If you have a business which loses $8.8 billion yearly but supports a $20 trillion economy to function, optimally, via nationwide logistics and supply chain systems, is that really a loss? If you try to avoid the losses, turning that business into an immediate profit-center, you can cut out rural communities from global commerce, and also decimate many small businesses. Case in point: United States Postal Service.
My question is this: if Nigeria decides to run a postal system that is operationally supreme but loses $500 million a year to cushion a new dawn in ecommerce and business operation, which can generate taxes of at least $1.5 billion, along with a few base points on the GDP, is that a good playbook? If we believe that commerce cannot happen, optimally, without logistics, what are what are Nigeria’s options if we cannot follow the U.S. playbook?
If NIPOST (Nigerian Postal Service) improves, the marginal cost problem will be solved, meaning that ecommerce companies can ship items at better cost margins. Possibly, that would help them compete better with open markets and supermarkets. Yes, if NIPOST takes over the distribution challenges, ecommerce companies will then become unbounded and unconstrained by geography, making them national players. Today, our ecommerce firms are not exploiting the true value of the web since most are focusing on specific cities – you cannot be doing a web business and be restricted to a small locality. So, if NIPOST helps to fix distribution, the ecommerce firms would become more valuable as the scalable advantage has improved.
As I noted when I commented on seeing my book on print for the first time, logistics is at the heart of ecommerce. I had written a book, submitted it to Amazon and waited for the royalties to arrive. I did not even bother to get a print version of this book! Amazon is handling all and selling the book across America and beyond. Amazon does what it does because the United States Postal Service provides deep support to reach any city and location.
If NIPOST can offer that in Nigeria, a new dawn will emerge in the ecommerce sector in Nigeria. Ecommerce companies will simply focus on making sales while NIPOST takes care of the distribution for them. And when that happens, they would have scale which will then make them very competitive on pricing compared with local open markets and supermarkets across Nigerian cities. That trajectory is how the ecommerce sector will blossom in the land.