Back in 2013, when e-commerce was just starting to take off in Nigeria, I made my first online purchase. The experience captured the industry’s struggles at the time. It took five weeks for the perfume I ordered to be delivered. The reason given was the delivery personnel had problems finding my address in Lagos’ outer suburbs. Being a “pay on delivery” order, the company couldn’t notch that order as a sale until the delivery was completed, despite presumably incurring costs throughout the five-week period with delivery attempts. In many similar situations, the delayed deliveries have often resulted in order cancellations.
Like many others who had reservations about how well e-commerce could work in Nigeria’s complex market, the experience put a long-term dent in any hope we had arrived in a brand new world.
Earlier this week, several years—and tens of millions of investment dollars later, we were reminded just how tough e-commerce is in Africa’s largest economy. Konga, one of Nigeria’s biggest e-commerce players, fired around 60% of its staff and adopted several changes to the business model including shuttering its warehouse, starting to charge merchants to post items, and axing its popular pay-on-delivery option for customers. Some of Konga’s competitors had also stopped the pay-on-delivery option given security issues for delivery personnel and frequency of cancelled orders.
Running warehouses and managing inventory has been a major challenge for many of these companies. Importing popular shopping traditions like “Black Friday” didn’t do much to help either. Even though Black Friday quickly became Nigerian e-commerce’s biggest shopping day of the year, customers soon figured out that many of the discounts were not what they promised. This ended up handing the initiative to traditional retailers like Shoprite for the best deals.
There are those who believe shedding the pay-on-delivery option is the first step towards truly enabling digital commerce and resetting the industry. The timing could be fortuitous as several local payment startups have started to transform online transactions. This will help e-commerce businesses focus on significantly improving service delivery and help reduce skepticism about the nascent industry.
While the pay-on-delivery option was a workaround in the early days of e-commerce, companies now appear to be evolving as they chase big dreams of dominating the retail. The first step, after all, is to know your market.