How unstable FX shut down MallforAfrica
Africa-focused e-commerce platform, MallforAfrica has suspended its operations in Nigeria, which might lead to the company’s total shut down due to the unstable foreign exchange regime in the country.
The naira has seen multiple devaluations since 2016 when the President Muhammadu Buhari-led administration took over. Nigeria’s exchange rate data in 2016 shows that the naira was trading at N304.5 per dollar, N305.5/$ in 2017, N306.5/$ in 2018, N307.0/$ in 2019, and N380.0/$ in 2020. On 20 May 2021, the naira traded at N412.8 per USD, weakening 7.7percent month-on-month, while the currency was down 12.7 percent year-on-year and 7.7percent year-to-date.
For companies like MallforAfrica, the difference in the value of the naira against the dollar is enormous as it directly impacts prices of goods and erodes return on investment. For example, a shopper buying a product from Amazon, one of the vendors on MallforAfrica in 2016 would need triple the amount to be able to purchase the same product today.
In the past, macroeconomic challenges have forced platforms such as OLX, Gloo, efritin.com and others to shut down. Even Jumia and Konga have not been immune from the challenges. While the founders of Konga had to sell the company to Zinox, Jumia trimmed its asset holdings in Nigeria and other African countries to survive.
“We would like to inform you that we are temporarily not accepting orders at this time. This is as a result of the unstable forex rate in Nigeria and some policies of the Central bank of Nigeria (CBN),” the company said in response to a customer’s order.
Founded by Chris and Tope Folayan in 2012, MallforAfrica operated as a profit-oriented online mall that enables Africans to find and purchase items from international retailers. Its online platform and payment system give its users access to numerous retailers from the United States and the United Kingdom.
Private equity firm, Helios Investment Partners reveals on its website that it raised funding in a private equity round for MallforAfrica in July 2013, with no exact amount stated.
Research shows that prior to the time of funding, the company didn’t gain traction, but after the funding round, it received coverage from CNN in 2014, as well as the New York Times and Fortune in 2015.
Their mission was to build trust and connect African shoppers to some of the world’s biggest online retail platforms. As a result of fraud, most of these platforms banned Africans, but MallforAfrica came as the middleman, taking on the risks of fraud on one end and handling shipping on the other.
At the time of this report, BusinessDay found out that the app is no longer on the Google Play Store or Apple Store, as customers can no longer log in, and the company has stopped taking orders on its website.
“At this time MallforAfrica is no longer taking any orders. We appreciate your patronage over the years and truly adore each and every one of you. Orders made prior to our closure have been processed or are being refunded. If you have funds on your MfA account, they will be refunded. Please be patient with us as we finalise refunds during the month of November. Our customer service team is working hard to ensure all refunds are completed fast”
In Nigeria (@mallforafricanigeria), MallforAfrica stopped responding to its already existing and prospective customers on Facebook on Tuesday, September 28, 2021 and Instagram on Wednesday, September 29, 2021. Its last tweet was on Tuesday, June 3, 2021, but it’s apparent that it stopped posting on Twitter because of Nigeria’s Twitter ban, which took effect from Wednesday, June 4, 2021.
The situation of e-commerce in the country also plays a huge role in startups shutting down, experts say.
“Prices of goods and services are unstable, if you go today and buy something, by the time you go for the same good next day, the price will change. This does not allow for planning and planning is vital to running any business,” Segun Kuti-George, CEO Goshen Exquisite Marble and immediate past chairman of the National Association of Small Scale Industrialists, Lagos State said.
Some sources are of the opinion that since the site is currently down, it is most likely that the MallforAfrica brand will shut down completely and come back as a new brand. However, all orders made before the website and other media platforms went down are being fulfilled, and customers could still get their items from pickup centres. But no new orders will be placed before the rebranding.
“The value of the naira to the dollar should not be N518 to $1. Nigeria is not exporting much, but there are also several countries that are not manufacturing like Nigeria and their situation is not as bad as that of Nigeria, which means that the country’s exchange crisis is induced. There is a hidden hand behind the country’s exchange crisis. It is more than the forces of demand and supply determining the country’s exchange rate regime,” Kuti-George said.
MallforAfrica partnered with stores like BestBuy, eBay, Macy’s, Barney’s, and Bloomingdales racking up to $17 million sales in 2014. In 2017, the company partnered with a logistics company, DHL, to further cross-border deliveries, and in 2018, they partnered to launch marketplace.com, a fashion shopping platform that is now offline.
The company has seen growth since inception with a new company birthed in 2019 called Link Commerce. “Last year, DHL wanted to replicate MallforAfrica, brand it as theirs, and take it across sub-Saharan Africa (SSA). So, what we did was to develop an African e-Shop for them. And now, DHL is doing basically what MallforAfrica does, but the difference is that e-Shop is in 37 countries in SSA while MallforAfrica is in only 4 countries — Ghana, Kenya, Ivory Coast, and Nigeria,” CEO Helios Investment Partners, Chris Folayan said in a report.
From then on, MallforAfrica positioned Link Commerce as a Software and Service (SaaS) solution, which it used to build e-commerce platforms for other businesses as it did with DHL.
While the reason for the company’s shutdown still remains uncertain, Folayan is optimistic about its rebranding and comeback.
“We have seen great growth year-on-year. But we all realised that the Nigerian economy has had an impact on expected growth and projections. So what do you do when that happens? You pause, regroup, rethink strategy, then hit the market with a revolutionary way to improve e-commerce for all despite economic challenges,” Folayan said.