It is a serious undertaking to digitize the operations of mom-and-pop stores in Nigeria. It might even be the best thing since fintech right now.
Today's news comes from Alerzo. Alerzo is a small-known B2B ecommerce retail startup, based in Ibadan (Nigeria). Nosara Capital, a New York-based company, has led the $10.5 million Series A round. FJ Labs was among the participants, as well as several family offices in America, Europe, and Asia, including Michael Novogratzs.
Alerzo raised over $20 million in total since its launch. Baobab Network, an accelerator that focuses on Africa, is one of the early investors. Signal Hill, a Singapore-based manager of funds, was also part in last year's seed round, which raised $5.5 million. To serve its customers, the company said that it had closed a $2.5million working capital facility.
Alerzo was founded by Adewale Opaleye in 2018 to be a last-mile distribution platform that allows retailers to order inventory directly from manufacturers. The business was officially launched in 2019 and focuses on helping street vendors and shops in Nigeria's south-western cities to access household supplies faster and more efficiently.
Opaleye spoke with TechCrunch to say that he founded Alerzo in order to empower the millions women who make up the backbone for consumer commerce in Nigeria's $100 billion informal sector.
This problem was created by the difficulties his mom had to face while running two mom-and pop stores.
My mother ran two small retail shops in Ibadan as a way to support my siblings and myself. In an interview with TechCrunch, he said that he saw the many difficulties she faced in running her stores and decided to create a business that was unique to cater to those needs.
This makes it difficult for retailers to access formal financial and banking services.
Because informal retailers in Ibadan face more challenges than those in Lagos, the founder said Ibadan was the best market for the company's headquarters.
Alerzo's core business distributes FMCG products using a first party relationship platform. This allows suppliers to clear inventory quicker and lets Alerzo manage the supply chain.
Opaleye believes that this business model was inclusive and made economic sense because of the lack trust in the market and the requirement to deliver on time.
Alerzo claims that he has built a network of over 100,000 small businesses. 90% of these are women-led. The company serves only the country's tier-2 and tier-4 cities in Southwest Nigeria, Ibadan, Ekiti, and Abeokuta. It connects retailers with multinational and local distributors of consumer brands like Unilever and Nestl, Procter & Gamble and Dangote.
These retailers would need to leave the store for a day to travel to a central market, pay transportation costs, and bring large quantities of inventory back. Alerzo eliminates the stress of running a retail store. It also reduces the time and costs involved in the process.
Alerzo's platform is used by approximately one-third the total number of retailers. Its website states that retailers can place orders via SMS, voice, and WhatsApp, and have them delivered to their shops in under 10 hours. This company claims to have processed more than 1 million orders in the past year.
Alerzo is the owner and operator of its full-stack tech-driven supply chains and logistics that process these orders. The company offers warehousing, fulfillment and storefront delivery services to informal retailers. The company currently has over 200 vehicles and 20 warehouses that it can use to serve its thousands customers.
In the last few years, there has been a significant increase in last-mile delivery companies and distribution companies. There has also been a substantial increase in demand services in many sectors. Most players in Nigeria focus on Lagos and Abuja as the capital of Nigeria, but Alerzo's strategy to cover other cities seems to have paid off.
Alerzo is almost the first to move in less crowded markets. However, there will be stiff competition as other key players try to enter. Omnibiz has Ibadan in mind, while TradeDepot plans to establish a presence in 10-15 cities. The goal is to reach all the major cities by the end.
Alerzos investors are still bullish on the company's potentials.
In a statement, Ian Loizeaux (Managing Partner at Nosara Capital), said that we have studied informal retail markets around the world over the past couple of years. Alerzo stood out because of a strong management team and a founder who has a unique understanding about his customers and an attractive business plan with exceptional unit economics. This company represents a multi-decade opportunity for Nigeria to digitize and streamline its retail supply chain.
Signal Hill seed investor Kevin Jung cites Alerzo's focus on the informal market outside Lagos as one reason he supported Alerzo. Opaleye's focus on Asia, which Opaleye used when he visited China in 2016, was also mentioned by Jung as a key reference point for the new business model for digitizing informal retail markets.
Alerzo's office is located in Singapore, where the CEO claims it serves as a regional hub for best practices from similar high-growth companies operating in India and Southeast Asia. These can then be applied to Nigerian markets. The company also recently opened a Lagos office to expand its digital footprint.
This Series A round will allow for the expansion of northern Nigerian geography with the proceeds. Alerzo plans to launch AlerzoPay which will be the company's cashless lending and payments platform.
