Africa may not be the first place Western retailers consider when they ponder expanding globally. But Chris Folayan has introduced an e-retail concept that he hopes will change that.
Folayan is the founder and CEO of virtual shopping mall MallforAfrica. The online marketplace, which launched in 2011, seeks to quell many of the concerns Western brands have about selling into Africa such as fraud, customs and duties, and delivery. At the same time, MFA aims to give African shoppers reliable access to hard-to-find, authentic Western goods at a reasonable price.
Folayan, who traveled to the United States from his home country of Nigeria to attend San Jose State University, came up with the idea for MFA after tiring of lugging suitcases full of Western goods requested by friends and family back home when he returned to Nigeria for a visit.
“Everyone was asking me to bring different items from different stores and the list kept getting longer and longer,” Folayan says. “And there is a wait limit for extra baggage, even if you are willing to pay.”
So, Folayan, who now has more than 15 years’ experience in marketing and technology development at technology companies, got to work developing a desktop and mobile program that allowed shoppers to fill out a form and order items.
“It started as a primitive online form that I tested with friends and family,” Folayan says. “At first I just wanted to develop something that would enable ordering items and I figured I would figure how to get them to people later.”
Three years later Folayan has figured out fulfillment well enough for a growing number of big-name brands to try out the concept. Over the past year MFA’s number of merchants grew from 40 U.K. and U.S. retailers, to more than 120 including Macy’s Inc., No. 8 in the Internet Retailer Top 500 Guide, Amazon.com Inc. (No. 1), Aldo (No. 443), Neiman Marcus (No. 41) and Net-A-Porter (No. 102). MFA’s annual sales for 2014 were between $15 million and $20 million, and increased 500% from a year earlier. And individual shoppers are spending a considerable amount on the site. The average cart is $260, Folayan says.
And that is just selling into Nigeria. MFA is expanding into Ghana and Kenya this month. Those three countries combined boast a total population of 244 million. As of August 2014, the site sold 8.5 million items and shipped 3 tons worth of merchandise each week.
“We’ve had an incredible amount of success with MallForAfrica,” says Kent Anderson, CEO of Macys.com. “In the short amount of time that Macys.com has been available to Nigerian consumers we’ve done a remarkable number of transactions resulting in sixfigure revenues.”
The process works like this: An African shopper downloads an MFA desktop application or an MFA app to her Windows, Android or iOS smartphone. She opens the app and chooses the store she wants to purchase from, for example, Macys.com. She is then directed via the app to the Macy’s site and shops as a U.S. consumer would. When she clicks to add a product to her cart, she is directed back to MFA to check out. There, she enters her shipping information and pays with an MFA prepaid debt card that she has loaded money onto. Duties and customs fees are calculated at checkout depending on the item, and shoppers pay a 6% to 7% shipping fee plus a 2% to 3% fee to MFA. Once she enters her card number and MFA verifies she has available funds, the MFA system places the order directly with Macy’s.
Macy’s then ships the package to MFA’s 17,000-square-foot warehouse in Portland, OR, where a team of nine MFA warehouse workers check that the order is correct and ship it on to Africa. The product arrives at the shopper’s home or at one of 25 pick-up points in Nigeria within five to 15 business days.
Shoppers must sign for their goods. About 85% of shoppers opt to collect goods at a pick-up point, Folayan says, and MFA is expanding the number of locations to 150 this year via a contract with Red Star Express, a licensee of Federal Express.
MFA currently doesn’t charge retailers to list on MFA and only makes it money from the fees it charges shoppers, Folayan says.
MFA, Folayan says, is aiming to confront the concerns many e-retailers have with selling into Africa—that a consumer will pay with a stolen card, that a dishonest shopper will lie and say the goods are damaged or that she got the wrong goods, and that customs and delivery will result in a maze of frustration and headaches.
“Because we use a prepaid card, we verify funds and can offer zero fraud liability, Folayan says. “A customer must sign that she received her package and we inspect every single order in our warehouse before shipping it to Nigeria. We get two left shoes or the wrong color of an item every day, and we filter out those issues in the U.S.” The MFA return policy for now is if the shopper receives what she orders, she can’t return it if she simply doesn’t like it.
Folayan says MFA opens up access to a new world of inventory to African shoppers at competitive prices.
Africans typically acquire Western goods in one of three ways, Folayan says. If he wants something that isn’t a knock-off, he visits a Nigerian bricks-and-mortar shopping mall (there are only about four in the entire country). Here he can be relatively certain that the product is authentic, but he will likely pay a 300% to 400% mark-up and have access to only a small portion of the brand’s product assortment. Alternatively, he can go to a market and purchase what is most likely a poor-quality fake. Lastly, he can ask a kind friend or relative leaving the country to do what Folayan did for years and bring back goods from his trip.
Folayan notes that there are a few competitors in Nigeria that operate e-commerce sites with local warehouses and can get goods to shoppers in a few days, but he says they lack MFA’s breadth of selection. A big online retailer, he says, might operate a local warehouse that stocks 75,000 products that they own and ship out, but MFA offers access to millions of SKUs from more than 100 retailers. What’s more, MFA doesn’t have to shell out the cash to purchase any of them until the shopper pays, Folayan says.
MFA now has 72 employees, 12 in the United States and the rest in Africa. In July 2013 it received an undisclosed amount in a series A round of funding from U.K.-based Helios Investment Partners, which focuses on African start-ups. It’s looking to close a second round by the end of the year, Folayan says.
“We plan to sell in 23 African countries by 2016,” Folayan says. “There is a need. And where there is a need, there is a business.”