MallforAfrica, a Nigerian-owned platform that enables Nigerians to shop globally, recently shut down its business, bringing to spotlight the many challenges impeding the growth of eCommerce in Africa’s most populous country.
Their exit comes on the heels of eCommerce sales projected to grow to $7 trillion across the globe by 2024, Visa Consulting and Analytics report shows. According to Euromonitor, the world’s fastest-growing economies by 2030 will be in Africa. This consequently makes the continent the next big e-commerce market.
Although MallforAfrica cited Nigeria’s unstable foreign exchange market as a major challenge, there are other growth obstructions not letting operators thrive in the market.
Tope Folayan, MallforAfrica’s founder said the idea for MallforAfrica was conceived from a personal need and that the application is only a middle man in the transaction of business between the buyer in Nigeria and the various sites in the U.S. or U.K.
“I tried to shop on various U.S. and U.K. websites and couldn’t. So between me and my brother, Chris Folayan, we developed this app which now solves that problem. You can shop on Amazon, Marks and Spencer and a whole lot of UK and US sites which would normally not sell online to Nigerians,” Folayan said.
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Companies such as OLX, Gloo, Efritin.com, among others have been forced to take the exit option for different reasons. Jumia has also tinkered with its strategy, selling off business verticals to survive, while Konga was sold to Zinox.
The eCommerce market in Nigeria is faced with many challenges. The cost of international logistics and the chain of distribution cancelled orders for on-demand services, and subsequently, loss of revenue are contributing factors to the closure of eCommerce companies. The World Bank’s Logistics Performance Index (LPI) 2020 ranked the nation 110 out of 160 countries.
The growth of e-commerce will significantly depend on the quality and efficiency of logistics networks from intra- and cross-trade to financial transactions in payment of goods and services.
And as this positive narrative continues to place Africa as a top investment destination, the need for advanced logistics systems has become inevitable.
From delayed deliveries between local destinations to sluggish growth of cross-border trade, the effects are being felt across the board.
But experts say there is strong potential for payments providers to partner with growing pan-regional players to support this growth.
Gideon Ayogu, Head, Corporate Communications, Konga/Zinox Group said, “The major challenge faced by Konga in the e-Commerce space is that of logistics, especially considering the decrepit transport infrastructure in Nigeria, and this challenge under the current management is being surmounted with the equipping of Kxpress”.
Kxpress is an internally owned logistics subsidiary which leverages on the proliferation of Konga physical stores across Nigeria.
“At the last count, Kxpress can call on over 400 delivery assets, including vans, trucks, cars, buses and motorcycles, while Konga also uses its stores closest to the customer as pick-up points or for last mile deliveries,” Ayogu said.
Another challenge cited is the issue of publicity from dissatisfied customers on social media, notably with the rise of social media marketplace. Konga is solving this by paying close attention to product quality. There is a zero tolerance for fake or substandard products to the merchants on its marketplace.
Modern online retailing is headed towards pre-orders, requiring mature infrastructure for both small and medium businesses. This will help meet the packaging, storage, distribution, freight and last-mile-delivery requirements.
Also, with the rise of social media marketplace, for example Instagram, eCommerce merchants have had to struggle with capturing the attention of their customers who range from middle-class and upper-class Nigerians.
However, the impact of the economy on these citizens has by far affected the choices they make between food items and luxurious collections among others, BusinessDay research shows.
According to African Development Bank (AfDB) data, the average monthly income of a middle-class, which makes up about 23 percent of the Nigerian population is within the range of N75,000-100,000, while out of over 169 million people, only 3.3 million people are classified as upper class earning above N400,000 monthly.
In one of Nigeria’s counterparts- Kenya, eCommerce transactions are mainly driven by cross-border merchants. This means that there is potential for the local eCommerce market to develop, and that there is the need to examine if sufficient acquiring infrastructure exists domestically to enable these players.
The growth of eCommerce is currently driven by both digital payments and cash-on-delivery in Kenya, showing the potential to convert more customers to digital payments through card-not-present (CNP) such as card-on-file and card present (CP) which includes softPOS or mobilePOS activities. While in Nigeria there is a greater dominance of domestic transactions driven by purchases
Though challenging, Africa is a land full of commercial opportunities. Therefore, for e-commerce companies in Africa including Nigeria to achieve sustainable bottom-line growth, there needs to occur more tech-empowered handshakes between multiple service providers across markets.
Governments have the responsibility to create one-window-policies that empower digital payment solutions as well as logistics infrastructure including road networks, air cargo handling systems and warehouses among others, experts say.
Similarly, e-commerce and logistics powerhouses like Jumia should commit to empowering more upcoming entrepreneurs. They must also use their positions to continue paving the way for economic integration in Africa.
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