Home Business Amazon joins Nigeria’s gold rush

Amazon joins Nigeria’s gold rush

- Expected entry scuttled Konga's bid for Jumia

By AYOOLA OLAOLUWA

America’s multinational technology company, Amazon, has joined the scramble for Nigeria’s bourgeorning e-commerce market.

The e-commerce giant had last week announced plans to expand to five countries across Africa, Europe, and South America, while maintaining its base in the United States.

The five countries are Nigeria and South Africa on the African continent, Belgium in Europe, as well as Colombia and Chile in South America.

A statement from the company which currently operates in 20 countries across the globe, explained that while it will scale up its U.S-based outlets, it will also be investing in long-term growth in countries outside the country.
According to the firm, the timing of the rollouts would be between 2022 and 2023, with Nigeria’s marketplace, codename Project Fela, set for launch April 2023.

With the launch of Amazon’s marketplace, Nigerians and foreigners living in the country will have access to the firm’s fulfilment service known as ‘Fulfillment by Amazon’.

Also, Amazon’s prime membership program will be made available at launch in Nigeria.
Informed sources told Business Hallmark that the management of the company, troubled by the decline in sales occasioned by the Covid19 pandemic and its aftermath, had sought to improve sales and generate more demand and growth by onboarding new sellers which they hope will help upscale the firm’s prolonged slowdown.

“The company had been scaling back hiring, subleasing warehouse space, and limiting delivery network expansion since 2020 in anticipation of unforeseen slowdowns.

“However, the huge potentials in Africa, particularly Nigeria, is too massive to overlook. I believe they (Amazon) are blaming themselves for entering the fold very late”, said Gbenga Ositelu, a branding specialist at 2Core Communications Limited.

However, contrary to Ositelu’s assertion that the company enetered the fray almost too late, BH findings revealed that Amazon, though not having a physical presence in Nigeria, had been exploring opportunities in the country as far back as 2016, providing services through streaming apps, web services and online ads.
For instance, the tech giant expanded its Prime Video streaming service to Nigeria in 2016, while its web service, Amazon Web Services (AWS) product has been in use in the last seven years.

Also in 2021, the company made significant investments in the country, including original production and exclusive license pacts with leading Nigerian filmmakers.

One of the deals is a multi-year licensing agreement with a local production outfit, Inkblot Studios, producers of the box office hit, The Wedding Party.

The agreement with Inkblot, founded by the trio of Damola Ademola, Zulumoke Oyibo, and Chinaza Onuzo, gives Amazon’s Prime Video the exclusive rights to distribute the Nigerian company’s many theatrical releases starting from 2022.

“We know Prime Video customers around the world love movies and this new deal with Inkblot Studios will deliver some of the best Nigerian and African films available for our customers.

“Nigerian stories are truly some of the most exciting and thrilling in the world. The Inkblot deal will allow us to deliver great Nigerian movies, post their theatrical release in Nigeria, to our global audience, and will continue to build upon Prime Video’s catalog and goal to delight Prime members”, Prime Video’s Director of Content Acquisition and Head of Worldwide Major Studio Licensing Strategy, Ayanna Lonian, had said during the signing ceremony in December 2021.

The deal, according to industry sources, is Amazon’s first exclusive production and licensing deals with a leading African film studio.

While also speaking at the event, the Co-founder of Inkblot Studios, Chinaza Onuzo, said the company was thrilled to be working with Amazon Prime Video.

“At Inkblot Studios, we produce some of the biggest and most creative, original films in the Nigerian film industry. We are very excited about the opportunity to showcase our films to Amazon Prime Video’s over 200 million members.

“We believe that Nigerian films have a truly global appeal and are thrilled to be working with Amazon Prime Video to deliver the very best in entertainment worldwide”, declared Onuzo.

Despite Amazon’s seemingly early incursion into Nigeria’s lucrative film market, another American streaming giant, Netflix, had beaten it and others to the game when it signed a contract with EbonyLife, owned by prolific Nigerian producer Mo Abudu, to stream its originals movies on its platform.

Jolted by the late start which gave early entry advantage to Netflix, Amazon’s management, it was reliably gathered, decided to change tactics.

In order not to spook its competitors to its expansionist life streaming, e-commerce and cloud computing businesses in Nigeria, the firm had quietly been recruiting engineers and salespeople in Lagos, BH gathered.

Though, Amazon just mentioned the hiring of a leading major advertising agency, Insight Publicis, to drive a marketing blitz aimed at attracting subscribers to its platform during its recent official announcement of starting operations in Nigeria, the firm, it was learnt, had been assiduously working behind close doors for a long time.

The firm recently advertised three roles for its Nigeria Originals team based in London in April 2022.

“We are investing in the region and this is what the advertising campaigns represent,” Amazon had said in a statement.

According to an analytics firm, Digital TV Research, Africa, especially Nigeria, owing to her massive youths and computer literate population, has become an important growth area for streaming services, with Disney+, Netflix, Amazon, French streaming service Canal+, and South Africa’s Showmax all competing for subscribers.

The analytics firm estimates that the company, Amazon Prime Video, which currently has 600,000 subscribers in Africa, will add 1.5 million new subscribers by 2027, with majority of the new sign-ons expected to come from Nigeria.

Aside the entertainment industry, Amazon is also planning to expand its AWS cloud business in Nigeria. The firm’s AWS is the world’s largest cloud computing platform. Already, its services are already in use in Nigeria.

BH checks indicate that despite not having an in-country data center or office, the Amazon-owned AWS platform is particularly popular amongst startups and large firms operating in the country.

However, some local startups owners who spoke with our correspondent said they had been experiencing payment challenges because Amazon charged then in U.S dollars for using the platform.

“Paying the fees currently charged in dollars is a challenge because of the Central Bank of Nigeria’s policies restricting dollar transactions.
“But a locally based AWS office will help overcome that challenge”, declared a data engineer with a data bank firm at RiverView Estate, Km 12, Lagos Ibadan Expressway, Isheri.

On behalf of AWS, Insight Publicis in June advertised for 10 positions that would be based in Lagos, including entry-level engineers, accounts managers and senior sales managers for Nigerian clients.

The dedicated accounts officers, our correspondent learnt, will manage local payment startups that will be attached into the AWS platform.

While the newly recruited sales managers will have the task of wooing enterprise clients like oil firms and banks that preferred keeping their data in-house.

Speaking on the development, an analyst at Tellimer Research, Ayobami Omole, noted that big tech firms like Amazon are finding the opportunities that abound in the country too tempting to resist.

“As more people get on the internet and organizations continue to improve digitization efforts, the demand for digital services and infrastructure increases,” Omole stated.

There have been a flurry of investments into data centers in Nigeria lately owing to the ever rising demand for cloud services by individuals and businesses.

For instance, a U.K.-based private equity firm, Actis, pumped $250 million into a Nigerian data center, RackCentre, in March 2020.

Also in December 2021, Equinix acquired a Nigerian cloud infrastructure company, MainOne, for $320 million. MainOne is the operator of West Africa’s first privately owned undersea fiber cable.

“After Amazon launched a cloud data center in 2020, there have been talks about the company increasing its hyper-scale data center capacity in Africa. So I am not surprised that they are planning to set up an office to serve their customers in the region,” Omole said.

In spite of their huge potentials, Amazon is not limiting itself to cloud computing and film streaming. The technology giant also have its eyes on the nations’s massive e-commerce market.

A source in the U.S Embassy in Ikoyi, Lagos, confided in BH that many American companies had shown interest in having a presence in Nigeria since the International Trade Administration (ITA) released its latest report on business opportunities in Nigeria.

According to the ITA report titled: ‘Country Commercial Guides on Nigeria’ seen by BH on Thursday, e-commerce spending in Nigeria as at October 2021 was $12 billion. The agency further projected that spendings will reach $75 billion in revenues per annum by 2025, just three years away.

Meanwhile, the Nigerian market is presently being controlled by Africa’s biggest online and e-commerce giant, Jumia and Konga, owned by billionaire businessman, Leo Stan Ekeh.

Though industry stakeholders argued that Amazon’s entry will largely result in more competition for local e-commerce companies, particularly Jumia and Konga, BH reliably gathered that one of the two firms may soon be swallowed by Amazon.

A source informed BH that Stan Ekeh’s recent move to acquire Jumia was scuttled by Amazon’s last minute declaration of interest in the struggling firm.

According to the stakeholders, Jumia’s shareholders had insisted that the company’s management should consider offers from Amazon before an agreement, if any, should be reached with Konga.

Amazon’s owner, Jeff Bezos, it was learnt, is open to doing deals with both Jumia and Konga, but is said to prefer going for Jumia owing largely to the company’s market share and dominance.

“The eggheads at Amazon’s Seattle headquarters in the U.S knew what they are doing. I am even suprised why they waited this long.

“Nigeria, owing to her large youth and middle-aged population, is the next frontier in online commerce.

“Fifty percent of the country’s population is under the age of 30, making them potential future e-commerce customers at a time when smartphone penetrationis rising sharply”, declared Ositelu.

Business Hallmark had in a story published in April 2022, reported that Silicon Valley firms had intensified efforts to garner a chunk of Nigeria’s ever expanding (Information Communications Technology (ICT) market.

The technology firms are lured by the exponential growth and huge potentials of the nation’s ICT market. Nigeria’s startups and ICT companies have earned global praise for their ability to churn out innovative products to meet the needs of the local market.

The tech firms with presence in Nigeria include software, social media and ICT giants, Google, Microsoft, Oracle, Cisco Systems, Facebook and several other small and medium range firms.

Apart from these social media and software giants, BH investigation revealed that multinational hardware manufacturers like Samsung, HP, Dell, Acer, Asus, Intel, Nokia, IBM and vendors (Huawei, ZTE and Ericsson) are daily pitting tents in Nigeria to ensure that they are not edged out of the booming market.

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