The nascent e-commerce sector recorded some milestones in 2015 while it continues to witness a flurry of activity. The highlights of which include: Increased local investment for some start-ups:
In 2015 the e-commerce sector which was hitherto shunned by local investors attracted more investments. Although the e-commerce start-up investment landscape remains dominated by foreign investors; some local investors also ventured into the sector in 2015 snatching a substantial stake in some of the profitable e-commerce platforms.
For instance in June, 2015, Nigeria’s online hotel booking platform, Hotels.ng received about N240 million investment from Omidyar Network and Nigeria’s EchoVC Partners, thereby becoming the only e-commerce company in Nigeria with the most indigenous investment of up to 90 percent, having also received seed investment of $225, 000, about N36 million in 2013 from Lagos-based venture capital firm, Spark.ng.
This may have spurned more interest in the sector as barely three months after the Hotels.ng deal was unveiled, digital payment processor, Interswitch, through its $10 million E-payment Growth Fund, invested $1 million into SlimTrader. SlimTrader is a turn-key ecommerce solution provider for businesses in Sub-Saharan Africa. It received the investment to expand its operations in the hospitality sector.
In the same October, Printivo.com, a digital printing start-up secured seed financing from EchoVC Partners, an early-stage technology venture capital firm. Printivo who could not disclose the exact sum involved in the deal at press time only hinted that it was a six-figure investment that will be used to significantly broaden the company’s product range, increase headcount, accelerate customer acquisition and scale the business.
In November, the flurry of investment continued as Nigeria’s newest online travel agency, Travelbeta.com which launched operations on 1st October raised $2 million in seed funding. According to Chief Commercial Officer of the new online travel platform, Onyeka Akuma, the investment came from a group of Nigerian investors led by Altheus Limited.
Growing influence of online marketplace
Another major trend that dominated the ecommerce sector in 2015 was the increase of online marketplace adoption by operators. Most operators who were vendor specific retailer restructured into the Alibaba style. This model was introduced in Nigeria by Kaymu.com, a subsidiary of African Internet Group. But Konga.com after one year of operation adopted this model and has outpaced Kaymu in the market with over 50 per cent of its sales coming from the marketplace by the end of the third quarter. This model which is referred to as a primary type of multichannel ecommerce, aggregates different vendors, providing an ecommerce site where products or services are provided by these multiple third parties while the operator processes and manages the transactions.
This was the model that Nigerian banks adopted as they schemed their way into e-commerce, perhaps to shore up their liquidity through retail banking. Within the year, a number of commercial banks opened online marketplaces where their Small and Medium Enterprise, SME customers can operate an online store enabled by them.
The trend started with the launch of the SME Market Hub by Guaranty Trust Bank, GTB in June. This was immediately followed by opening of the GreenMall by Fidelity bank, MyMall Nigeria by Ecobank and the YesMall by Skye Bank.
Tackling pay-on-delivery
In 2015, some of the players in the industry also made more efforts at boosting customer trust while introducing measures to take advantage of this newly built confidence. This was in the way of introducing e-payment solution to encourage online buyers to pay before delivery. Players and industry watchers alike have criticised payment on delivery, arguing that it is counterproductive and increases cost of operations and level of uncertainty that comes with the business.
This made some companies like drinks.ng withdraw pay-on-delivery method from their payment options within the year. However, some other retailers like Konga.com responded by introducing the KongaPay in partnership with some commercial banks. The KongaPay allows customers to register with a bank account and during transaction; the system will generate unique One-time Password, OTP for every payment request and send it to the customer’s phone as SMS for authentication, just like token for online payment.
The customer’s bank account won’t be billed until his order has been shipped so that the customer can still cancel the order anytime before shipping confirmation. This was followed by Kaymu.com’s partnership with Interswitch in December to provide electronic payment options for its customers.
Restructuring
However towards the end of the third quarter, it appeared there was subdued spurt in the sector. The country had emerged from a general election and a new government was not formed for a four month period. At the same time, the price of oil crashed and many investors divested from Nigeria.
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