Nigerian ecommerce: Is the end near for payment on delivery?

Nigeria ecommerce retailers are increasingly viewing payment on delivery as a problem. While some etailers believe it’s an effective way to get around the millions of Nigerian who don’t have access to digital payment, others are not so convinced.

For one online seller, Azolibe Malachi, payment on delivery is the way to go. To demonstrate this he recently set up a $20 Facebook ad campaign to sell a wrist watch and sent visitors to his Konga Store that offers payment on delivery option. He got a total of 15 orders.

After 10 days, nine items were delivered while six was returned. He then set up another similar campaign – same budget and product but without the payment on delivery option. This time he only got five orders.

‘Payment on delivery is a bad idea and it is bad for businesses in Nigeria’

“Payment on delivery is a good business model I stand to be corrected. Nigeria’s past history on internet-related businesses (has made) not so many Nigerians to be ready to part with their hard-earned money before seeing the product,” he said.

But last month, ecommerce giant, Konga.com opted to take the first major step that could be viewed as the beginning of the end for payment on delivery in Nigeria when it decided to kill the option on its platform.

In a statement, Konga.com CEO Shola Adekoya said the company concluded that prepay is the necessary approach for its business and the Nigerian market.

He argued that the company considered the cost of inflation and increasing challenges in managing payment on delivery, as well as the resulting level of order cancellations on the platform.

“We will continue to review other ways to provide payment on delivery to customers, but for the time being, we will remain a prepay-only platform.

“We have enabled a contact seller button that allows open communication between and seller and buyer in cases where pay on delivery transactions still want to be carried out directly between the seller and the buyer,” Adekoya said.

He strongly believes that with the action, Konga.com will now be able to run a more efficient business and focus its energies on orders that the customers want. “It would also lower our operating costs, putting it on a better track,” he added.

Industry experts believe that the decision was well timed since the payment space in Nigeria has already recorded advances and there are more easy and seamless payment options for customers than before.

‘Bad idea’

Says Drinks.ng founder Lanre Akinlagun: “Payment on delivery is a bad idea and it is bad for businesses in Nigeria. In a country where you are introducing new concept, it is very bad to introduce a new bad habit at the same time,” he said.

He argued that it feeds right into the character of many human beings that he said are indecisive and picky.

“Generally, as a people, we are very indecisive, but we are also very choosy. When a delivery person arrives your house and you don’t like the item, you send it back at the cost of the company that is trying to deliver,” he said.

“There’s also the issue of inconsistency in fuel delivery, including lack of time keeping by consumers,” he said.

‘Pivot towards classifieds model’

Industry expert Osarumen Osamuyi believes that in turning off the payment- on-delivery method (and cutting such things as support staff and warehouses), it appears local tech companies have pivoted towards the classifieds model — where merchants pay a listing fee to put their products on the platform, and take advantage of Konga’s logistics arm to fulfill those orders.

This, he said, may be the future of ecommerce in Nigeria and probably elsewhere even though the ecommerce in India and elsewhere continue to depend largely on the payment-on-delivery option that could be phased on in Nigeria.

But to have an idea of how much of a problem payment on delivery is for online businesses in Nigeria, Malachi revealed that his business’ entire bounce rate is 30% — with 70% delivery rate for payment on delivery.

“I spend About 220 000 naira every month on unserious buyers — people who have refused to pick up their goods. I also pay 1.5% for cash handling for pay on delivery,” he pointed out.

Featured image: JuralMin via Pixabay