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Building Confidence in Nigeria’s Tough E-Commerce Market

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By Sammy Lee

Despite the positive projections and huge potential locked in Nigeria’s emerging e-commerce landscape, the sector is proving more than a tough nut to crack for the majority of players in the country.

Even for the sector’s pioneers, the struggle is real.

 

E-commerce in Nigeria: An Evolution

 

Heralded by BuyRight Africa.com, a platform founded by serial entrepreneur, Leo Stan Ekeh and which was challenged by the absence of credit card and e-payment infrastructure when it was launched over 12 years ago, e-commerce in Nigeria has always been and is still widely regarded as the next big thing.

 

The rise of latter-day powerhouses, Jumia and Konga also brought a flush of confidence in the sector. This was basically due to the keen interest from angel investors and venture capitalists, buoyed by projections of Nigeria’s booming youthful population and aspirational mindset of its growing army of digitally-savvy people.

 

The reality is, nevertheless, a bit less enthusiastic.

 

Jumia, owned by the Rocket Internet Group, has struggled to make its continent-wide business strategy work despite attracting considerable investment. Years of heavy expenditure on marketing and overheads coupled with glaring strategic deficiencies in how it has tackled Africa’s biggest market has turned the firm into a loss-making venture.

 

The company has also repeatedly taken some huge hits over product quality and bad press over the poor conduct of some of its staff. Jumia has sunk deeper into losses on an annual basis, with figures reportedly in the region of over $150m. Despite reporting a Gross Margin Value (GMV) of €163.4m in Q2 2018, its Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) tells a sorry tale of huge liabilities in its balance sheet. Further fuelling fears are reports of a likely exit for its biggest investors after it emerged that Rocket Internet was planning to sell off its stake in the firm, even as other investors – MTN, AXA, Orange, Millicom and Goldman Sachs have remained mute.

 

 

A Tale Of False Dawns

In little less than the space of two years, a number of promising e-commerce ventures have either quietly exited the Nigerian market or declared their decision to make a shift away from a decidedly difficult terrain, ironically one that is widely regarded as boasting the right mix of ingredients required in creating Unicorns that will match the likes of other global super-heavyweights such as Amazon and Alibaba.

 

According to research, the Nigerian e-commerce industry is currently worth over $17bn, with estimates indicating that the sector could account for over $29bn by 2022. For the likes of Gloo.ng, OLX, DealDey and Efritin, among many others, however, e-commerce in Nigeria is no child’s play.

 

Of the distressed lot, perhaps only Yudala, founded by a then-23-year-old Harvard alumnus, Prince Nnamdi Ekeh in 2015, was able to successfully navigate the Nigerian e-commerce terrain.  Yudala had entered what was a keenly-competitive sector with a futuristic omnichannel strategy which fused a robust online platform with a chain of retail stores nationwide. In addition to pioneering a series of firsts, Yudala was equally responsible for the first drone delivery in the e-commerce world and also holds the record of being the first e-commerce company to introduce an offline version of the hugely popular Black Friday sales. The Yudala brand name was, however, absorbed into Konga after the combination of the operations of both firms in May 2018.

 

Gloo.ng founder, Olumide Olusanya, had cited the 2016 recession and its impact on business, a negligible Nigerian middle-class market and huge logistics challenges as reasons for the exit of the almost seven-year old e-commerce firm which positioned itself as an online super-store from inception. The story was not much different for Efritin, an online marketplace for used goods which officially pulled the plug on its Nigerian operations on January 9th 2017, barely 16 months after its official launch.

 

The announcement that Dealdey, Nigeria’s only daily deals website, was shutting down its Nigerian operations almost a year after suffering severe financial challenges which led to a mass staff cull, did not come as a surprise to many. The company had been struggling for a while to keep its head above water despite being the subject of a well-publicized acquisition in 2016 by Ringier Africa Deals Group (RADG), a joint venture between Swiss Ringier Africa AG and South African Silvertree Internet Holdings (Pty) Ltd.

 

Dealdey’s ouster came on the heels of reports that Career24, a leading online job portal owned by Naspers will be shutting down operations in Nigeria in March 2019. Naspers, headquartered in Cape Town, South Africa is the face behind much of Africa’s largest pay-TV business and newspapers and is widely regarded among the world’s biggest investors in e-commerce after a recent surge of investments in a number of online-based businesses on the continent.

 

OLX, an online classified ads firm founded in 2006 and another Naspers-owned venture, also ran into heavy weather in Nigeria and some other African countries where it shut down its operations. Although boasting a useful business model, issues involving the unscrupulous practices of some sellers and buyers on its platform and the inability of the company to find a lasting solution led to a massive loss of confidence and subsequent failure of the business in Nigeria.

 

For Chris Uwaje, Africa Chair for IEEE World Internet of Things (WIoT), the challenge in cracking the Nigerian e-commerce market lies heavy in the approach or business strategy adopted by most players, many of whom fail to situate foreign business models, ideas and strategies within the culture of the people and Nigeria’s existential realities.

 

According to him, the high failure rate in the sector can be attributed to an absence of reliable knowledge of the nuances and predilections shaping the average Nigerian’s shopping behaviour which local know-how and capacity brings.

 

Uwaje revealed that, when asked which of the current players they would invest in given a seed fund of $1m, over ninety percent of a select group of budding tech entrepreneurs he was mentoring had plumped for Konga.

 

“It came as no surprise because of the local know-how, strong international network, consistent success and decades of experience in the Nigerian technology sector at the disposal of the new owners of Konga. Aligned to this is the quiet way they have gone about in repositioning the business without the usual hype that accompanies most e-commerce ventures in Nigeria.”

 

“Nigeria remains a fertile business environment, especially for online-focused ventures such as e-commerce companies. It is also a country with peculiar challenges and a very strong traditional approach to retail which requires a deep sense of local know-how and understanding by players. This is one of the biggest hurdles faced by e-commerce start-ups here. Many e-commerce ventures run with foreign concepts and strategies more suited to foreign climes, making it harder for them to survive the difficult terrain that is the Nigerian business space.”

 

Dr. Wale Ogunfunwa, an e-commerce enthusiast, is of the same school of thought.

 

In his opinion, a lot of e-commerce companies copy what obtains in advanced climes such as Europe and the United States, with scant regard for the infrastructural challenges encountered here.

 

“Here in Nigeria, logistics remains one of the biggest headaches faced by e-commerce players as our transport infrastructure is severely underdeveloped. Worse still, there are no reliable physical addressing system in some major cities,  not to talk of the hinterlands. If you transplant a foreign strategy that works in Europe where delivery and transport infrastructure are highly developed, for instance, but which fails to address these identified gaps here, then you are bound to fail,” he submitted.

 

“Trust is also a major issue. A customer who has been disappointed the first time is harder to convince. Winning the e-commerce war in Nigeria requires a strong player backed by core local know-how and resources that can build and own its own delivery and supply chain network that will reduce delays to the barest minimum, while also presenting a strategy that will accommodate Nigerians’ proclivity for traditional retail.”

 

What Hopes for The Sector?

Considering the struggles of other players, the battle for the soul of the Nigerian e-commerce market is presently a straight fight between Jumia and Konga. However, it is clear where the pendulum is currently swinging.

 

Acquired by the Zinox Group from erstwhile majority investors – Naspers and AB Kinnevik – in a landmark deal in late 2017, Konga was one of the pioneers of the e-commerce revolution in Nigeria. Its online marketplace model, which was initially criticized by rivals including Jumia, made it an instant hit with a Nigerian populace that had just been bitten by the e-commerce bug. The hugely popular model saw it rack up thousands of customers and merchants on its online platform which lived up to its name as Nigeria’s largest online mall, resulting in Jumia eventually copying and adapting the marketplace model.

 

In May 2018, Konga’s operations was merged by its new owners with that of Yudala, another bright star in the e-commerce space which had taken the e-commerce sector by storm with a futuristic omnichannel business model. This model featured a combination of its online platform with a growing network of brick-and-mortar stores across Nigeria. Interestingly, the foresight in its omnichannel model was justified by global e-commerce giants such as Amazon and Alibaba which wasted no time in adapting it – a development that goes to prove that Nigerians are capable of leading from the front.

 

Since its acquisition by the Zinox Group – arguably Africa’s most structured technology conglomerate with over 30 years of brilliant success in the Nigerian technology space – and its subsequent merger with Yudala, Konga has gone a long way in restoring investor and customer confidence in the sector.

 

Building Confidence Through Strategic Investments

The owners of the new Konga – renowned for years of successfully navigating Nigeria’s technology space – have retained the omnichannel business strategy that Yudala was famous for. Not only that, it has taken this further by focusing on expanding its reach across Nigeria’s considerably huge landscape – a move that remains instrumental to capturing more Nigerians in the e-commerce net. As at today, Konga boasts over 35 physical retail stores across disparate locations nationwide, with many more in the pipeline. The company boldly claims its target is to reach the 774 local government areas in the country.

 

Also working for Konga is the huge investment in technology that is repositioning the business and its operations for cutting-edge efficiency. In addition to a world-class partnership with global tech giant Microsoft through which it is revamping its technology back-bone, Konga also boasts a well-equipped internal technology team which has built a suite of robust applications driving the company’s operations.

 

The company has also invested heavily in the acquisition of massive regional warehousing facilities including the latest – an 85,000 square meter space in Lagos.

 

It is, nevertheless, through two internally-owned businesses with which it has resolved the pain-points of logistics and payments that Konga has distinguished itself from the rest of the e-commerce field.

 

For Konga, Kxpress – an in-house logistics company, has been a source of blessings. Through the significant investments made by its new owners, Konga possesses arguably the most efficient delivery/logistics company with the largest network of line-haul trucks, vans, buses and motorbikes in the e-commerce space and with the capacity to handle last mile delivery to every part of Nigeria. Deliveries are now handled within 24-48 hours and with minimal delays, further growing user confidence in the sector.

 

 

And through KongaPay, a Central Bank of Nigeria (CBN) licensed payment system owned by the company — Konga has also de-mystified the payment challenge. KongaPay, which works with all banks in Nigeria, allows users domicile funds in an e-wallet for their transactions on the Konga platform. In addition, Konga offers other options such as payment on delivery (POD), payment on pick-up of items and cash payment in all of its stores nationwide.

 

 

Efforts to speak with Leo Stan Ekeh, Chairman of the Zinox Group – Konga’s parent company – were unsuccessful. However, Nick Imudia, co-Chief Executive Officer, Konga Group, disclosed that the company is determined to change the e-commerce narrative in Nigeria for good.

 

“Creating confidence in the marketplace and in the minds of Nigerians of all classes is key to what we are doing. The Konga strategy is attuned towards considering the culture of the people, by providing them multiple platforms. Our intention is to continue to optimize and we certainly will not disappoint the trust reposed in us,” he disclosed.

 

The case for Konga is an even simpler one for Uwaje.

 

“The rise of e-Commerce in Nigeria will accelerate the innovative application and use of Drone Technology to deliver essential goods and services nationwide, facilitate rural community education as well as save critical lives at all levels of national emergencies.

 

“An e-Commerce platform such as Konga should be viewed as a too-big-to-fail enterprise…E-Commerce has great potential to reduce traffic congestions, infant and maternal mortality, deliver healthy living, wellness and improve meaningful life expectancy. These amongst others are the deep benefits of uplifting Konga as Africa’s foremost e-Commerce Platform,” he concluded.

 

Sammy Lee is a global e-commerce researcher based in the United States.


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Ugo Onwuaso is an ICT enthusiast. He believes technology should be used for general good. He holds a Master of Public Administration (MPA) degree from the Lagos state University. Dear Reader, Your support matters. But we believe that technology makes life more exciting and helps improve the lives of people around Nigeria and indeed the world. That is why, we have devoted our energy to independent reportage of technology and finance and how they affect lives. Our incisive and analytical view of how technology news affects the daily life help individuals and organizations make up their minds. Quality journalism costs money. Today, we're asking that you support us to do more. Kindly support our effort to deliver technology and finance journalism to everyone in the world. Donate as little as N1,000. Bank transfers can be made to: UBA Plc 1017156876 Communication Week Media Ltd

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Wema Bank Launches Second FGN-ALAT Digital ‘Skillnovation’ Cohort

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Wema Bank has launched the second cohort for the FGN-ALAT Digital Skillnovation Programme in partnership with the Federal Government to train and equip two million young people and 1 million MSMEs across Nigeria with relevant digital skills.

Since the launch of the first cohort in 2023, over 300,000 youths and business owners have leveraged the platform as a launchpad for their business and career success.

This cohort featured 100% virtual learning sessions through which participants from the 36 states in Nigeria and the Federal Capital Territory (FCT) were provided with self-paced online learning experiences.

As cohort 2 begins in the second quarter of 2024, the FGN-ALAT digital programme is officially transitioning to physical training sessions and the curriculum will cover key digital skills including software engineering, product management, business analysis, cloud computing and product design, among others.

This phase of the programme will be executed via FGN-ALAT digital hubs, which will be set up in the different states across the six geopolitical zones in Nigeria to ensure that every Nigerian can access the programme’s full benefits regardless of their location.

These hubs will be equipped with training and incubation facilities ideal for digital-driven learning, giving participants the opportunity to acquire marketable and transferrable digital skills and gain a competitive edge in the global digital ecosystem.

The FGN-ALAT digital hubs will be set up in phases and trainings will commence accordingly, starting with Borno  and Anambra State.

Wema Bank’s Executive Director of Retail and Digital Business, Tunde Mabawonku, emphasised the pivotal role of the programme in bridging the gaps in Nigeria’s macroeconomic landscape towards national development.

“We are unwavering in our commitment to supporting MSMEs and with the FGN-ALAT Digital Skillnovation Programme, it’s all about the bigger picture—which is why we have partnered with the Federal Government to augment the scale of this programme’s impact.

“By tailoring this programme to suit the needs of both entrepreneurial minded and professionally inclined Nigerians, we are not just arming SMEs for more efficient business management and growth, we are also equipping Nigeria’s workforce for increased productivity and the ripple effect will not only create more viable employment opportunities for Nigerians towards reduced unemployment and underemployment rates, but further drive economic growth and national development, boosting Nigeria’s position on the global playing field.

“The digital evolution is moving sporadically and by empowering our youth and MSMEs with in-demand digital skills, we are ensuring that Nigeria is not left behind as the world evolves.

“Beyond the intellectual resources and other non-monetary opportunities, we are going a step further to provide financial support for these participants in form of millions of naira in equity capital, soft loans and grants, to enable them put their learnings to practice and build sustainable streams of income that could help them become employers in their own right.

“I encourage you to take the big step forward in achieving your business and career goals by joining the programme. All you have to do is visit the website to register. This programme is completely free and there’s more than enough room for you. Your success is Nigeria’s success and as your unique journey unravels, our promise remains certain,” he said.

Referring to the programme as an eye-opener for all, Mariam Isah, a beneficiary of Cohort 1, said, “It’s almost unbelievable all I’ve learnt in one month virtual training.

“I started this training simply looking for a way forward for my business but I have unlocked secrets that are life changing not just in my business but in all aspects of life. I am so grateful for this rare opportunity, and I can’t wait to be a part of the cohort 2.”


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StarNews, Global Black Economic Forum Launch Business Competition In Partnership with MTN & USAID

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Africa’s leading video streaming platform, StarNews Mobile and the Global Black Economic Forum (GBEF), have announced a call for applications for the launch of their Business Competition in Lagos, Nigeria.

Held in partnership with MTN and United Nations Agency for International Development (USAID), the initiative will empower Nigeria’s most promising businesses that are classified as Small-Medium Enterprises (SMEs) with invaluable investment and partnership opportunities from the USA.

Held over 10 weeks between April 8th to June 14th, hosted exclusively on the StarNews Biz Channel on the StarNews platform, this competition offers a platform for emerging entrepreneurs to showcase their ventures and gain national visibility.

With subscribers voting for their favourite candidates, the top 20 contestants will seize the spotlight and make their mark on the business landscape.

The StarNews Business Competition in partnership with GBEF delivers a unique opportunity for thriving Nigerian SMEs to access mentoring, funding, partnerships and socio-economic development tools through the Global Black Economic Forum.

With the prospect of securing cash prizes through StarNews worth up to NGN5,000,000, getting access to StarNews’s network of investors and the opportunity to gain national visibility by having their business on the StarNews web platform.

The top three winners will also receive coaching from GBEF’s Academy for Advancing Excellence and become part of GBEF’s ecosystem of global leaders committed to social and economic justice across the Black Diaspora.

Previous speakers at GBEF convenings from the entertainment sector include Wyclef Jean (Haitian Musician & Activist), Debra Lee (Former CEO of Black Entertainment Television – BET) and Ceci Kurzman (Founder of Nexus Management Group). Applications will close on April 5th 2024.

Speaking on the competition’s launch, Guy Kamgaing, Founder and CEO at StarNews Mobile, says “The StarNews Business Competition is a passion project close to our hearts at StarNews Mobile.

It’s about discovering the most promising business entrepreneurs and creators in Nigeria, opening up global opportunities for them and providing them with the resources and tools to achieve their goals.

By partnering with MTN, USAID and GBEF, we want to be a platform of empowerment for these SMEs by helping them give back to the communities that are supporting them.”

According to the US Embassy and Consulate for Nigeria, over 80% of Nigerian startups are incorporated in the United States and more than 60% of venture capital funding in Nigerian startups accounted for by the US.

In 2023 alone, Nigerian startups raised a total of $398mn however, this signalled a 66% funding decline compared to 2022 due to the global economic downturn, reinforcing the massive need for a fresh injection of capital and business support for Nigeria’s emerging SMEs.

Alphonso David, President and CEO of the Global Black Economic Forum notes that, “Our partnership with StarNews Mobile is a critical resource as we continue to build the collective strength of entrepreneurship across the Diaspora.

“Building a sustainable ecosystem of Black entrepreneurs in the United States and across the African continent is essential to create a future that makes economic opportunity and economic freedom a reality for all.”

A sister company to ESSENCE, GBEF advances its work by convening global summits and conferences, bringing together world leaders, business leaders, entrepreneurs, celebrities and civic leaders to address the most challenging problems facing our communities.

GBEF’s Academy for Advancing Excellence facilitates workforce and leadership development strategy, addressing the talent pipeline & employee lifecycle, providing leadership development & coaching, and conducting institutional assessments & research.

GBEF also develops and implements economic and social justice policy recommendations with partners ranging from civil and human rights organisations to government entities and corporations that advocate for economic opportunity, social justice, and health equity through thought leadership, advocacy and litigation.

Launched in 2017, StarNews Mobile empowers African content creators with the unique opportunity to monetize their work through a subscription model, boasting over 4 million subscribers and a thriving community of more than 120 content creators.

With a strong presence across six countries including Cameroon, Nigeria, Côte D’Ivoire, Congo, Benin and Ghana, the platform has also established key partnerships with major telecom operators such as MTN and Orange.

To-date, StarNews Mobile has secured over $8mn in funding with its most recent raise – a $3mn pre-Series A funding round in October 2023 – led by Janngo Capital with participation from French football players Aurélien Tchouaméni, Jules Koundé and Mike Maignan.

 


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Companies Invest More than $100,000 Yearly to Upskill their Cybersecurity Teams – Study Reveals

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Over 70% of businesses pay more than USD $100,000 for additional training annually to keep skills of their cybersecurity employees up to date, a recent global Kaspersky study has revealed.

However, the surveyed companies also highlighted that there was a lack of relevant courses covering new challenging spheres in the educational market and stated that training does not always bring them the expected result.

In its recent study ‘The portrait of the modern Information Security professional’, Kaspersky examined the topic of the global cybersecurity staff shortage, analysing the exact reasons businesses lack cybersecurity experts, and identifying the ways they evaluate and upskill their cybersecurity workforce¹.

According to the research, companies are investing significant amounts in upskilling their cybersecurity teams: 43% of organisations globally say they usually spend between $100,000 and $200,000 per year on information security courses, while 31% even invest over $200,000 for training programs. The remaining 26% state they usually pay less than $100,000 for educational initiatives².

However, cybersecurity practitioners also note that the educational market is struggling to keep up with the rapidly changing industry and fail to deliver the necessary training programs on time.

Survey results for the Middle East, Turkiye, Africa (META) region shows that the scarcity of courses covering new challenging spheres (48%) was the main problem for those searching for cybersecurity training.

50% of respondents from the META region also stated that trainees tend to forget what they learned because they had no opportunity to apply newly acquired knowledge, therefore the courses were useless to them.

The need for special training pre-requisites such as coding and advanced mathematics, which were not specified at the pre-registration stage were also problematic for 37% of practitioners from the META region.

“With a constantly evolving threat landscape, businesses should continually improve the skills of their cybersecurity personnel in order to be well prepared for sophisticated cyberattacks.

“Developing high-profile specialists within the company and building internal expertise can be an effective strategy for organisations that aim to retain existing employees and allow them to grow professionally, instead of constantly hunting for new candidates and checking their professional backgrounds and practical skills.

“For organisations served by Managed Service Providers it is also important to maintain a pretty high level of expertise internally and use the same language when discussing the scope of services and Service Level Agreement with them,” comments Veniamin Levtsov, VP, Center of Corporate Business Expertise at Kaspersky.


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