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Why hyperlocal delivery might be the best model for eCommerce in Nigeria now

February 13, 2019 · 4 min read
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The past three years have not been a bed of roses for the Nigerian eCommerce industry. Within a space of a year, a couple of online marketplaces have shut down and there’s no sign of runaway profitability in sight for the sector.

The major promise of eCommerce is the convenience of shopping from the comfort of one’s home or office without worrying about transportation among others. In a bid to build trust, earlier industry players introduced the payment on delivery (PoD) model, which has since become what the industry cannot do without.

Suggested Read: Why Jumia Nigeria may not be stopping pay on delivery anytime soon

It appears reality is catching up with the industry though. Gloo — an online grocery store in Nigeria — is pivoting away from eCommerce in February 2019, just within three months after another player in the industry, DealDey closed shop.

The recent happenings in the eCommerce sector are pointing to the fact that online marketplaces are probably ahead of their time in Nigeria.

At the initial stage of the sector, the blame was majorly on challenges around logistics as well as payment. But now, there are tens of logistics companies in the country with multiple payment channels and from all indications, PoD is going to be around for the long term. With issues about payment and logistics out of the way, it can be deduced that the problem with the industry is that of the market readiness.

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Swedish investment firm, Kinnevik, in its 2015 annual report, revealed that Konga had merely 210,000 active customers (PDF). This is in line with Gloo CEO, Olumide Olusanya’s claim that the addressable market for eCommerce is still low.

According to Femi Aiki, founder of Foodlocker, the key to sustainability of eCommerce businesses might lie in a hyperlocal approach. He is of the opinion that eCommerce companies that serve a single city have an edge, with respect to logistics, over those that serve multiple cities.

Femi’s Ibadan-based eCommerce outfit currently only serves select areas within the city. Similarly, Supermart, a 4-year-old online grocery delivery service, founded by ex-Jumia executives, and based in Lagos, operates in only five delivery zones within the city.

Does running eCommerce in a single city have more potential than addressing a nationwide market? Aside from serving a single city, will online grocery shopping work in the country considering that there are housemaids, cooks among others that are serving most of the addressable market of the online grocery stores — corporate professionals?

Aiki affirms that people that choose not to shop online don’t see the value that eCommerce is presenting because of a subconscious decision they have to make while shopping online — comparing with offline alternatives, which they eventually go with, especially if they are cheaper.

In Foodlocker’s experience in Ibadan, Nigerian eCommerce is for busy and corporate professionals who place high value and importance on their time. Apparently, eCommerce in the country has not gotten to its tipping point yet. The players that would come in at the tipping point would have an awesome story to tell because the timing will be appropriate by then.

For Saudat Salami, it’s not really about the timing but understanding the market that one is playing. Her online grocery delivery outfit, Easyshop Easycook caters to both businesses and retail customers in Lagos. It also delivers outside Lagos but limits this to only businesses.

Salami attributes the choice of only Lagos for the retail market to the traffic situation in the state, with a business model that is structured around working women and bachelors.

For her company, which has been in operation long before the eCommerce boom in the country, the traffic situation in Lagos is an advantage as busy professionals rely on the eCommerce platform to take care of their grocery shopping.

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Apparently, doing retail in only Lagos makes more business sense to the company than doing retail across the nation. Salami doesn’t see the need to go national with online retail.

“It is not the future, it’s the present,” Salami responded to the question of if hyperlocal will be the future of eCommerce in the country. “It’s better for me to buy where I am and also serve my location,” she affirmed.

Despite the fact that the agricultural sector in the country lacks storage infrastructure, Foodlocker, Supermart and Easyshop Easycook are all dealing in groceries and fresh foods. And doing retail in a single city for them guarantees delivering value to their customers which might not be possible if they were to serve retail customers outside their respective states.

These three eCommerce companies have proven that hyperlocal works in Nigeria. The likes of Jumia and Konga can also go hyperlocal considering that they both run a model that allows merchants to sell on their platforms.

As stated earlier, Nigeria might not just be ready for eCommerce considering the infrastructure deficit in the transport system. On the other hand, it’s also about understanding the local market and structuring the business model after the realities of the market.

Yinka Awosanya

Yinka Awosanya


Mobile & African Tech Enthusiast │ Data Analyst │ Music

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