E-commerce for Africa

Another pretty lengthy article from me 🙂

* All the mock-ups presented are just for illustration only and do not represent any sort of endorsement by the product owners.

I want to share a few thoughts about the e-commerce space in Nigeria and offer a nice option to help the space grow not just in Nigeria  but also on the continent. I would like to call my idea an innovation and not an invention because what I am simply doing is looking at what has worked successfully in other industries and trying to adapt it to an entirely different industry that looks pretty stagnant right now. To help drive home my points, I am including a few mockups of what this would look like.

While I live in Nigeria, I still do most of my online shopping in the US and China ; on Amazon USA for small items and on Aliexpress for large orders. Despite shopping outside Nigeria, the shopping experience remains second to none, especially on Amazon.com – customer service is exceptional.My last order was for 22 copies of a book and somehow the books found their way to Niger – the country not the state o. A quick online chat with an Amazon sales rep and the whole issue was resolved, the books were rerouted. The books were delivered and despite being a few days late, I felt really good and satisfied about the whole transaction. It was just simply a wholesome experience for me.

With the recession fully upon us now, I seriously doubt I will be shopping in the US or China anytime soon though 😉

Away from the US and China and back to Nigeria.

Things are not very “dandy” right now in Nigeria, with the recession upon us, everyone is getting creative with how they shop; we want every value for every kobo spent.

The e-commerce space in Nigeria and in most developing markets remains a very challenging one. Despite the recession, the wholesale and retail trade sector continues to grow but somehow it just doesn’t look like it’s affecting the online players.

The last time I checked, none of the major players are doing too well with stories of heavy financial loses and mass recruitments all over the place. From Jumia to Konga, the story is not so different. Simply Google it and you will see what I mean. It’s all gloom right now. Amazon isn’t making profit too but that’s a strategic decision.

Players in the space need to focus on developing the category and not just their offerings alone. We simply don’t have enough Nigerians online to justify the investment made in some of the big e-commerce players right now. With the sector still growing, players need to focus on long term growth, they need to be ready to play for the long haul too, there is simply no quick wins in this space.

What if I said e-commerce doesn’t have to be limited to the internet.What if we could introduce a solution that automatically increased the potential market size to everyone with a mobile device and not an internet connection? The opportunities for growth simply quadruples.

It’s tough to run a competitive e-commerce business here in Nigeria for just too many reasons. I will not bore you with the fine details but here are some of the challenges faced by e-commerce players in the market that players have to contend with:

  1. Logistics is probably the number one challenge. You hear the word “Logistics” used to stand for just about every imaginable problem. Logistics covers everything from operations to warehousing to road network and the post office.
  2. Marketing – Most of the players are unknown. To become known, you need to market yourself and build awareness for your brand and offering. The cost to do this for small players can be very prohibitive. Several of the players in the space also end up doing a shoddy job about brand building. Rather than hire professionals, they try to do it themselves and this usually results in poor results. Hiring professionals can also be expensive.
  3. Business Model – Business model of many of the players makes it impossible to be able to compete on price and quantity with the open market. The open market is almost always guaranteed to be less expensive than the top players. Notice how both the top players have switched to a marketplace model? This helps them address a number of issues while also being plagued with others. A marketplace model helps increase your offerings and also reduces your warehouse requirements.
  4. Technology – Probably not as big an issue these days but thought to mention it nonetheless. Everyone uses the same underlying technology. While not a problem, every site looks just like the other and user experience is simply not top notch. You will know what I am talking about if you have shopped on international sites. Magento and AWS are the platforms of choice and understandably so.
  5. Payment – This one na die. We probably invented “pay on delivery” here in Nigeria. We had to. Nigerians don’t trust online sites with their cards. This is a big logistic problem for players. This model is extremely tough to sustainable. It’s very expensive to maintain but we can make it work..With only 200,000 ATM cards reported to be active in Nigeria, it only makes sense to try to include those without the cards in the mix. Payment on delivery is not going anywhere anytime soon so we just need to get creative with how we use it. I hear some players are planning to stop using it, would be nice to hear how that is working out for them.
  6. Product Sourcing – How do e-commerce players get their products? Do they get them directly from the manufacturers, a major distributor or in most cases do they just rely on a seller in computer village?
  7. Users –  Read my piece on the number of internet users in Nigeria. With less than 200,000 registered debit cards in Nigeria the number of people who can shop and pay online is limited. We simply don’t have enough people online yet. We need to bring new users “online” to shop.

Everyone suddenly wants to play in this space, banks are opening e-commerce portals all over the place, as at my last count, 5 banks had their own e-commerce platform. The Telcos with all their financial muscle are not being left out –  MTN is visibly behind the marketplace.ng. Can’t blame these guys though, barriers to entry is very low for these players and considering their business, it’s pretty much innovation to them.

In this article I won’t attempt to help solve all these problems, rather I will focus on an idea of mine which I feel can begin to help e-commerce players design an e-commerce offering that is better suited for Nigeria and other developing markets. Not redesign everything o but simply added some small element to the mix.

As Africans, let’s attempt to rework what e-commerce means to us. Let’s make it easier for more people to shop 🙂 ok?

In developing markets, mobile penetration is logically much higher than internet penetration as mobile penetration significantly fuels internet penetration in this parts. Even with internet penetration being high, not every online user shops on e-commerce sites for some of the reasons presented already.

If you look at some recent numbers published by Jumia and Konga, I seriously doubt Nigeria has up to one million e-commerce users. That number may even be significantly lower than 500,000 if you look at recent Konga active users data published in their 2015 financial results. 500,000 users from a user population of 170 million Nigerians? Not good enough.

How do e-commerce players make the best of these mobile users? ( if you say “mobile apps” I will shoot you :-), just goes to show you are not paying attention) . While mobile apps is probably a step up in user experience, you are still relying on the same “online” Nigerians.

How do e-commerce users take advantage of these high mobile penetration numbers in such a way that irrespective of your mobile device you are able to make use of their service to order what you need?

Who says e-commerce in Africa should be tied to your desktop or even a mobile app? What if we could turn just about everything into an online store and users wouldn’t even need Internet access to shop?

Low end technology like SMS and USSD short codes have the potential to totally redefine e-commerce as we know it in Africa.

Just think of it for a little bit then come back to read the rest of this article in a few minutes 🙂

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Welcome back 🙂

Every product on a retailer’s website or store already includes a unique SKU id, what if we took it a step further and added a unique sms number(keyword) to all products as well and made it easy for users to order products and services using the code and a simple phone with sms capabilities, no internet required? No smartphone, no Internet required.

What if on every e-commerce website, each product had an option to order using a unique code as shown in the visuals below. With clear call to action to order?

How would this work? Let me break it down in a bit more detail. Let’s assume we had an e-commerce site call KONJUM for fun 😉

  1. KONJUM registers one unique dedicated short code number with the NCC e.g 5000. Needs to work with all telcos.
  2. KONJUM generates a unique “keyword” for every product e.g Tecno Camon C9 – 1003, Samsung A6 – 1009 on their portal and so on.
  3. KONJUM builds a custom system to handle SMS/USSD orders and integrates it into their existing CRM and inventory system. System could be deployed to support SMS or USSD.
  4. KONJUM uses the product with strong call to action to order via sms in all it’s communication both online and offline.
  5. User visits KONJUM’s website or sees offline advertisement of Tecno Camon C9 and simply performs the following task to place an order – SMS 1003 to 5000 or use a USSD option of *5000*1003#
  6. CRM and Inventory system picks up order and confirmation of order is sent back to sender via sms.
  7. KONJUM’s Customer service rep follows up to confirm order and address. At this stage all the vetting is done and a customer profile is built.

KONJUM could easily partner with banks for direct debits which user needs to confirm via sms for direct back deduction. On the other hand, pay on delivery can also be utilized to simplify the process for a start.

What do you think? This could easily be implemented using simple SMS or an USSD system, it’s totally up to you. Smaller e-commerce players can even deploy the SMS version using just a regular number,  no short code required.

There are many things to take into consideration for this to succeed such as who bears the cost of the SMS sent but you get the picture. This idea instantly begins to redefine e-commerce and increases the potential e-commerce market size to everyone in Nigeria. Who said e-commerce had to be restricted to a desktop or a mobile app?

To avoid abuse a token of 50 or 100 naira could be the order charge. This could then be deducted from the final order cost when customer pays.

Payment on delivery is a nightmare for all players but a necessary evil. A central and shared reputation management system that could be called up by all players could help here. This service tracks the reputation of online shoppers using their phone numbers and email addresses. Think Uber rating for e-commerce.

We could begin to  redefine e-commerce on the continent, this way.

  • Turn every BRT bus into an e-commerce site.
  • Publishing and distributing free magazines with e-commerce inventory included
  • Billboards as e-commerce channels.

I think as Africans, we need to focus on our unique circumstances to make the best of our options. It’s great to learn from other markets but it’s best when that knowledge is implemented in the context of one’s situation.  I can’t wait to see the very first e-commerce site on the continent that fully embraces this.

* All the mockups presented are just for illustration only and do not represent any sort of endorsement by the product owners.

Let’s discuss.

With over 10 years experience in the digital and technology space in Nigeria, Stanislaus Martins is a solid fusion of technology and marketing. He is a professional photographer and creative at heart. Stanislaus likes to talk innovation, technology, digital and marketing. He is currently Head of Digital at Insight Publicis, one of the top marketing communications agencies in West Africa.

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