Restriction on foreign exchange bane of online shopping- Bagdadioglu

Sefik Bagdadioglu is the managing director of Kaymu Nigeria- a 100 percent online market place with a social and community focus. In this interview with CHINWE AGBEZE & ANGEL JAMES, Bagdadioglu talks about the e-commerce industry and how they are coping with the present economic recession. Excerpt

How was Kaymu’s performance in the past one year?

2015 was a good year for us. We experienced very significant growth both in transit number of sellers that we have on the site, which exceeded 50,000, and this turns on the traffic which have reached millions. We also had an extremely good black Friday where we almost increased our daily sales by 50 volts and that was a very interesting and good day. It seems like Nigerians are embracing e-commerce more and more, each day.

Things obviously slowed down a little bit last quarter; there are several reasons for this. One of them obviously is the economic downturn. When you have a significant part of people’s incomes going into transportation and electricity, therefore, any price surge in the price of diesel increases the cost of transportation and also the cost of electricity, and electricity is an input for pretty much everything. What that means is that it reduces the people’s disposal incomes, therefore, they have less money to spare on necessities.

How has the foreign exchange restriction impacted on your business?

Our site is focused on small and medium enterprises. A lot of our sellers bring in goods from abroad and that’s how they source. They source things from Dubai, China, Turkey, UK, US e.tc and they resell here. Obviously, restrictions on foreign exchange had an adverse impact on our sellers. I try to speak with our sellers on a daily basis over and over and this is one problem they raise.

So, how does it work? Usually, you have big importers that bring in containers of goods. Thus, instead of sourcing for products themselves, sellers are now more reliant on the importers who have the foreign exchange that would enable them bring in containers full of goods to Nigeria. Overreliance on importers has two impacts; one is that diversity goes down because you have large importers bringing in similar products and everyone does have similar products. The second one is that you are adding an unnecessary extra layer. Obviously, the person who is bringing in the container to Nigeria is going to make their own profit and when they sell it, the resellers in Nigeria are also going to make their own profit, so that has a double impact on the price of the goods. Hence, this obviously raises the price level.

How has the economic contraction affected Kaymu?

As inflation increases, consumers become more selective in what they are buying. They want to find better deals and I think this is where e-commerce can play a very good role because e-commerce allows the consumer to source goods at a more reasonable price, especially in a site like ours where we focus on diversity and affordability. So you are providing the different channels for the consumer. Inflation is very bad for the country but in times like this, people actually change their consumption pattern and those who don’t purchase online would like to try it out because it is cheaper to buy online.

What challenges do e-commerce businesses face in Nigeria?

People who would like to do cash on delivery because online payment channels are not as developed in Nigeria as in other countries and this adds to the cost of transaction. The condition of the roads in Nigeria is quite bad, so if the roads were in a better condition, we will be able to bring products to Benin in an hour but because it is bad, it is going to take seven to eight hours. Electricity is another challenge and this adds to the cost of doing business. Every single shop has a generator because there is no consistent power supply which means that cost will shoot up.

How do you manage trust issues because when you are using your card online, issues of trust are bound to arise?

Trust is always going to be an issue. Trust was an issue in United States, United Kingdom, Canada, China, Turkey, because online shopping is something new and you cannot just see the person you are purchasing from, hence, the customer is hesitant.

There have been complaints about consumers placing an order for a product, but they receive an entirely different quality. How do you deal with this?

At Kaymu, we have a two stage product process- when a seller orders for a product, it goes first to the quality control team- where they need to see if the product is actually reflective of what the seller says the picture and the product is. They either approve or decline. The second stage is when the customer opens the product and find out it’s not their real size.

We have a rule that every seller has to accept returns or refunds within the first three days. So if the buyer wants to exchange a product, he contacts the seller and the seller has to give a response. If the seller refuses to do this, then it rises to our level and we take it up from there. We need to make sure the process is good for both buyers and sellers. When buyers leave comments on our site that they are not impressed, we encourage sellers to call them immediately.

How long does it take Kaymu to deliver goods to customers and what happens if you fail to deliver within the specified period?

For both Lagos and outside Lagos, it will take between three to seven days, but outside Lagos comes with an extra charge. If the buyer does not receive the product within a speculated time, we refund the money.

How are your prices compared to physical stores?

We are not only cheaper than physical stores, we are also cheaper than probably, all other e-commerce companies as well, because the commission we charge on sellers site is one of the most competitive in Nigeria.

What’s your share of the e-commerce market?

We are sister companies with Jumia. So, we focus on the social aspect of shopping. We are one of the top three e-commerce companies, but at the same time, we are still starting; you wouldn’t see the giant van of ours outside, as we try to go more grassroots while trying to expand. We try to connect to universities, churches, and so on.

What’s your assessment of the e-commerce business in Nigeria?

The e-commerce business in Nigeria is increasing but the issue here is how fast it is increasing. I think it’s less than 10 percent. The problem is that the e-commerce business is highly concentrated in Lagos. It is true Lagos is the economic hub of Nigeria; however, there are also millions of consumers outside of Lagos, but there are still a lot of work to be done and there are opportunities.