distribution, visibility and sales for consumer goods, the DTC/hawker channel has proven to be an adequate fast penetration channel. The way the media keeps replaying an average song until it sounds somewhat good enough, is the same way hawkers can make consumers love a new product. With a good product and the right pricing strategy, this is the winning channel for market entry for consumer goods. Pure Bliss wafers, Bigi drinks, Rite sausage roll, Popstar Popcorn, Red Oaks plantain chips, Yucca & Minimee chinchin are products that have taken advantage of the hawker/DTC channel.
The channel is mostly unstructured. No tax records, no business registrations, no offices or structured employment process. It is supply unabashedly rising to meet demand, not waiting for permissions. Over the years, several companies have tried with little success to bring some structure, form, into the DTC channel. Employed and uniformed brand ambassadors who engage in door to door sales and sampling or are huddled up at traffic lights holding up fancy nylons containing an assortment of different products, is the picture we see for a few weeks, and they disappear for months.
The apparent drawback in structuring the DTC is price sensitivity and lack of trust at the consumer end, and size of profit/reward on the side of the ambassadors/agents. On the execution side, there is yet to be developed a training program on how to catch up with moving buses or how to dash through a maze of vehicles, untiringly, under the sweltering weather while dodging government revenue officers. This is something Chinedu and the typical hawker in Lagos have; sheer grit and toughness to deliver.
There is also the knowledge gap. There are not enough studies or data showing the high traffic zones and their timelines. There is no data showing the quality of consumers in the different routes. Chinedu is easily able to rank Berger as the number one quality traffic spot in the whole country, followed by Oshodi, Yaba, Obalende and Ajah, before other spots like Mile 2, Orile, Iyana Ipaja, and Agege. His experience and knowledge, his distribution network of over 100 hawkers and his relationship with key distributors of consumer goods industry are what has elevated his income to over N1 million in less than half a decade.
Chinedu sometimes finds his relationships with the buyers, amusing. He talked about how sometimes, out of pity, a consumer throws N50 ($0.14) through the window of a bus, to a sweating hawker in traffic. How they sometimes allow the hawker to have the N10 change, their faces glowing from their apparent generosity. He spoke particularly about bank cashiers earning N35,000 ($96) monthly looking scornfully at or talking rudely to these hawkers who may as well earn ten times their pay.
After hours of discussions with Chinedu, and several rounds of calculations on profit, margin, costs and total revenue, I had learnt a lot about the hawker’s life but perhaps the most fascinating part of my discussion with him was centred around his aspiration. He looks to backward integrate; set up a production factory to produce his own special brand of popcorn, sausage rolls, and carbonated drinks. He doesn’t have any interest in university education. He also strongly disagrees with me when I insinuate that the traffic situation in Lagos will get better.