Entrepreneurship Zone: 14 July 2023 :: The Lagos hawker who makes one million Nigerian naira monthly

Fri Jul 14 05:15:56 CAT 2023

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Entrepreneurship Zone: 14 July 2023 ::  The Lagos hawker who makes one
million Nigerian naira monthly

Bulls 'n Bears Investors Diary: Today's Events

 <https://www.hyundai.co.zw/> 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.-Howwemadeitinaafrica

Lagos, Nigeria

INVESTORS DIARY 2023

Company

Event

Venue

Date & Time

Dairibord

AGM

Virtual

July 13 2023 | 11am

CBZ

AGM

Virtual

July 21 2023 | 4pm

POSB

AGM

Chapman Golf Club

July 25 2023 |10am

Afdis

AGM

Virtual | St Marnocks, Lomagundi Road, Stapleford

July 26 2023 | 12pm

RTG

AGM

Rainbow Towers Hotel

July 27 2023 |12pm

ZHL

AGM

206 Samora Machel Avenue

July 28 2023 | 10am

Delta

AGM

Virtual | Head Office, Northridge Close, Borrowdale

July 28 2023 | 12:30pm

Heroes' Day

Aug 14

Defence Forces Day

Aug 15

zIMBABWE

2023 harmonised elections

August 23

REST OF AFRICA

Counters Trading Under Cautionary

CBZH

GetBucks

EcoCash

Padenga

Econet

RTG

Fidelity

TSL

FMHL

Post your event (AGM, EGM, Analysts Briefing, etc) on the Investor Diary
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DISCLAIMER: This report has been prepared by Bulls 'n Bears, a division of
Faith Capital (Pvt) Ltd for general information purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy or
subscribe for any securities. The information contained in this report has
been compiled from sources believed to be reliable, but no representation or
warranty is made or guarantee given as to its accuracy or completeness. All
opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
suitable for all investors. Securities of emerging and mid-size growth
companies typically involve a higher degree of risk and more volatility than
the securities of more established companies. Neither Faith Capital nor any
other member of Bulls 'n Bears nor any other person, accepts any liability
whatsoever for any loss howsoever arising from any use of this report or its
contents or otherwise arising in connection therewith. Recipients of this
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investigation into the business, financial condition and future prospects of
any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

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