E-commerce in Nigeria: Founder of Drinks.ng shares lessons learnt
Born and raised in London, Lanre Akinlagun moved to Nigeria in 2013 to launch online alcoholic beverage retailer Drinks.ng. He previously worked in digital marketing at companies such as Universal Pictures, Vizeum and IBM, before taking up the role as marketing director for iROKOtv, an online streaming service for Nigerian films.
After a difficult start, Drinks.ng has gone on to become a key player in the country’s alcoholic beverage and e-commerce sectors. James Torvaney spoke to Akinlagun about how he started the business, why the real money is in wholesale and the thinking behind the company’s brick-and-mortar stores.
Why did you decide to start Drinks.ng?
I was one of the initial members of iROKOtv, along with Jason Njoku. Me being the party guy, he asked me to get the drinks and party sorted for his bachelor party in London, which I did, and it was pretty straightforward.
I was asked to do the same thing for his Nigerian ceremony, but it was not so simple. Everyone was telling me that I needed ‘a guy’ that I could send to the open market to buy drinks. I didn’t understand – why did I need a guy? Why is there not just a place I can go to to buy a few drinks?
So I went to the market myself to buy the drinks, and it was just a terrible experience. I thought, “I can do better than this”. Back then there was this dot.ng boom, with other online businesses like Hotels.ng and ToLet.com.ng (now Propertypro.ng) also starting.
Jason helped me raise an initial investment of US$100,000 – the only external investment the company has ever raised – and I came back to Nigeria in 2013 to start the business.
Tell us about the company’s early days.
The first year was absolutely terrible. Sales were hardly coming through.
A lot of the solutions and infrastructure that we have now, just didn’t exist back then. There were no Tecno phones back then – you had iPhones and Samsungs, which were extremely expensive and out of reach for many, and Blackberrys, which were terrible for e-commerce.
Payment solutions and delivery companies were non-existent. There weren’t payment gateways available. Paypal was one option, but chargebacks were crazy in those days. People would order, receive the drinks, and then claim a chargeback. They’d get their money back and we’d get a fine. So we had to stop that.
We never wanted to engage with payment on delivery, because we had a lot of bad experiences. So we had to use online bank transfers – it was the only way to get around it. And it really hindered the growth of the business at the beginning. And this was all in the midst of an election, with fuel scarcities and other disruptions. There was an almost complete shutdown of business.
A lot of this stuff is much better now. You have so many options now with companies like Flutterwave and Paystack, and many of the banks have good payment solutions as well. We stuck to our guns, trusted the process, and grew gradually as opposed to jumping on trends that reduced our customers’ faith in us. We’ve since had individual payments of more than 10 million naira (around $15,000) through our website, which shows how much trust people have in our platform.
What stage is the company at now?
We have around 40,000 customers nationwide, and we average about 200 orders a day, including both B2B and B2C customers.
Last year we booked around eight billion naira (around $12 million) in revenue, and are on track to achieve close to 15 billion naira (around $23 million) in revenue this year. The plan is to establish physical presences in both Abuja and Ghana before the end of the year, and increase our daily orders to 500-1,000 per day. We are also looking at entering the Kenyan and Rwandan markets and are already testing a franchise model with a couple of partners in southwest Nigeria.
Where do you see the big opportunities in the drinks market?
Initially we were doing a lot of single bottle orders, because that’s what the drinks brands want and that is how they market their products. So if you came to our website, you would see a lot of marketing focused on individual retailer customers – ‘buy a bottle of Jameson’, ‘buy a bottle of Hennessy’, etc.
The problem with this is that there is barely any money in retail. Consumer marketing is just too expensive and too inefficient. The initial problem that we were solving for – buying individual drinks – is no longer a problem for people. There are so many options available now if you just want to buy a single bottle of alcohol.
So we are pivoting the entire business to wholesale. The average order size is a lot bigger, and the delivery process is a lot smoother. We will still offer retail sales but our focus will be on weddings and events. So when you go on our website now the first things you will see are cases of drinks, not single bottles. We have signed up our first brand ambassador, comedian Mr Macaroni, who will be focusing entirely on helping us crack the wedding market.
There are a few reasons why many companies still choose to go down the retail route as opposed to the wholesale route – wholesale has traditionally been seen as less of a desirable business to be in, it has very low margins and it is expensive to maintain so much inventory and storage space.
Drinks.ng also has a handful of brick-and-mortar outlets. What was the thinking behind these stores?
We currently have four physical stores that we operate ourselves, although at one point we had seven. We have a new flagship store on Adeola Odeku street (a major road in the heart of Victoria Island, Lagos’s commercial centre), which is hands down the best liquor store in West Africa. It was expensive, but it has paid for itself and helps us build our brand and connect with customers. Since we opened that store six months ago, at least six or seven stores just like that have opened around Lagos. This shows how people are starting to see the value in offering customers the right retail experience.
That said, we want to grow geographically without having to spend money building outlets and buying inventory ourselves. The last few months we have been reducing the number of stores and warehouse space and building more of a marketplace model with a select number of trusted retail partners. So you might order through Drinks.ng, but the order is fulfilled by a partner store that is closer to your location. We make a lot less money per order, but it makes it easier to scale.
We are also experimenting with a franchise model – letting other people invest, and in return use our brand name, website, and connections to grow a business. We have already started with two partners in the southwest of Nigeria, and it’s been successful so far.
I think at this point, we could go fully online, but that’s only because we put in the work to build trust and visibility via traditional channels over the years. Offline absolutely helps to build people’s trust in your brand.
What have been your most effective marketing channels?
Instagram and Google ads have been big drivers for us in the past. Now, TikTok and Snapchat are doing a lot of work for us. That’s where the ballers, the big spenders are, particularly Snapchat because it’s anonymous – you don’t need to share your personal details to use it. We’ve mostly used ads on social media but are now looking at doing more content marketing.
Offline media, such as billboards, can be a great awareness platform but it’s expensive and we haven’t seen an effect on sales. So we don’t really use billboards, although we have seen positive results from radio marketing.
We have used influencer marketing in the past but I’m generally not a fan. We have to be very selective about who we work with. A lot of these influencers will take your money but don’t do anything. They may have followers but they don’t have engagement, and a lot of it has no impact on actual sales.
Highlight some of the trends you see in the Nigerian drinks market?
Being online, we are more suited to the middle to upper class of Nigeria, who go for more expensive drinks. The most popular category of drinks from a volume point of view is cognac, in particular Hennessy. What’s growing aggressively right now is whiskies: single malts such as Glenfiddich, Glenmorangie, and Balvenie are becoming a lot more popular. Nigerians’ palettes are becoming more sophisticated and their taste buds are maturing.
From a champagne point of view, people are going for classic champagnes like Moët, Veuve Clicquot and Dom Perignon.
But surprisingly two of the fastest growing categories in Nigeria at the moment, which I never thought I’d see, are gin and tequila. Historically, apart from Chelsea gin, which has a traditional use, Nigerians never drank white spirits – you never see people drink rum or vodka. My assumption is that a lot of this comes from Nigerians travelling abroad. Tequila is very popular in America and I think this comes from the ballers in Nigeria travelling and clubbing in places like Atlanta in the United States.
How closely do you work with the drinks brands themselves, for example Hennessy or Glenfiddich?
Myself and the drinks brands are like husband and wife. We are both working on solving the same problem which is how to mature the wine and spirits industry. Close collaboration with them has been key for us. We would not be where we are today without the help we’ve had from every single one of the drinks brands.
The drinks brands obviously provide us with drinks and we help them understand digital media and the e-commerce spaces. We advise them and run campaigns and promotions for them – for example, giving customers a free power bank with a bottle of alcohol – and give them feedback on what they are doing right, what they are doing wrong, and where they can improve.