In 2018 I wrote: “The easiest way to waste money and destroy value in Nigeria is to start an ecommerce business with B2C model. As I have noted many years ago in a seminal piece in Harvard Business Review, making money on ecommerce in Africa would happen but would take a really long time. I do not expect any to work till after 2023 (2022). But before then, it is putting good money in a value-destroying venture that would bleed cash until the owners give up. Ecommerce today in Africa at B2C is simply a loss-making online endeavor only people with deep pockets can do. You can be in it if you do not care for profitability.”
The news now is that MallforAfrica is shutting down: “MallforAfrica is temporarily closed, that is true, but we pray and trust in God to have it back up and running in the very near future, better than ever. No date as of yet to announce. But we will keep everyone posted,” Chris Folayan, CEO of MallforAfrica said to Techpoint.
The company joins Kalahari, Mocality, Efritin, OLX, old Konga, etc as B2C ecomemrce companies which have struggled or collapsed. Please note that I am big on B2B ecommerce since they do not have the marginal cost issues I noted in the B2C ones (watch the video below).
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The biggest challenge in ecommerce is the marginal cost paralysis. And unfortunately, no ecommerce company can fix it since none can price without consideration of losing buyers to supermarkets and open markets. So, any ecommerce operator that wants to keep its products low must discount it and that means absorbing the marginal cost. That is what they do. And they keep doing so until they run out of more money.
As I explained in the HBR, buyers have options, from local open markets to hustlers on traffic lights. Any ecommerce must beat the alternative ecosystems on price to win new customers and keep present ones. To do that, they would need volume, only possible with a nationwide or regional operation. But without logistics like postal systems, that will not happen. Do not waste your money starting an ecommerce business in Nigeria until
2023(2022). It is the most unfortunate way of wasting capital in Nigeria. Only the post office can make our ecommerce take off and without that infrastructure, ecommerce is a waste of efforts, in Nigeria.
Comment on LinkedIn Feed
Comment: Hmmnn…What I have always been baffled about this is how Jumia is managing to run their business for these number of years in Africa. But I quickly noted that Jumia has managed to create a business model to diversify into different businesses but fronting the e-commerce side more. Prof Ndubuisi Ekekwe, is there something different about Jumia that we are not seeing yet on the e-commerce business is being run there? Thanks in anticipation of your response!
My Response: Jumia is using the double play strategy on the one oasis of ecommerce. Flipkart/PhonePe for India, Alibaba/Alipay for China, etc. No ecommerce company has been successful on B2C in any part of the developing world. But you use the data from ecommerce and make money via something else. JumiaPay is capturing value for Jumia even though its ecommerce is not doing great, but for that JumiaPay to rise, Jumia ecommerce has to exist!
Do Not Waste Time Starting B2C Ecommerce Business in Nigeria
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We need a different e-commerce model, to overcome the obvious challenges, and it has to be ecosystem model, not the present standalone experiments operators have been running.
It goes beyond pricing to what is sold on the platform. What do you think would happen if the only way to purchase Indomie noodles, Milo, Peak milk and Golden Penny spaghetti is to be via e-commerce? I will leave it at that.
When we are ready to build market systems that work, we can begin to ask the right questions; for now our approach remains primitive.
I think distributed commerce by leveraging geofencing will work especially in highly commoditized goods like food stuff or fashion. What comes into play is the marketing for robust adoption and the user interaction on the platforms especially on payment.
Say we had access to BNPL solutions on food stuff in Lagos, or Kaduna, I think people will jump on the solution.
My name is Praise Akachukwu. November 5th 2021, I started an e-commerce platform called Revenes. It’s dedicated to the selling of smartphones and gadgets online.
By God, it is going to grow big irrespective of what others have done or not done. It is going to grow, irrespective of the downfalls many have witnessed.
Write it down!
@Praise Akachukwu, This is not about one claiming faith – our people with God!
I like your disposition, but the discussion here is about exploring opportunities not Stated here…If the present business model of direct sales to consumers is not “working” for e-commerce business and they are folding up with the passage of time…what should we do as Africans and Nigerians in particular?!
My position is that we must continue to research these businesses as their ideas are coming up with our peculiarities in focus…Africa and Nigeria has so many challenges! Education is Key – Not just going to School per se…Perceptions about ordering stuffs online, Poverty index and people wants to make ends meet will not wait for you – that’s why they are on the Streets!
Hmm, @ndubuisi I have read your posts over the years and do appreciate the knowledge gained. However your claim is too assertive to be true.
I currently run an e-commerce company (zit.ng) and even though we have counted our losses over the years, we have entered a clear path to profit.
In the last one year, we have consistently made profit, months upon months.
Every business has it’s audience and if properly managed, it would definitely yield the desired out come.
Cheers!
Kindly excuse my typos.