In June 2017, I wrote and asked Amazon to come to Nigeria. I also made a video (below). The main postulation is this: Amazon has the capacity to become the postal service system in Nigeria that will connect rural and urban Nigeria at scale. Yes, Nigeria needs Amazon to help support its infrastructural development especially in the areas of logistics and transportation.
The rumour is that Amazon is coming to Nigeria. If that is true, that is a big deal. Amazon is more important to Nigeria than Google or Facebook. Why? Amazon has the capacity to unify rural and urban Nigeria through catalytic infrastructure. Nigeria began fading at scale when the postal system collapsed.
Today, there are two generations of Nigeria: those who witnessed a working postal system (and train system) and those who came when everything was gone. If Amazon comes and invests $billions – more than Nigeria’s national budget on logistics and transportation, and opens it to all farmers, shippers, etc via its fulfillment business model, it would be magical. (Sure, the neocolonialism vibes will rise; I get it.)
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Read what I wrote in June 2017 when I was dreaming of the impact of Amazon coming to Nigeria, not just to sell cloud services, but run ecommerce operations.
Amazon today is a bank, lending to small companies that sell on its platform. It is also a transformation company with expertise in logistics in the air, sea, and road. With its networks of empires, anyone can live in the Amazon America, eating food from Whole Foods, watching moves from Amazon, reading on the Kindle, buying most things from Amazon. The list goes on. Its impact permeates industrial sectors and anyone it touches, it secures it as Napoleon Bonaparte did when it conquered nations in the 18th century.
From Business Insider leak, Amazon will launch in April 2023. With that, Jumia and Konga will see more competition. This remour differs from another one here which focuses on Amazon Web Services.
- “Belgium’s marketplace, called Project Red Devil, is slated for late September 2022. The one in Colombia, dubbed Project Salsa, is scheduled for February 2023.
- “South Africa, codenamed Project Fela, is also expected in February 2023. The marketplace in Nigeria is due to launch in April 2023. That project shares the codename Project Fela with South Africa,” it said.
- “Chile is planned for April 2023, too. It shares the Project Salsa name with Colombia,” the report added.
All countries are planning to launch with their own marketplace and access to Amazon’s fulfillment service called Fulfillment by Amazon, one of the documents said.
For Amazon, expanding into more countries now makes sense. The company needs to generate more demand, as growth is slowing across the board following a two-year, pandemic-driven sales explosion. Amazon has been scaling back hiring, subleasing warehouse space, and limiting delivery network expansion this year in anticipation of a prolonged slowdown. Onboarding more sellers in new countries may help Amazon fill more of its warehouses, which are dealing with excess capacity after overbuilding facilities during COVID-19 lockdowns.
If this materializes, Amazon’s infrastructure can fix the marginal cost problems for many sellers. I expect Amazon to have an immediate impact as many people can begin selling online, connecting into the logistics apparatus Amazon would be expected to build. It is dropping $5 billion in the Indian market, a fraction of that will help on foundational logistics infrastructure that will help Nigeria. You can call that Nigeria ecommerce 2.0.
Opportunity for B2C Sector
The reason why ecommerce companies, especially those in B2C, struggle in Nigeria, is the huge marginal cost on distribution. If Amazon arrives and builds the foundational operating system for logistics, and allows everyone into it, Nigeria will begin the ecommerce 2.0 era. Sure, Amazon will “tax” Nigerian companies and people, but when you aggregate the impact, good things will happen.
Of course, how does it feel for a nation to put its hope on another conglomerate? Nigeria is waiting for Dangote Refinery to fix its currency by substituting the import of fuel. Now, Ndubuisi is hoping for Amazon to fix its ecommerce B2C market by providing logistics.
Do not blame me: this is being pragmatic. Nigeria’s ecommerce B2C market will not scale profitably until we have a postal system; Amazon has a chance to build a quasi-version. Yet, it is all rumour since Amazon did not confirm the leak! Nonetheless, I hope it comes; Nigeria needs those $billions.
Comment from Feed
Comment: making a case that Google is better for Africa. Google inc has been a great resource to us Africans in both resources and support. For internet savvies it is almost impossible to do anything online without Google and /or it’s product, Amazon inc confirms this superiority. Google has breached the gap of unemployment and providing substantial resource and support to Africans , of which many Nigerians have benefited and can attest to. Virtually everything we do currently on the internet space is directly or indirectly linked to Google. Business may not be recognized if not listed on Google, this include Sme’s and large scale Businesses. As the world has gone hybrid in execution of task and providing meaning service , Google remains the most vital resource to lean on. In comparison, Google is more like Microsoft which will always be a base for all computers in data synchronization, manipulation and analysis. As a beneficiary of Google bootcamp program, I was wowed with numerous Opportunities with Google inc. I am aswell familiar with Amazon inc and its service, but I cannot compare theirs as a better fit to GOOGLE.
My Response: Fair. Amazon will affect our agriculture in many ways if it can build logistical infrastructure. Agro commands 30% of our GDP. Agro employs 67% of workers in Nigeria. ICT is fine, we are here chatting, but its impact is marginal when compared to agro. If we improve our logistics, we can double food production.
That will help millions of people, not just a few with smartphones. Google is great but Amazon funds millions of vendors by giving them working capital loans provided they sell. What that means is that if you run a business on Amazon, it can use your sales projections to give you loans; no need to visit any bank. Check AWS which is #1 in Africa – more than 70% of leading startups in Nigeria are in AWS. Most of the things you noted are offered by AWS.
Comment: Prof, is this not an eye opener for Nigerian e-commerce & tech entrepreneurs like you to dare to take the plunge? With your clear-cut explanation of the market dynamics at play, one can see that a “business model” is already looming large in your head. Can’t we, Nigerian e-commerce/tech entrepreneurs, financiers and stakeholders like yourself aggregate your skills and network to deploy this business model/infrastructure and revolutionize our e-commerce logistics value chain? I know this sounds really fantastic compared to actual implementation, and I have nothing against FDIs, but do we keep waiting for foreigners to come discover and reap the hidden riches in our country?
My Response: ecommerce is not making fanciful websites. Ecommerce is buying aircrafts, vehicles, ports, etc to move goods and services. You need to build logistics, warehouses for fulfilment, etc and for that, you may need to spend the budget of Lagos state. I am not sure there is anyone with the heart of that in Nigeria. Amazon Logistics is bigger than FEDEX. You may see a website but behind are planes, vehicles, etc https://www.axios.com/2021/10/21/amazon-shipping-bigger-than-fedex. You need $billions for such; Amazon spends half of Nigeria’s annual budget (~ $16 billion) on those planes, vehicles… yearly.
Comment: I agree with Joachim Duru Google is more important than Amazon. We resource for ideas….. selling item without the concept of the operation is trash
My Response: More than 70% of startups and digital companies in Nigeria that are worthwhile are powered by Amazon AWS. From Paystack to Flutterwave to Tekedia.com, etc all live on Amazon. If you shut down Amazon, those shiny things will go. Amazon is not just selling things.
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E-commerce is a logistics business, nobody should be confused about the electronic there, all the clicking and checkout will amount to nothing, if there’s no logistics infrastructure offline to get the job done. When items become too expensive as result of disparate and inefficient logistics system, the e-commerce halts.
As for hoping or waiting on a foreign conglomerate to build the logistics infrastructure, we don’t really have options, the government simply cannot do it, because there are competing interests chasing the meager revenue, so it’s hopeless to expect the government to build it.
The population continues to grow, so it’s not like everything is static, and when you don’t make proportional investment on annual basis to meet up with growing demands, your deficits continue to balloon. This is Nigeria’s situation at the moment.
Our situation dire, so whoever that is willing to make such a massive investment to get a sector going, we are not in a position to question intent, rather to see those infrastructures standing in our cities and villages; you cannot uproot them once built.
The kind of investment to get us near the equilibrium point is dizzying, looking towards government for such undertakings is out of it.
I would be the first to welcome Amazon to Nigeria, if they come fully. Amazon is a massive business with multiple sectors. They may come with a section of their business, i guess their movie business to test the waters and learn more about what make Nigeria tick.
But for the ecommerce…. it is a long way. they may have to be extremely patient for some reasons (which i do not think they will be). From bad road networks to impromptu change of governmental regulations to unsteady currency value to poor electricity supply to insecurity (which does not seem to end soon)…. these are on-ground factors that would affect them when coming fully. Almost all these challenges does not seem to be solved in a decade
Remember they have investors to impress and results to deliver. They were able to remain patient and reinvest in the beginning but not now that they are monstrous. they have targets to achieve. Coming to Nigeria means completely rebuilding Nigeria by investing in our road networks, power generation, etc, which i do not think they would be willing to do. Fulfilment needs as much constant electricity as logistics. It takes more than logistics to achieve a successful ecommerce business. Constant power supply is a major requirement, if Amazon must come here.
South Africa has almost constant(if not constant) power supply and excellent road network. So i may think that Amazon may either set up base in South Africa and use that base to deliver goods to Nigeria for on-time delivery and maybe, partner with locals to take it to end-users. OR they should simply buy Jumia and do the needful. And i guess…The reason why Jumia has not been bought is because they may not have been impressed with the results coming from Africa.
i still think they are testing the waters. Lets see how things go next year