In an unforeseen move, and just barely over a year into its own existence, DealDey is making its first acquisition — and the target is 3stiches, an online retail store that up till now been quietly carving a niche for itself in online fashion retail.
If my sources are accurate — and they are — this latest play by DealDey is a done deal, and the ink on the signed legal documents to that effect should be dry by now.
In a mixed exit for the online fashion retail store that will see the the founders wind up with cash, significant shareholding and executive positions at DealDey, the 3stiches deal is an acqui-hire. In monetary terms however, I was unable to ascertain the value of the deal.
One has to wonder however DealDey’s agenda is here, and why they chose 3stiches over others in a market that is now chock-full of small time online retail stores. A few theories.
I recall reading a Konga release (sorry, I couldn’t find the link) in which the management stated that they didn’t want to be “the Amazon of Nigeria, but the Konga of Nigeria”. How they chose to put it doesn’t matter, the budding DealDey empire has made no secret of the fact that they aim to dominate Nigerian e-commerce. With hindsight, it all now looks like a really elaborate strategy that is just now beginning to take shape. Daily deals was the first point of contact. Once they had ascertained that Nigerians were indeed willing and increasingly able to make commercial transactions online, they brought Konga onto the scene.
Erring on the side of caution, or data, or both, they decided to focus on a high velocity niche with significant logistics advantages — beauty, home and personal care products. Apparently, business is now good enough that they feel comfortable extending into other product verticals.
While not nearly as high velocity or logistically forgiving as home and personal care, fashion is a profoundly logical choice for DealDey’s next move, not only because it appeals to people of all genders, ages and income brackets (especially a disproportionately large aspirational youth demographic), but also because it’s a great place to make higher margins and make up for the slim ones they must have had to be content with in their current range of business.
Doing online fashion retail is no joke, cost and effort wise. Instead of starting from scratch, DealDey has elected to advance a considerable number of steps on the e-commerce board by acquiring a business that not only already has strong operations, management, logistics and customer relations experience in that space but also possesses ample inventory liquidity as well as relationships with international and local fashion labels,. By acquiring 3stiches, DealDey has effectively bought itself into a strong position from which it can compete favourably with Rocket’s Sabunta fashion brand which has since been subsumed into Jumia, as well as a long list of other nimble online fashion retail upstarts.
As for the question of why DealDey chose 3stiches, I think it wasn’t just a great choice, it was an obvious choice, for two main reasons — they’ve got street credibility in the local e-commerce game, and they are the right size.
3stiches certainly wasn’t one of the first to get into the Nigerian e-commerce game, but the fashion-focused store has been doing online retail in Nigeria way before it became cool and resulted into what some are calling an e-commerce bubble. They’ve obviously acquired invaluable local e-commerce savvy from all the time they’ve spent augmenting their offline in-store traffic with online sales and know the game inside out, from lead generation, to ordering, to payments, and fulfilment. These people have been using pay on delivery before the Kongas and Kasuwas “invented” the term.
I obviously haven’t had a chance to look at their books or financials, but from what I can see, I it appears that 3stiches is just the “right size” to be acquired by a larger Nigerian player. Unlike most of the online e-commerce small fry that are currently proliferating in the space, they are big enough to be taken seriously. Their fashion target audience is diversified, and they have physical stores that you can visit. But again, they’re not so big as to be un-acquirable. Taafoo, for instance, is not unlike 3stiches, only that its much, much bigger, and probably out of DealDey’s reach.
I imagine that where DealDey’s longterm play is concerned, 3stiches must fit like the perfect baseball mitt.
I’m sure that there are other insights embedded in backstories that I haven’t been told, which I am thus not able to deduce and articulate here. But from the facts at hand, there are other questions and postulations that follow. Will 3stiches continue to run as a standalone online retail concern, or will it be co-opted and rebranded as a DealDey e-commerce vertical? Another possibilty is that it could be merged with Konga to create a fashion category in addition to beauty, home and personal care products it already carries. It has also crossed my mind that this is probably the first of a number of acquisition cards that DealDey has up its sleeve.
We won’t know the answers to these questions till next week, when the acquisition will likely be formally announced. However, the 3stiches site hasn’t changed, and there is no official communication from DealDey as of now, except to decline comments.
As the bigger players within Nigeria’s e-commerce game demonstrate more aggressive expansionist intentions, the plot thickens even further, and it will be interesting to see how the space reacts to this new development.