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A merger of two Nigerian e-commerce players is the latest bid to win Africa’s largest market

Quartz africa
Quartz africa

Two months after it was acquired by Zinox Technologies, Konga, a major e-commerce player in Nigeria, is taking another step in its evolution.

The six-year old company will merge with Yudala, the e-commerce company affiliated with Zinox Technologies. Both companies will operate using Konga’s brand identity from May 1. Even though Zinox initially said it would not consider a merger at the time it acquired Konga, the company now says it will benefit more from combining the strengths of both companies rather than having them operate as competitors.

While Konga will retain its model as an online marketplace which allows merchants list items for sale, it will return to operating warehouses after closures in 2016, according to Zinox spokesman Gideon Ayogu.

The merger marks an eventful past few months for Konga. Last November, the company cut nearly 60% of its staff citing the need to run leaner operations before it was acquired two months later by Zinox. Former key shareholders Kinnevik and Naspers, who had provided much of the $78.5 million Konga had raised since inception, were bought out for undisclosed amounts but likely at a loss. Konga CEO Shola Adekoya also stepped aside soon after the acquisition.

Best of both worlds?

In merging, Konga and Yudala will pretty much be carrying out an experiment to combine online and offline operations on a larger scale than ever before in Nigeria. Since its launch in 2015, Yudala has maintained offline retail outlets21 stores across 10 Nigerian citieswhile Konga has garnered a reputation for its strong online presence and technological backbone. Its online marketplace listed over 10,000 merchants at the time of Zinox’s acquisition and it has pushed in-house solutions including KongaPay, a mobile payment solution, in response to Nigeria’s online payment problems. Those assets will now be combined with Yudala’s offline operations in Nigeria.

In addition to mainly selling mobile and electronic devices, the physical stores will also serve as payment and pick up locations for items ordered online, Ayogu says. Walk-in customers will also be able to make orders in stores for items only available online. Zinox plans to increase the store count to 50 before the end of the year.

Despite the rise of e-commerce since the turn of the decade in Nigeria, leading companies have faced significant struggles, including the lack of a reliable online payment infrastructure in the early-days. Poor road network infrastructure and an inconsistent addressing system have complicated the logistics of delivery. Crucially, the returns, mainly with regard to customer acquisition, was not at par with money that had been invested: in 2016, Konga’s active customer base was 184,000less than 1% of Nigeria’s population.

The slow pace of customer base growth fuels the theory that offline stores retain a major pull especially in a market where the culture of seeing and touching items before purchasing them remains prevalent. Indeed, “Black Friday” sales which have become popular locally now appear to be a bigger hit with physical stores.

“Working around cultural nuances,” is necessary to win the ecommerce race, Ayogu says. “We understand a lot of shoppers are still largely traditional in their approach to e-commerce.”

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