Startups

Traclist founders share their failure story and motivation for new venture, Sendbox

April 09, 2019 · 5 min read
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When it comes to online business operation in Nigeria, eCommerce easily comes off as the low hanging fruit. But even though the space is arguably one of the most crowded online business terrains in Nigeria, a fact is that it has been marred by so many business shutdowns.

Popular opinion has always been that these shutdowns follow varying levels of disparity between the initial expectation and actual result of the many players that ventured into eCommerce.

Poor internet penetration, high cost of data, as well as the challenging economic conditions are often highlighted as major factors a lot of these eCommerce business did not take into consideration.

But how do you explain that a startup that generated revenue in excess of ₦80 million ($220,000) in 2015 alone, and grew at an average of 4.5x from the previous year, is no longer functional just two years down the line?

The Traclist story

You may remember Traclist, Nigerian fashion-focused eCommerce marketplace once run by Emotu Balogun and Segun Afolahan. The illustration above speaks of the startup.

Even though the startup came out around the time there was Konga, Jumia and no less than 120 other eCommerce businesses, it successfully carved a niche for itself, and more impressively through bootstrapping.

Such was uncommon in the entire eCommerce marketplace at the time. But was all really well with the startup? By 2017 there were rumours that the startup was shutting down. And in what partly confirmed the rumour, one of the co-founders told Techpoint then that Traclist working on a new product.

Following a more recent chat with both founders, they now highlight logistics and order fulfilment as the biggest bane of the now defunct Traclist.

(L-R): Traclist co-founders, Emotu Balogun and Segun Afolahan

“As a marketplace, the issue was not about trust or co-coordinating the merchants in an effective way. The issue was about how to ensure that fulfilment happened effectively, as we were solely responsible for dealing with all of the logistics,” admits Emotu Balogun, co-founder of Traclist.

How big is the eCommerce logistics problem?

For many merchants, order fulfilment is not considered the most glamorous aspect of running an eCommerce business.

The reason is that it involves end-to-end services such as getting products from warehouses, packaging, handing them to shippers and possibly sending an automated email response to customers to let them know their packages are in transit. This is easier said than done apparently.

“The model we ran required that we had physical assets in dealing with logistics,” Segun admits.

Alongside working with a number of logistics partners, Traclist went ahead to set up a warehouse where it managed some inventories, did the work of packaging and shipping as well restricting delivery to Lagos.

Ideally, that should have been a fix to its fulfilment and last mile delivery challenges. The obvious advantage of in-sourcing ones logistics is gaining control of the whole value chain, thereby ensuring quality.

However, this comes at a very huge cost of setting up the infrastructure for the entire delivery value chain. From a unit economics point of view, Traclist wasn’t in the advantage.

“Most of the products sold through Traclist were imported, and seeing as our delivery was restricted to within Lagos, we had a huge constraint in our ability to scale the marketplace,” Emotu goes on to add.

Granted, small deliveries to many locations has its inherent problems. But still, the unit economics says a lot as to why Traclist generally struggled not just with delivery but business as a whole.

Consider online grocery markets for instance, where products are less differentiated and are somewhat manufactured locally, the outcome might have been different.

As companies enter a high-growth phase, it is vital to focus on optimising cost efficiency while delivering value to customers. Perhaps working fully with third-party logistics partners would have provided better economics of scale for Traclist in this case.

Unless of course the bandwidth to fully focus on logistics in-house is available, taking the challenge head-on can be a costly mistake. So far, it seems that approach is not working for Nigerian eCommerce.

Things (times) are changing, introducing Sendbox

Beyond just standardising logistics, a major issue of eCommerce stems from the fact that most customers do not want to take up the burden of shipment.

But compared to what it used to be in the early days of eCommerce, customers are really beginning to  understand that they need to pay for their delivery.

Segun believes much of that credit will go to social platforms like Instagram, Facebook and WhatsApp that are increasingly becoming platforms for online trading and challenging participants in the delivery supply chain.

That customers are more likely to be accountable for their transactions on social platforms is something he thinks will force the market into maturation.

But being that this activity is largely unregulated, a flip-side that he notes is that it could promote fraudulent practices at a massive scale simply because the customers essentially do not know who the merchant is.

This is what their new venture, Sendbox is attempting to build on, using expertise from past experiences to provide delivery, escrow payments and authentic reviews for people who use social media platforms for eCommerce.

Sendbox homepage

In many advanced countries, shipping and logistics is as easy as checking in and out of social media. This is what Sendbox is trying to be by integrating its shipping and tracking features into merchant’s (businesses, online platform etc) workflow. All that is required of merchant is to book a shipment.

The founders say they would then transcend that transparency to transactions between the merchants and their own customers, thereby building trust on channels (social platforms to be precise) where the platform itself doesn’t provide any of that infrastructure.

“We would be the independent source of truth for all these transactions because now, all a customer needs do is ship their products through Sendbox,” says Segun, “What that does is make the logistics space healthier and likewise make flow of transaction easier.”

So far so good, the founders boast of Sendbox processing over 60,000 shipments in the last year alone, averaging about 5,000 per month.

Seeing as early-stage tech startup investor, Microtraction recently invested in Sendbox, you get the feeling that the product has imbibed a lot of learning from its former self.

Nonetheless, this is no one-size fits all solution to the challenges of logistics in Nigerian eCommerce. Because as attractive as Sendbox is, it might be facing serious competition from the likes of Instagram Checkout when it finally debuts in Nigeria. And that in itself is the real test for a solution like Sendbox that promises a lot.

But Emotu downplays any threat from the possible emergence of Instagram Checkout.

“Instagram Checkout may actually work in our favour, as we may be able to plug in our services as well,” he says.

It will be interesting to see how that pans out.

Ifeanyi

Ifeanyi Ndiomewese

Author

Ifeanyi is a desk reporter-turned administrator. Outside of work, I love to read and travel.

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