Manufacturers, distributors embrace e-commerce to lower haulage, distribution costs
Dangote Fertilizer Plant

By AYOOLA OLAOLUWA

As inflation continues to spiral out of control, leading to higher production and distribution costs, local manufacturers, especially those in the Fast Moving Consuming Goods (FMCG) sector are beginning to explore cheaper alternatives of delivering their products directly to distributors, retailers and the end-users, BusinessHallmark can reveal.

According to the financial statements of seven of the leading FMCG companies, May & Baker Plc, Nestle Nigeria Plc, Cadbury Nigeria Plc, Dangote Sugar Refinery Plc, Unilever Nigeria Plc, GlasxoSmithKline (GSK) Plc and NASCON Allied Industries Plc, which are all listed on the Nigerian Exchange Limited (NGX), selling and distribution expenses recorded 11.4 per cent increase of N65.54 billion in 2021, as against the sum of N58.82 billion in 2020.

These costs are outside other production costs such as raw material procurements, which rose to N451.56 billion in 2021 up from N323.33 billion in 2020 (representing a 40 per cent rise), warehousing and generated power supply.
“Manufacturing in Nigeria is not for the faint hearted. Their day-to-day business life is full of challenges. From unfavourable operating conditions, to uncertain market prices and transportation hazards; a Nigerian manufacturer faces it all in his quest for survival.

“The consistent surge in the cost of production has forced many manufacturers to look for ways of reducing their cost of production.
“There is a limit to how producers can raise the prices of their goods. If they push their luck too far, consumers would resist by looking for the nearest alternatives.

“So, the best bet is to continue to look for areas where we can reduce the cost of our products to be competitive in the ever constricting market”, said Mr. Bolutife Alalade, the proprietor of a toiletry firm in Ikeja, Lagos.

Also, the Finance Director of NB Plc., Rob Kleinjan, said during the company’s pre- Annual General Meeting (AGM) media briefing in Lagos that the company’s input cost and marketing expenses have continued to increase significantly, hence posing a challenge. He specifically mentioned the rising cost of fuel and diesel which has an impact in the production and distribution process.

“Our cost of sales increased by 26.6 percent to N276 billion from N218 billion in 2020 driven by raw materials and energy cost, the company already absorbs these additional costs; the N10 per litre excise duty which the government wants to implement is an indirect consumer tax, so going forward it will be passed on to the consumers,” he had said back in April.

BH checks revealed that many manufacturers are already taking advantage of the surge in the numbers of haulage and logistics firms who are daily bridging the gap between manufacturers, retailers and the end users. Apart from contracting the bulk of their goods movements to haulage and trucking firms, the manufacturers are also employing the B2B (Business-to-Business) method to market their products.

B2B is a type of electronic commerce (e-commerce) where products and services are exchanged between businesses, rather than between businesses and consumers.
For instant, a B2B transaction is conducted between two companies, such as wholesalers and online retailers.

“With these business innovations, FMCG products now have safer, faster and more effective routes to informal retailers who are the primary market targets.

“Unlike before when a manufacturer had to purchase fleets of trucks to move its products to the market, the task is now transferred to trucking and logistics firms at a fee.

“With this approach, a manufacturer won’t bother again about the cost of acquiring the fleet of trucks, recruiting and paying drivers, as well as fueling and maintaining the fleet.
“Apart from the risk of losing their products which are mostly insured in road hazards, they are no longer responsible for injuries and damages done to lives and properties anytime there is an accident involving vehicles conveying their goods on dilapidated Nigerian roads.

“The burden is now passed to other entities with different but far more competent approach to doing business”, declared Ms Teju Ogunmade, a relationship officer with a truck leasing company based in Lagos.

An official at the MAN House headquarters of the Manufacturers Association of Nigeria (MAN) on Obafemi Awolowo Way, Ikeja, Lagos, told our correspondent that big manufacturers such as Unilever, Procter & Gamble, Nestle, Dangote, Dufil, PZ and others have been able to gain wider market through B2B platforms and logistics companies who have developed the expertise needed to reach wider market.

Some of the best and most patronised logistics companies in Nigeria by manufacturers include GIG Logistics, Konga Logistics, Redline Logistics Nigeria Limited, Confidence Cargo Limited, Cross Country Limited, Logistix.ng, Dantrans Nigeria Limited (a transport arm of Dangote Group), Germaine Haulage Limited and many others. On the other hand, manufacturers are also benefitting from innovative edges introduced into marketing B2B platforms.

Findings by our correspondent revealed that the e-commerce ecosystem has grown exponentially, especially at the peak of the Covid19 outbreak and the resultant restrictions and lockdowns introduced by government. With the aid of technology, e-commerce platforms had successfully established a virtual market where millions of sellers meet consumers without having to physically meet each other.

The ease and convenience of shopping online, many buyers told BH, have endeared the medium to millions of Nigerian customers who now purchase practically everything from groceries, toiletries, kitchen utensils, as well as electronic appliances online. One of the major challenges facing manufacturers is the transportation of their wares.

But business-to-business e-commerce platforms are solving the challenge by bridging the shopping gap by bringing retailers online and linking them to manufacturers.

Apart from helping to transport the ordered goods from manufacturers’ and distributors’ warehouses to the target retailers scattered all over the country, which in many cases comes at no cost to the manufacturers, findings further revealed that majority of the firms operating in the nation’s informal retail market also provide warehousing and fulfilment solutions to manufacturers and distributors.
The e-commerce companies, BH learnt, have hundreds of vehicles and warehouses which are open to serve thousands of suppliers and retailers on their platforms.

The Chief Executive Officer (CEO) of Alerzo Limited, one of the major B2B e-commerce players in the country, Adewale Opaleye, said the e-commerce market holds enormous potentials.

“If your business is not in the digital space, you are simply not fit for today’s competitive market dictated by dynamic customers.

“The market is no longer waiting for customers, as products and services are now tailored to meet the customers where they are located.
“The wave of business-to-business e-commerce is sweeping through the informal retail sector and making a notable impact in the Nigerian space, with a number of companies such as Alerzo providing suitable channels.

“So, it has become imperative for product manufacturers to embrace the digital space if they are to fully exploit their target market”, the CEO of Alerzo noted.

He added that as a market aggregator with manufacturers and distributors as partners, the services of Alerzo have far reaching impact and benefits for all stakeholders in the value chain.
“Their (ecommerce channels) intervention is making the market more effective and robust.

The implication of this on the market is that, with the technical facilities of the likes of Alerzo, and other e-commerce market players, FMCG products have safer, faster and more effective routes to informal retailers who are the primary market targets.

“Suffice to say that multinationals such as Unilever, Procter & Gamble, Nestlé, Reckitt Benckiser, Dangote, Dufil, PZ Cussons, Cadbury, Unilever and many others are now able to reach a wider market through digital technology”, Opaleye added.

Many of the ecommerce brands like Konga Logistics, apart from operating in Lagos and other big cities, are also expanding their reach to other regions of the country, making them a veritable vehicle through which product manufacturers can make inroad into other regions of the country.

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