E-commerce and the cutting sword of recession
While some are leaving the market, others are making entry, while some are recording losses; others are recording boom, the irony of the market place, a drama playing its script in Nigeria’s e-commerce marketing space.
By Azeez Disu
Since the country slip into recession, its aftermath has affected virtually all sectors of the economy, jobs are lost, companies run on debt and some have shut down their business operations.
When it rains no roof is spared from the shower emanating from the sky, the e-commerce industry is not spared from the harsh realities of recession. Online platforms like Efritin has shut down, OLX, Konga, Jiji, Jumia, and others are struggling for survival.
The National Bureau of Statistics (NBS) has revealed that unemployed rose from 9.48 million at the beginning of last year to 11.19 million by September 30 and over 1.7 million Nigerians lost their jobs within nine months during the period.
The increase in Forex rate and high cost of goods and services has further affected most businesses. Nils Hammar, Saltside Technologies, Chief Executive Officer and Efritin boss, blames the closure of its Efritin Nigerian offices on recession, poor investors’ friendly environment, high cost of data and others.
“We are reducing our investment in Nigeria. That effectively means we are reducing our staff; everybody has to go. But in terms of using the site, it will continue as before. By investment we mean the investment we made from the launch, it will be reduced,” Hammar disclosed.
“Like I said earlier, data cost is too high and limits the growth potential of the market. If you look at the size of Nigeria and the online activities, there is a big discrepancy. Before e-commerce and classified ad sites will start recouping Return on Investments (RoI) there has to be drastic reduction in cost of data,” the Saltside Technologies and Efritin boss said.
OLX Nigeria, Jumia, Konga, Mall for Africa, Uber Nigeria and other has drastically cut down their budget of operation. A staff of Mall for Africa, an online market place revealed to Marketing Edge that the crunch of recession has affected their business and sales have dropped “ Consumers are now weary of extravagant spending” the source said.
At this period, one would have expected that no investor would be willing to make an entry into the market but surprisingly, Aramex , one of the leading global providers of e-Commerce, logistics and transportation solutions found its way into the market at a recessive period. Market watchers forecast that more entries will be made before the end of 2017.
Hussein Hachem, Global Chief Executive Officer, Aramex, pointed that Nigeria is one big market that investors cannot ignore considering its population, over 180 million people, out of which 62 per cent are youths and they are highly connected on the internet and there is massive usage of mobile phones.
“We believe Nigeria is the hub of the region and we would like to connect more Nigerians to their neighbours. So, that is the value we are looking for. Foreign exchange scarcity is a global issue. The challenge in Nigeria is also what they are facing in South Africa, the same thing in Europe as well. If you look at the Pounds, it has depreciated by 22 per cent. So, it is a global phenomenon. However, our outlook is beyond the short-term.” he said.
As e-commerce cut down marketing communication budget, reduce general expenses; reduce staffs or probably hire inexperience ones to do multiple jobs at less pay, selling of inferior goods at the price of quality, industry watchers fear that these trend will be injurious to the growth of the industry and reputation of the companies involved.
Experts therefore urge e-commerce companies to adopt professionalism in their business operations in order to avoid losing market share in an attempt to cut cost citing that “If you trim too much fat, you start to trim the meat”. They noted that this period might be a hard time for businesses to survive but firms that adopt the right marketing strategy, cut cost reasonable and diversify its business operations will grow stronger and better.
Meanwhile, most Nigerians still prefer to go to the open market to buy their goods rather than purchase online or click to book a ride on a car hiring services platforms like Uber. Digital Marketing Manager, Tecno Mobile, Jesse Oguntimehin, said challenges confirming online shopping is in the area of trust and can be best tackled if the companies addresses the issue of delivery and quality of their product.
“Trust is increasing, but there are still people who do not trust the quality of items being sold online in Nigeria. This can be tackled by ensuring all sellers are verified and low quality items can be returned and buyers compensated.
“Another challenge is that of timely delivery of goods ordered. It still takes more than 3 days to 7 days for goods ordered to be delivered and it takes longer sometimes. Post office can be used, plus delivery hubs, with options for people to chose to pick their items from a hub rather than have it delivered to them.
“Pay on delivery means that some consumers will sometimes return items without paying for them. People who pay before items are delivered should be given a superb discount to encourage pay before delivery.” he said.
Similarly, Smartphones penetration has greatly contributed to the boom of e-commerce industry in the country. Cheap smartphones have flooded the market and more are making entry with preloaded online shopping site apps and its easy access to download any apps features.
More so, cost of data has also encouraged customers to patronize e-commerce companies. Though, the issue of security due to online fraud is still a major concern. Internet Fraud is on the increase, shoppers are skeptical about using credit card to make payment online.
Kushal Dutta, the Country Manager of Jumia Travel is optimistic that despite the challenges in the sector, it is on the path of growth considering the country’s internet penetration.
“All the data are saying the same thing. Nigeria is one of the countries with the highest number of people using the internet. It is one of the highest countries among the internet penetration. This is a phase for Nigeria where they are getting exposed to the internet. It is just a matter of time before the internet penetration will translate to e-commerce penetration. You know using a technology does not necessarily mean the acceptance of the technology. Nigeria is on the right path and it is only growth and growth.”
Founder/CEO Hotels.ng, Mark Essien, believes that now is the best time to invest in the country. He stated that things will get better and the economy will boom.
“There is no doubt that some investors are pulling back. They are pulling back on deals that we are aware are getting done but are suddenly getting delayed and lengthened, because they are becoming way more cautious because of what is happening in the macro-economic environment. But that certainly has not changed us. Our companies are growing. If we had come in and got scared by what is happening in the economy, we would have definitely missed out on some spectacular companies. And I have learnt from my investing experience that most of my significant deals came at a time of uncertainty and fear.”
As all sectors of the economy struggle to win the war over the tsunami called “Recession”, e-commerce has a lot of potential that would help the economy spring back to life if well managed. Meanwhile, Stakeholders have called on the government to come up with enabling friendly policies like reduce tax or tax holiday and cut down data rate.
Investors are waiting to enter the e-commerce space, most are aware of the words of Cushla Sherlock, Corporate Communications, Credit-Suisse which says “The e-commerce industry is a force that no investor can afford to ignore.”
RECOMMENDED ARTICLES
Comment
No comments found.