TOO MUCH WAREHOUSE WAHALA

E-commerce companies in Nigeria are dropping their popular pay-on-delivery option to stay alive

Quartz africa
Quartz africa

This week, Konga, one of Nigeria’s pioneering e-commerce companies, said it will start charging merchants to list products on the platform moving away from a model which allowed free listing but earned sales commissions. It has also shut its warehouse service and, crucially, will no longer allow customers pay for orders upon delivery.

The changes came at a cost as Konga fired around 60% of its staff. In a blogpost, CEO Shola Adekoya said the move will allow the company run a “more efficient business” and lower its operating costs. Essentially, Konga will no longer stock any items and will only facilitate trade between merchants listed on its platform and willing buyers.

Konga’s structure change signifies just how tough it is to manage inventory for an online business in a vast and fractured market like Nigeria. The big hopes of dominating the Nigerian market like Amazon does elsewhere has been met with many difficulties. In their early days of operations, Konga and other e-commerce players allowed customers to pay for orders upon delivery to work around gaps in payments infrastructure.

At the time, online payments infrastructure were not reliable and frequent transaction failures meant that the skepticism around the new industry only worsened. Delivery logistics have also proven cumbersome with gaps in mapping and address systems.

The pay-on-delivery option sought to fix another trust-related problem as many Nigerians were unsure of buying—and paying for—items they’d not yet seen. But the measure had its pitfalls: e-commerce companies risked incurring losses on delivery trips for unconfirmed or cancelled orders and delivery personnel also faced security challenges. In March, the gruesome murder of a delivery man in Nigeria’s south made national headlines. There have also been several reports of robberies.

Adekoya says switching to the prepaid model “is a necessary approach” for the Nigerian market and it appears Konga’s competitors have also come to the same conclusion. In April, PayPorte, a three-year old online retail store, canceled the payment-on-delivery option for shoppers. Jumia, Konga’s main competitor, now only allows the option for select orders. As a substitute, most e-commerce companies will be banking to a new crop of local payment start-ups to facilitate reliable transactions. But the big two—Konga and Jumia—have also taken matters into their hands by developing in-house payment solutions to boost online payments on their platforms.

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