There is enough space for at least 15 Big eCommerce stores in Nigeria – PayPorte Founder

by | Dec 7, 2015

This article is part of Techpoint Africa’s Founder’s Table monthly series, where we catch up with founders in the startup ecosystem, learn about their failures, successes and a few tricks of the trade. Subscribe.

Eyo Bassey is the MD and CEO of PayPorte, a relatively new online retail store in Nigeria that boasts 48-hour delivery time frame.

Techpoint spent an afternoon with chatting him about the state and future of eCommerce in Nigeria.

Can you let us know a little bit about your educational and professional background

My name is Eyo Bassey Francis. I am the MD/CEO of PayPorte Global Systems. I am a graduate of Pure and Applied Physics from Ladoke Akintola University of Technology (LAUTECH). When I finished from LAUTECH, I worked with a company called Socket Works Global. I started off as their Global Systems Administrator, then I rose to the position of Head of Software Engineering.

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After Socket Works, I went to start my own business. I set up Rom-Flex Networks Limited. Rom-Flex is an IT company that does both IT infrastructure and Software Development and has given birth to a couple of other companies. PayPorte is one of these companies.

I am also an alumnus of MIT and the London Business School. I’ve also taken a couple of courses in Harvard but I’m yet to be alumnus.

How did an Applied Physics graduate end up in IT?

Applied Physics is not so far from IT. I’ve always had passion for IT even before I got into the university; from people hiring me back then to go surf the web on their behalf, to finding my way into Software Development (I also write code). My passion for IT was basically inspired by the role models I had back then. People like Larry Page who were at the centre of the internet boom. I was also so privileged that on my 17th birthday, my mum surprised me by buying me a computer. That further aided my passion for IT. I took it up from there and here we are today.

Was this (entrepreneurship) something you set out to do from the get-go? Would you say you were born an entrepreneur?

I would say I’ve always had the entrepreneurial instinct in me because of my background. I lost my dad when I was 11 — we are 5 kids in the family and I am the eldest — so we faced a whole lot of challenges. I always had this entrepreneurial thing going, from hawking on the streets to helping out in friends’ businesses.

Maybe it also could have been passed down to me from my dad. My dad also worked for himself until he passed on. I think the challenges of life also helped form me into this path. So I wouldn’t say I was born an entrepreneur but rather, I have this great entrepreneurial spirit in me.

In spite of PayPorte being a child company of Rom-Flex, how easy was it starting up?

PayPorte has been very challenging. Running an internet businesses in Nigeria, or in Sub-Saharan Africa is not easy. Not only do we not have enough incubators, we also have the challenges of finance and the fact that internet businesses seem to be abstract. Having to convince people to do internet business is a problem.

By the way, what inspired PayPorte?

PayPorte wasn’t meant to be a company. eCommerce was just coming up in Nigeria and as Software Developers, we thought it would be a great idea to build an eCommerce system suitable for Nigeria. Our plan was to sell it as a product. I like to call this PayPorte 1.0.

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Soon it dawned on us that we could actually do this as business. That’s how we migrated to PayPorte 2.0. When I say 2.0, I mean when PayPorte kicked off as an online retail store on the 25th of September 2014.

Was PayPorte 1.0 ever used?

Yes

So what happened to all those initial clients after PayPorte 2.0 kicked off?

We ‘swallowed’ them up.

PayPorte came at a time when certain ‘giants’ were already established in the eCommerce space.  What convinced you that it was a good idea to come the party?

Right now there are no giants in the eCommerce space. eCommerce is a wide terminology. When you buy flight tickets online, that’s eCommerce. When you pay for a JAMB form online, that’s also eCommerce. But when you now bring it down to a part of eCommerce which we refer to as online retail, the space is still very much open. We have analysed the market; as we speak right now, there are over 35 million Nigerians that are on the internet week in, week out. Every month in Nigeria, 80 million people at least get in contact with the internet. That’s the market we are talking about.

Here at PayPorte, the companies you refer to as ‘giants’ today, we refer to them as ‘other market players’. Now these other market players, what is their capacity? Can market player A , for instance, successfully process 5000 orders in one day? The answer is no. This is because of the uniqueness and the challenges we have in  this environment.

For instance, addressing system issues. When you get addresses like “number 14 Coker street, the third mango tree and the red roof on your right”, how will you deliver products to that area? You have maybe 30 – 40% of orders that come that way and you think you can process 5,000 to 10,000 orders a day? That’s impossible.

Take 10% of that 35 million addressable market I mentioned earlier, that’s 3.5 million Nigerians. Can all existing market players, including PayPorte, serve 3.5 million Nigerians daily? No. So even if 10 more players come into online retail, we still can’t serve the market.

There is no competition yet in this market. We only have other market players reinforcing the potency of online retail. But I can tell you there is an overwhelming market.

So are you saying we actually need more online retail stores?

I would say that 10 more online retail stores the size of the current ‘giants’ can survive the Nigerian market

PayPorte is an online store, but you appear to employ somewhat aggressive offline campaigns. Why is this?

It is in our roadmap for PayPorte to get into offline brick and mortar by 2016. Considering the environment we are in, a lot of Nigerians are not so ready to spend above a certain amount of money online without having a physical feel of the quality of the good. At PayPorte, we are running a hybrid model, which marries online and offline to show people the kind of quality of products you should expect when you go online to shop on PayPorte.

Even in advanced economies it’s also that way. In case you don’t know, Amazon just opened its first offline store. They’ve had offline stores before in universities but now a real offline Amazon store has opened in New York. Even Alibaba in China partnered with a major offline retail store. Reading and analysing the market for the ongoing trends, we realise that this is the right time to push for offline. I wouldn’t even say we are ‘aggressive’ now; we are just checking the space. So far, we’ve had 2 successful offline campaigns in Lagos.

Based on your experience with PayPorte, what are some of the challenges to successfully running an online retail store in Nigeria and how have you surmounted them?

The number one challenge is marketing. The overheads on marketing are too many. Nigeria particularly doesn’t have a unifying portal for Nigerians like the Chinese and Indians do. Our customers are scattered everywhere — Facebook , Google, the blogs, sports sites. So we are forced to rely on Facebook, Google and all of that for online marketing. This costs a huge amount of money daily. That’s what puts people off eventually — marketing.

Another challenge is technological infrastructure. I know we have a couple of companies in Nigeria that boast they can offer robust hosting or IT infrastructure services. However, a couple of them have not proven to be ripe. PayPorte has invested so much much on IT infrastructure. We run 4 concurrent servers at the moment. 3 of them are on 3 different continents. That costs a lot of money. How do you cope with that?

We also have the challenge of acceptance. Nigerians are still a bit sceptical about the internet. We are overcoming that daily. That’s where the Cash on Delivery model stems from . Maintaining that costs a lot of money when it comes to logistics and overhead.

Another issue is internet fraud. We handle that by having all our customers insured. Every customer that processes an order on PayPorte is insured. As long as you can prove that you were defrauded after you shopped on PayPorte, you are covered.

However I would maintain that the pain point of eCommerce in Nigeria is marketing. It will cost you over half a million to put the cheapest billboard out there. So a company that has 10-20 billboards, you have an idea how much they pay per month. Marketing, both online and offline, is expensive. After you’ve dealt with marketing and a few of the other things I talked about, then you look for how to source the product. You don’t want people coming in and you don’t have the product.

What would you say about the Pay on Delivery model? While it is currently serving its purpose, do you think it will need to be phased out at some point?

PayPorte is going to be done with Pay on Delivery by December 2016. For those that want to come into the eCommerce space, I’d tell them the truth — Pay on Delivery is not a sustainable business model. PayPorte already has it on its roadmap that by December 2016, Pay on Delivery will be a more expensive option. We will not end it outright but it will be a more expensive option as against the norm today

How is PayPorte funded?

Payporte is a solely Nigerian owned company. We get our funding from other projects and consulting services we’ve done with Rom-Flex. Right now, there is no single external investor in PayPorte. PayPorte is owned by its management and staff, who all have a stake in it. Yes. people approached us for investment but we are not ready yet. PayPorte will only be ready for investment from the first quarter of 2016.

You earlier highlighted the need for more players in the eCommerce space. Based on your experience so far, what would you advice anyone looking to enter the space?

It’s a market that has easy entry and easy exit. What does it take you to setup an online store? Get a domain name for less than N5,000, get hosting for maybe N30,000 and you are in business already. But it requires far beyond that. If you’re coming into online business in Nigeria, you have to be ready for the long haul. You must have had your strategies carved out from day 1. Before PayPorte opened its doors to customers, we had most of the things we needed to do carved out.

You must have solutions to 3 challenges you’re bound to have before you come into the space — product sourcing, marketing and delivery. On every other aspect you can fall and rise but for these 3, you have to be certain.

I know a lot of eCommerce  stores that close daily in Nigeria. If you are not ready for the long haul, don’t come on. I would advice you instead to latch unto complimentary services for eCommerce business. If you don’t have the money for the entire process of running an online store in Nigeria, you probably can handle a facet of it. You can probably get into logistics, or even photography. You have no idea how many thousands of products we have in our warehouse that haven’t gone up on our site because we don’t have enough hands to take the right pictures and format them in the right way.

Finally, what is the future of eCommerce in Nigeria and how does PayPorte’s vision tie into it?

Our target this year was to be be one of the most preferred online stores. With the feedback we’ve gotten, in the last couple of days I think we are almost there. Our vision is for PayPorte to have a footprint in every major city in Africa within the next 5 years, both online and offline.

We also want to pioneer 1 hour delivery. In fact by February 2016 that will come to fruiton in Nigeria. These are part of the things we want to do in the future.

Of course, you can see the advent of drones. PayPorte will also launch its own drones. In fact, our drones are already in a very advanced stage. Hopefully by December 2016 we will start running them.

As for the future of eCommerce, everything will go online. I believe in the next 10 – 15 years banks will sieze to exist because you will be able to do all your transfer and payments online. While brick and mortar stores will persist, in the future we will have a lot hybrid systems. A lot of more services are going to be delivered via eCommerce. To me that is the future.

I believe that for Nigeria to be served satisfactorily, we need a minimum of 15 online retail stores in Nigeria. Have you to thought about it, if 1 million Nigerians decided to get together and place online orders today, nobody will be able to handle it. All of us market players joined together cannot handle it. We need at least 15 market players. But even these 15, their capacity at a time won’t be more than 1500 orders a day . If you take 10 companies that is 150,000 orders, which is not even up to 1 million. Believe me when I say that by December next year, Nigerians will demand to process up to 1 million online orders everyday. Who is going to handle them?

We are only complimenting one another. Anyone coming into this space needs to realise that there is no competition. The biggest mistake you will make is thinking you’re competing with anybody. Choose your space, know what works for you, reinforce what works for you and you get your results. There is more than enough space for everyone to play. But remember, it is very easy to come in but it’s even easier to feel the heat and run out.

Múyìwá Mátùlúkò
Múyìwá Mátùlúkò

Chief Servant. I bully myself because I make me do what I put my mind to.

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