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Why They Failed: eCommerce in Africa


In Africa, there are e-commerce companies we no longer see. Brands such as OLX, Eritin.com, Jumia-Congo, Jumia-Cameroon, Gloo.ng, DealDey that had become household names, then suddenly they just stopped existing.

What actually happened to these e-commerce businesses? What caused their exit from the African market? What lessons can we learn from them about the complex African business environment?

The digital revolution has led to the emergence of new business ideas and models across all levels. It has created a levelling ground wherein small businesses can compete favourably with bigger businesses as a result of unrestricted access to information. One area where this has proven true is in the e-commerce industry which has witnessed the rise and fall of e-commerce businesses in Africa.


DealDey (Nigeria)

Year of establishment: 2011

Year of shut down: December 2018

Dealdey started as a major importer of its products which it stores in its warehouse and in turn sell to its customers. In time, owing to the cost of maintaining the warehouse (N27m annually) and as a result of mismanagement and theft, it shut its warehouse in 2015 and started dealing with Merchants who in turn sell products to customers, this made it difficult to guarantee product quality. It is believed that this marked the beginning of its downfall.

Efritin.com often simply referred to as Efritin.ng

Year of establishment: August 2015

Year of Shut down: 2017

Efritin.ng was a classified advertisements website operating in Nigeria. It was owned by the Swedish company Saltside Technologies. Efritin.ng was a general online marketplace for used goods where buyers and sellers connect to transact on everything including used cars, mobile phone, computers, properties and even job searches in all parts of Nigeria. In other words, Efritin.ng was mostly C2C, a company creating a place for customers to do business together.


Efintin.ng logo


Gloo.ng (Nigerian Online Grocery Startup)

Founded: October of 2012

Year of shut down: February 2019

Gloo. ng was a Lagos-based online supermarket whose value proposition is to provide customers with a very convenient, efficient and affordable means of shopping for their living essentials, saving them irreplaceable time, needless stress and valuable money. Gloo. ng was dedicated to delivering high-quality brands of grocery and living essentials, directly to your doorstep, on a same-day basis and at very affordable prices. Therefore, it was a B2C (Business to Customer) business.

OLX (On-line-exchange), Nigeria

Date founded: May 9 2012

Shut down: February 2018

After its establishment into the Nigerian market, OLX went on to become one of the leading online classified sites in Nigeria. In 2017, the company claimed the site recorded N12.1 trillion online transactions in 2016. The report not only shows the enormous value of the second-hand market but also demonstrates the positive impact online classifieds has on the Nigerian economy. This is a concrete demonstration of the OLX brand essence ‘Everybody wins’, as sellers win when they sell items they no longer need at lower prices, and buyers also win when they buy items at great discounts and the community wins as the trade leads to increased circulation of cash in the local economy.



OLX logo



Jumia Group (Rwanda Congo, Gabon, Cameroon and Tanzania)

Jumia is a three-headed online giant: a marketplace with one billion annual visits largely dominated by third-party sellers, a logistics arm that handles shipments and deliveries, and a payments platform.

Third-quarter reports in 2019 released by the company show that the Jumia lost $55 million in the 3rd quarter of the year, bringing its total loss recorded for this year to $180.1 million — and about $1 billion since inception. That same year, Jumia’s fulfilment expenses were $1.6m higher than gross profit. That means Jumia paid more to ship and deliver to buyers than it earned.



Jumia logo



In a move to focus its resources on other markets, cut down on the cost of operations and stop the massive bleeding of funds, between 2018 and 2019 the e-commerce giant shut down operations in 5 African countries namely; Rwanda, Gabon, Congo, Cameroon and Tanzania.

But with the company still racking up major losses, it seems to be struggling with managing operations and uneven growth across several fragmented markets that remain largely underdeveloped with respect to digital payments, delivery and logistical infrastructure. In its filing with the US Securities and Exchange Commission ahead of the IPO, Jumia admitted there was “no guarantee” it will break even and become profitable in all of its African markets.


The story behind why they failed?

What are the common trends negatively affective e-commerce in the continent?

E-commerce in Africa is bedevilled by the same issues that are plaguing the continent: political instability, insecurity and terrorism, distrust, isolated cases of fraud, illegitimate vendors who sell stolen and/or poor quality products, poor financial return on investment for the investors due to the continent’s economic condition, poor logistics and delivery infrastructure, lack of investments, lack of trust.

We live in a trust-challenged environment and that’s a very big problem that will not change overnight. Why do certain potential customers believe that what they see online might be different from what will be delivered eventually, hence, the preference to pay on delivery? Why do some check for prices online only to head to a physical shop to make purchases? Also, there is the lingering issue of fraud and engendering trust in online payment.

An average African is still learning to trust the internet system owing to its ‘buying culture’ built on the idea that seeing is believing and his ‘local buying habits’ that predominantly favour- and fuel- offline retail and a preference for cash payments.


The Buying Culture

The fact is Africa is still a traditional economy where over 80℅ of the citizens prefer to shop offline. With the purchasing power of citizens quite low, a high cost of operation in the country, alongside a lack of solid internet laws and identity management, internet businesses face several struggles.

Africa is characterized by an open/fragmented market and ‘local buying habits’ that predominantly favour- and fuel- offline retail and a preference for cash payments. The process of purchasing goods from an e-commerce site is long and sometimes less convenient than going to the market to buy the same goods.

Take a look at this analysis:

Step I: The consumer visits the e-commerce site

Step II: finds the desired product,

Step III: makes the payment for goods (most likely at a higher price) and

Step IV: then waits for goods to be delivered within 3 -7 business days (not guaranteed) or pay extra for express delivery (1- 4 days).

A potential user is probably thinking, “Why would I wait for my goods to get delivered to me, and risk the chance of it getting to me lately. And then still probably not get exactly what I ordered for?”

African e-commerce companies are faced with engineering a major cultural shift in customers’ behaviour rather than taking advantage of one.

On Mismanagement of funds, the Somalian national and former MD of Efritin.com, Zakaria Hersi is said to have stolen thousands of dollars and turned a blind eye to internal mismanagement and false fully creating invoice trails. The company is also reported to have 10 court cases in Nigeria that would cost it about N20 million in fees.

According to a former staff of DealDey, the company also suffered from internal mismanagement of funds and theft of product by members of its staff. DealDey faced series of financial challenges that led to a mass layoff of hundreds of its staff early in 2017. The company is also reported to have 10 court cases in Nigeria that would cost it about N20 million in fees.

On lack of investment, within its six years of existence, Gloo.ng raised less than a million dollars in funding, compared to Jumia and Konga who have raised about $850 million. Gloo.ng basically survived on less than $100,000 each year. According to the founder and CEO, of Gloo.ng Dr Olumide Olusanya; “apparently, the Nigerian eCommerce industry may not be profitable in the next ten years…” Olusanya opined that the need for eCommerce in Africa is not strong enough.

According to the then CEO of Efritin.ng Nils Hammer“It basically has to do with the fact that we didn’t get desired returns on our investment, so we decided to scale back on our investments in Nigeria and that means we are forced to let many people leave the company.I think the data cost in Nigeria is very high. In comparison to other parts of West Africa, Africa and the rest of the world, it is very expensive to use the internet for the vast majority of the people. It is very difficult for e-commerce and classifieds because they are quite late in the evolution of the internet industry,”

The foundation of a successful e-commerce industry is built on good infrastructure. Good roads, airstrips with safe tarmacs that can be utilized at night because you need the night economy to make e-commerce efficient. Coupled with these, return rates are high and people are not paying for deliveries. Structural challenges such as poor transportation systems leading to high cost in logistics and delay in deliveries.


Cost of Customer Acquisition and Operations

In a bid to remain competitive and increase the number of active users and transactions carried out on their platforms, most e-commerce companies spend a lot on marketing and advertising, infrastructures, staffing, customer care, and discount deals. The cost of acquiring a new customer becomes more than the total amount the new customer spends on your platform. So the company starts running at a loss but can’t reduce the marketing budget so as to remain visible and relevant.

Take for instance DealDey, the company laid too much emphasis on sales not minding at what price and discounts products were sold. Thus, they were making huge sales but almost at no profit.


Thus, we can now say ‘the system demands its own unique (and incorporated) methods and strategies’.


The African Business Environment

The African business environment is a dynamically complex one, with a mass consumer market with scarce infrastructure, and highly fragmented with huge consumption potential. It’s largely flexible, under-regulated, fragmented and understudied, which makes it unpredictable, fragile and ‘dangerously-fertile’ for business.

Africa is the world’s next big growth market, with a population of over 1.2 billion the second largest continent in the world, it has a huge human resource potential for e-commerce as it is a huge marketplace that is still fertile and unpredictable. There is no doubt that it’s still a growing market as far as digital business is concerned with lots of potential for maximum growth although there are structural factors that still hinder growth.

E-commerce, known as an electronic business is the art of buying and selling on the internet. It was introduced in Nigeria in 2012 by the two African-based e-commerce giants- Jumia and Konga, although it has come a long way it seems most e-commerce merchants are still trying to figure out the business. The African e-commerce market space seems quite underdeveloped with its limitations and challenges. In fact, one should not approach E-commerce in Africa in the same manner as in the developed economies.


An Africanized Ecommerce Business Approach

Has e-commerce evolved in Africa? Yes, to a large extent. In what ways have e-commerce businesses tried to meet the demands of the local business environment?

By default, everything about eCommerce is electronic, from product view to payment. Following this pattern, payment ought to be made online. But this is not the case in Africa.

As earlier mentioned, an average African is still learning to trust the internet system thus his refusal to adapt to payment before delivery, that is, online payment. E-commerce companies had to devise a means to meet the buyers offline by introducing payment on delivery (POD). Although the POD was introduced to build trust and credibility, it was as if they took a gun and shot their own foot. The policy of POD has proven to be a costly one as it eliminates ‘impulse buying’, encourages product return, theft, kidnap and possible killing of the delivery personnel, All these leading to high overhead cost on logistics. In fact, I consider this policy a deviation from the principles of online business, and a time bomb waiting to explore.


There is a saying that ‘if you want to get the African online then you must be offline’. Seeing is believing. This has led E-commerce platforms to set up stores, showrooms, pickup and distribution centres across the country which may contradict the whole concept of electronic commerce.

The fact that Africa is characterized by an open/fragmented market system has proven a strong competition for online shop. Therefore, e-commerce that is supposed to be an online business is now localized and ‘semi online. Adopting this principle has created a system whereby the street sellers and local shop owners can enlist (register) to sell their products online. Such as the Orinoco Affiliate marketing program, and the Jumia MarketPlace. Gone are the days when it was a thing of pride to own warehouses as an e-commerce company.



In order to build trust and eliminate distrust, e-commerce companies may have to operate a hybrid model consisting of a unique option to either shop online or at a physical store. This has proved helpful, as the saying goes ‘you have to be offline to get people online. Another innovation that cuts it, (and which is aimed at eliminating distrust) is the setting up a unique, safe and secure payment system, which ensures the security of customer’s funds during transactions which have made e-commerce companies develop their own unique payment systems such as JumiaPay and KongaPay.


The Copia Experience

Copia Kenya is a mobile commerce platform that uses a central point of delivery which is the retail outlet and sales agents. Here is how it works: customers visit a close-by small retail outlet, they select items from the catalogue and pay, the agent sends the order to Copia. Two to four days later, the customer visits the agent and picks up the offered goods. This Copia business model and strategy seems to eliminate structural issues affecting e-commerce in Africa such as poor internet accessibility, infrastructure and logistics barriers, non-existent home address issues, and distrust.

Unfortunately, the Copia business model isn’t the saviour we have been waiting for, as it also has its own shortcoming, which includes; the problem of coverage and accessibility, cost of building and maintaining retail outlets, and the problem of dishonest agents who may choose to falsify payments or issue low-quality product to customers.

I think the crux of the matter is our failure to redesign foreign business models, ideas and strategies within the culture of the people of Africa and that meets the continent’s existential realities. There may be a need to take a second look at the processes, target market and general user behaviour to find the best strategies that fit the African market.

There are lessons to be learnt from e-commerce companies in Africa: that have strived to remain above water and even more, from the unsuccessful ones. There are insights to be gain in attempting to understand how the seeming successful e-commerce companies in Africa have gone against the rules of electronic business: how they have decided to incorporate the street sellers and shop owners into their platform; how they have gone out of their way to build trust by allowing Payments on Delivery and building their own payment system; how they choose establishing physical stores called pickup stations, distribution centres and/or showrooms over owning warehouses.

But is this all there is to be done? For e-commerce to succeed in Africa it must be willing to adjust to the needs and peculiarity of the environment- there is a need for an Africanized business model approach. This demands more creativity and innovation. The system is not perfect yet, there is room for improvement. There are glimmers of hope on the horizon


Daniel Nnechi is an SEO Specialist, helping entrepreneurs and businesses scale their business online. He is the Founder of Nnechi Digital, an SEO specialist at The Bulb, and the Lead Digital Marketer at Urbanvibes London. Connect with Nnechi on FacebookInstagram, and Twitter.


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