Analysts say outlook for ecommerce in Nigeria’s pales as more investment in Africa’s most populous nation is still on physical stores like Spar, Shoprite and other supermarkets on lack of trust and fear of possible fraud.
Analysts who spoke to business a.m. are strongly of the view that there are no growth potential in the ecommerce business considering the avalanche of factors such as lack of trust, cash on delivery (CoD) model, Nigeria’s offline status – to mention but a few.
An analyst who used Konga, which recently merged with Yudala, as an analogy said: “using audited financial statement from old Konga’s largest investor (South Africa’s Naspers), Konga could not have been sold for more than $32.4 million after raising about $108 million.
“Imagine if this money had been used to build physical stores in major ten Nigerian cities [Shoprite style], Konga might be a unicorn now. Digital is the future but we need to thrive today also.
“As we move to the web, everyone needs to know that Nigeria has no modern supermarket chain (excluding Shoprite). That may be the opportunity now before the fancy of ecommerce,” the analyst said.
With the several issues ranging from lack trust, CoD model and Nigerians being mainly making payments in cash, analysts warned that prospective ecommerce players should always conduct rigorous research before pumping cash into less viable ventures such as ecommerce in Nigeria.
A reliable report indicated that the total monthly online payment in Nigeria is $134 million, which is less than 1 percent of all payment (cash and online)
In another research done by The Fletcher School and Mastercard, of the $301 billion of funds flow from consumers to businesses in Nigeria, 98 percent is still based on cash.
In chat, Tobi Asehinde, a digital marketing strategist and founder of Digital Marketing Institute, said ecommerce in Nigeria, especially when it comes to physical products, has been affected by the cash on delivery business model.
Asehinde said the merger of Konga and Yudala doesn’t necessary solve the many problems affecting both ecommerce platform as a result cash on delivery business model.
He said that Konga’s stoppage of cash on delivery, which definitely affected their sales, was a good move, and that the merger would make both companies leverage each other’s strength to move to a more profitable model in the new entity.
“It is also a good move to save two dying businesses that have grown strong brand equity but burdened by poor revenue growth in terms of expense and income growth,” Asehinde noted, adding, “They start spending their marketing and advertising budget in the most profitable and efficient way possible to acquire and retain more customers.”
According to analysts, the cash on delivery model come with a lot of risk and uncertainties as ecommerce in Nigeria especially the payment model has faced great challenges.
Nigerians are the biggest obstacles to ecommerce development in Nigeria, said Suleiman Abdulsallam, HubSpot certified integrated online marketer.
“How can someone deliver an item to you after which you jump on a waiting bike and zoom off without paying? This isn’t scam but pure theft,” Abdulsallam questioned.
Abdulsallam said Konga’s attempt at ensuring a strict payment-before-delivery model met stiff resistance from the customers in terms of sales volumes an issue that stems from lack of trust.
While citing an instance from the dispatch guy that was murdered in Port Harcourt, he said most of the people who opt for PoD are potential scammers/criminals. According to him, there is no coincidence that all the crimes that are ecommerce-related in Nigeria are from cash on delivery model
An analyst said the misunderstanding of Nigeria’s digital generation is that most technology companies often build their castles in the air.
According to the analyst ecommerce in Nigeria will take ages to work perfectly just like it’s working in the US and Europe as the present circumstances do not present the enabling environment needed for it to thrive.
These tough times leading to loss in revenue for the ecommerce industry in Nigeria has led ecommerce giants Jumia and Konga to delve into other areas of business such as the Jumia Travel.
According to reports, Jumia made a net loss of N53.3 billion for the full financial year of 2017. This is a major negative and huge difference compared to N40.5 billion reported in 2016, while Naspers, Konga owners as at that same period admitted that it “recognised impairment losses of $53 million relating to Konga.”