JUMIA NIGERIA NEGOTIATIONS BIBLE June 2015egotiating 2 great Deal it’s a big show 5 First and foremost. Be confident as we 376 the biggest e-commerce company Nigeria and in Africa. We actually are the biggest fashion retailer in the whole Nigeria, can you belleve that? The people You talk to sell less than we do. Way less. You come form a position of strength. Sell the dream: Sell the volumes «Every single point of margin, payment term, consignment term counts. We need to be profitable and its 10x easier to ‘add 1% to bottom line through revenue ‘than cost! So fight for our commissions like You never have before. Konga’s commissions are not sustainable, we are sure about this «Do homework for each meeting. You need to know everything about Your supplier and prepare for any eventuality of the negotiation. step 0— Preparation is everything! 1, Get as much info as possible on the supplier (the brand and the person You 2° speaking with) before: ne SIZE & REACH: small / medium / tare? -rypical clients? Number of WH In country (regional / national)? Location of HO is usually good indication of financial strength b. PRODUCTS: is he / she specialized in his category? Which brands does he have? What is the most important brand / product line for him / her? Knowing that helps you ereate value during the negotiation, because his constraints in Brand A re not necessarily the same a5 for Brand B (am ok to give you this brand But ‘what about this other brand? | do not have the online rights for Nigeria yet.") c._ LEVEL OF INFLUENCE: Suppliers talk @ lot with each other and some are more fstened to than others. Overall it [s vital to ceep it in mind while assessing Your alternatives: giving in on commissions with oné supplier will make it very difficult for you with other suppliers as well. To the contrary, explaining that you want {0 be fair to your existing suppliers and that you cannot accept such terms will push him to revise his terms upwards. 2. We need to know exactly what the offing prices are, We need to win on price 9 any negotiation on commissions needs to be against lowest competitive price. 3, What terms is the supplier giving to other offline channels. These terms plus 50% is our right and our negotiation starting point. We have many advantages for our sellers a. Weare easier {one warehouse) ib. We cheaper (less logistics cost) c We have more to offer (we build brand value for supplier) d, We are a channel to different audience — youn, rural)Understanding the key objectives and pain points of the supplier ig the most important in the negotiation. During the meeting, understand his priorities / concerns [ constraints. 4. Whatis the e-commerce strategy fOr this supplier or distributors? 5, Whom should we talk to inthe company? ._ Who is the end decision maker? b. Can the people we are meeting with make 2 decision, and if so on which perimeter? sé. What fs our range for negotiation? Least acceptable terms? Before every meeting Oe decide with the MD / Head of VM / Head of Fashion what your key objectives are. Use this as @ negotiation tactic (even get up in the meeting and actually call your boss oF pretend to) 7. doa dry-run for the negotiation. You must practice before you speak to any supplier. step 1- Give a great first impression about Jumial 4, Share impressive numbers about Jumia. We are the biggest store in Nigeria. This is won, you need to be super energetic and very confident. You need e NUMBER 1, you are where the battl to sell the Jumia vision and be very sure of your self - we will b either with us oF your competitors: willl a. #1retailer in Fashion In Nigeria b. Every year we grow by times . We now ship thousands and thousands of fashion items pet d2¥s and it is growing very fast d. Weare the biggest local website in Nigeria step 2 ~ Explain why online will take all growth, grow faster and even maybe cannibalize offline, number one opportunity in reall! 1. Build up argument about e-commerce fe. We can reach to new target customers ~ young and teen internet users, people living in rural area. We promote through SEM, SEO, GDN, Affiliates, Yahoo, Mobile, Facebook ( for this marketing / branding we normally get 6-10% on margin (GP) £. We can expand their market to rural areas, where they don’t have / can not build their shops or distribution network (which is inefficient for them, for this ‘we can get 3-5% more GP for logistic costs). Add some numbers to back up thisargument : “in the past month, we have sold this brand in over 30 cities in the aeaintry; we will do-the same with your product” g. Talk about our plan, we will move into mobile commerce, move to more cities, will increase our marketing budet.. 9, Talk about how much e-commerce Is changing shopping behavior In Nigeria, show data from Google! ‘a. Google search - adwords tb. Google trends: http://bitly/16q}8te c. Key data from google consumer report: i. hnttps://Avww.consumerbarometer.com/en (graph- puilder/?question=Mi&{filter=country:nigeria https //woww,consumerbarometer. com, fen insights/?countryCode=NS 4. Key points you can share with your sellers during the negotiations to impress them with your online knowledge Your brands are immensely popular {not known] online in Nigeria. For instance [Nike] Is the most popular fashion brand in NG. Over 22,000 searches on google over the past 5 months [do data research here] ii, However we do not see the [Smartmark] products enough. When I type “buy Nike Nigeria" on google.com the first link which appears is olx.com, which definitely is not the best platform to represent your brand. Let us make sure that people buy [Smartmark] products and not grey / second- hand products / fake products. | promise You that your authentic products will appear first in Google Ii, The Nigerian consumer is going mobile. Juma is heavily present on mobile, we can help you get there, Look at the screenshot from the last Google survey about internet in Nigeria (show screenshot from consumer report) ~ inttp://bit.ly/TH9AKHO - 93% of the Nigerians use smartphones to access the internet, and 13% of the Nigerians only use a desktop. Our website is mobile friendly, but most importantly our app is doing super well, Did you know that? We know it and we keep optimizing for those trends. We can help you meet your customers where they are looking for products. iv. Our website is the first local website in Nigeria in terms of traffic Vy, Our app (Jumia) is doing very well and is already the most downloaded local app in the Google play store (ranking #10). We can leverage this asset for you. Vic Last but not least: 67% of Nigerians research product online before purchasing them - hnttpi//bit.ly/1rwWwWF The consumer journey involves both online and brick and mortar nowadays. By showcasing your3, From a 4. Show itl. a b. products on jumia.com.ng, you will certainly drive more foot traffic to your stores once your consumers will have done the research their point of view: what can they gain from being online: increase market share (with Online they can 6° around offline problems, like shelf space, sales clerks not recommending the right product or not creating the right content) Business model is changing. They will not be able to survive if they don’t go online now Everyone is getting it, they should as Well, Number of sellers online 1s sky- rocketing, iF you don't join Jumia, your competitor will join, you miss the chance to become the strategic partner ofthe largest e-commerse in Nigeria them it is an opportunity they cannot miss because ‘their competitors are getting Talk about their competitors coming online Talk about all the brands interested. Talk ‘about the success stories (David Wel) — you need to get the numbers here 5, Create the threat: This has happened in the developed world and it will happen here. You t electr as wel ll them the facts how the big books stores (eg. Barnes&Nobles) and the big conic players such as RadioShack are all Bankrup. This is going to happen in Fashion Il. Massive Fashion e-commerce companies exist all countries. Zappos in the US. Zalando in Europe. Dafitiin South America, Juris in Nigeria. 4. vandeed itis my deep belie that online isa tsunami Which is changing the face of retail, Nigeria, because ofits very uniaue features, is going to be one of the most impacted countries in the world. When ‘a tsunami is coming, itis easy to navigate at sea if you are on a big boat. You can 80 anywhere you want. Looking at the cumami approaching from the shore is very dangero'® fon the other hand. | suggest that you do not remain 2 spectator of the change happening in the industry, but rather that you jump on the Jumia ship, and make it your ship, through our shop-in-shop solution. You shall open shops for all your brands in the Jumia online mall.” Culture: If they say “but Nigerians like touching products", you tell them “so do Europeans, that’s why they go to the shop ~ touch and feel - and then they go home and order online”.step 3- Explain online marketing and all the added benefits It will bring them For most suppliers being online means having on internet site. Jumia Is the one of the two companies in the region, which knows anything about online marketing (THAT 1S A FACT!) Online marketing is the key differentiator to the offline channel. This very quickly becomes 2 key negotiation lever. 1. What is online marketing: You really need to explain what online marketing is. Most quys have no idea what it actually means. Be careful to throw terms around (CTR, CR, SEM, SEO, etc.) which they might actually not know 2, What can you do: We are actually spending a ton of money to help their brands. That differentiates us from offline. 3, Get your margins through marketing: They right have very clear targets on terms, But they will have maybe more freedom on marketing 0 get your margins there. Step 4—Negot 1. Do not negotiate commissions. The commissions are set and that's all. f they challenge talk about our economics: a. We do delivery for them. We spend 1000 to 1500 naira per delivery i. We do marketing / brand advertising for them. We invest up to 5000 naira / order in marketing. ~ This justifies higher commissions because we are buying the traffic to bring it to you 2. You need to know which negotiation levers You can leverage: a. Marketing support b. Brand promotion c. Nationwide logistics d. 7 days return policy e. Payon delivery f.. Great clearance channel g. Shop in shop possible 3, For special negotiations where marketing ability plays a special role bring @ senior marketing person to really sell our marketing ability, 4, Ask for consignment a. Supporting points: Your direct competitors already partnered with us and does it. It enables us to deliver their products faster — We want to start with “e-commerce terms” to understand the market. Later con, we'll make outright purchases (if this is the case)_ if we cannot fulfil customer orders on Your products itis very bad for your brand and our brand. Remember its your sRoP online _ By giving me better terms, you are incentiviing me to push your products and increase your sales 5, if e-commerce terms” does not work, ask for timited consignment”, which is 4-5 units per SKU that will stay in the warehouse for 30 days to make sure that we can fulfil rstomer orders in time. Mention that this s very low risk for the supplier and a big step towards our partnership on ther side ("How many units do you sell per month? Will 4-5 nits affect your sales/operations?"). If these items 5% not sold in 30 days, we'll veturn/exchange them for better selling products (“But 199% chance they will be sold, We are already getting top-sellers”). 6. Ifthe supplier does not agree with limited consignment, mention that “We have more favorable terms with your competitors. Put ‘yourself in my shoes; would you like to push the products with better or worse terms? 7. Additional Points: a. Arguments regarding. consignment: — Argument for consignment — we must satisfy customer. Our policy is super fast delivery 1-x days (depends on which supplier You talk to), But, "the guy In your warehouse may forget our order", then the shipping is delayed and the viistomer will be unhappy with both Jumia and Your Brand! If he absolutely ‘wants to go for dropshipping first ("to see how many sales you make” oF pecause he is worried about us not giving back the stock or any similar concerns they have with new distributor), you c=" usually find an agreement ‘here you will keep fast moving / low ticket items in You? WH in consignment (lower risk for supplier because lower value) and go for dropshipment for high ticket long tall SKUs. Explain that you are making hhim a big favor because You incur logistics cost to come to his WH. Do this for 2 months, then renegotiate Consignment for every SKU: Also explain that the best way for him to assess our sales volume is actually consignment and not dropshipment : every time an order is placed, our logistics will always give preference to SKU in stock in the WH rather than any dropshipment contract, So We will sell his competitors products before his. bb. Use your negotiation levers: — Develop brand shop (we can integrate on their website + also have separate section in Jumia just for the brand) c.f you hit your “limit” ie the maximum you cn bend, get up and leave the meeting, pretend to “call your boss". Come back and tell them "my boss wants ime to stop negotiation and not list you, the conditions are not acceptable". "|can’t go back to my boss which such terms, if there any way you can help me?" “how can i help you fulfill your targets?", 4. For big brands with whom it is difficult to close negotiation, while SKUs are still displayed on the website (hunted products), it can be useful to: — Leave grey products on the website: “as long as we do not work with you, we cannot afford NOTs selling. Of course we would much rather prefer retailing your products rather than grey products” Step 5 - Close Deal Close 80% of deal a in the meeting and send email with terms right after meeting, Always send a recap via email within an hour after the meeting (see meeting minutes guidelines), Recap all terms of agreement and suggest clear next step until signature (with dates). If no agreement, show the positive points only, express mutual understanding and interest to work together and set next steps (suggestion of time and date for next meeting with meeting agenda). If all the decision makers are in the room close the deal! If the decision maker is not there, start the meeting by scheduling another meeting with the decision maker; then take advantage of this first meeting to get all the relevant information to make second meeting successful. “it would be very important for us to include Mr./Mrs. XYZ in these talks as he would be involved in the decision process. | suggest to take advantage of today’s meeting to answer some of your questions about Jumia and to reschedule a meeting with him soon. Would he be available at the end of this week?” Do follow up calls / meetings to sign contracts. It takes on average 5 calls / emails to finalize a deal. So never give up. Step 6 - Key answers to key objections: But you are not a fashionable website: © 3 years ago when we launched in Nigeria everyone told us that e-commerce in Nigeria would never work. Look where we are now. We are committed to becoming the undisputed fashion destination in Nigeria. This is going to happen. Look at the work we are doing on our Instagram for instance. © Weare increasingly becoming a fashion destination so a lot is changing to reflect that.* We are completely changing the look and feel of the website and app. Fashion will be more at the forefront than ever before. " We have started transitioning to shooting on live models to present fashion in a more visually appealing way and have a dedicated style team tasked with presenting fashion at Jumia in a more sophisticated way © Your commissions are too high: 0 Weare both a digital agency, a retail store and a logistical provider for you. We are still losing money. ‘© Itmeans that we are investing a lot of money to build this market. Every time we are shipping one of your products, we are losing money. | do not think that our commissions are too high. © Look at what is happening with Konga. They started very low and now they are increasing their commissions. It is very deceiving, Jumia is the partner of trust. © Ok but I want a lot of marketing from you: © This can be negotiated agreed once your store is performing, but most importantly once your OPS KPls are met (UTF%, returns rate, time to ship) «The commission is cheaper on Konga: ©. Alright that is true but | will say that. Go to Konga’s seller platform and read the ‘comments. http://community.konga.com/discussions. You will see that: * Logistics not done by Konga = Lots of returns = Lower marketing budget so lower traffic «© Why do you need to be supplied exclusively: © We are the most professional team in the market. We have consistently help our sellers increase their NMV faster than what Konga has done © We are not going to give you exposure and invest in marketing while your products are on our competitors’ websites, because it is not going to help us. We will waste our money helping them grow their business ‘© Why do you need to go from outright to consignment © We have realized that our strength is not in buying, We are very good at marketing and growing our brand online and this is what we want to focus on. So we are putting all our money in marketing to drive more traffic and sales in your, shop © We do not have outright budget. If we had to outright your products we would put maybe 10% of your inventory online which would in return greatly reduce your opportunity to increase your sales. © In online 20% of the SKUs stand for 80% of the NMV — you do not want to miss out on the best sellers onlineo Outright will limit the bre chances of being successful ‘©. Ifyou can not work on consignment let us work jadth of your assortment online, and reduce your ‘on dropshipment