Business
Logistics challenge hamper E-commerce
By Adebayo Obajemu
The e-commerce is without doubt one of the highlights of the internet world, but as good and sleek as this revolution in commerce is, it has faced quite a number of challenges. The key challenges are poor logistics and infrastructures, and these have in one way or another limited the development of this novel form of commercial transactions.
The operating environment is also identified as a major obstacle to the growth of e-commerce, as operators of courier and logistic companies facilitating this form of commerce in Nigeria have complained bitterly over being bent double by multiple layers of taxes from the federal, state and local government authorities across the country.
“As good and convenient as e-commerce is, the anomaly there is affecting the industry that is changing the form of global business and which has bettered the lots of many firms into multi-billion dollar enterprises”, said Dr. Olufemi Omoyele, director of Entrepreneurship at Redeemers University.
He stated that the “events of the last 24 months, I mean especially the Covid-19 pandemic have created a world of new normal, and this has brought impactful developments in the area of online shopping and e-commerce generally. He stated that aside key infrastructural and logistics challenge, their efforts are being frustrated at home by inclement business weather.
Officials of government agencies are said to be giving online shopping firms goose pimps in a bid to boost revenue and, perhaps, enrich their private pockets.
The Lagos experience is more instructive. Dispatch riders of courier and logistics companies are required to carry over 30 tax-related documents while on duty to enable them to access their destinations. In many cases, touts from Local Council Development Areas (LCDAs) which complement the role of Local and State Government revenue officials, demand ridiculous fees for permits and other documents. They mount road checks at strategic places in a mood that betrays their readiness for official assault and battery.
BusinessHallmark’s Investigations show that the documents demanded of the courier and logistics firms are literally limitless, often multiplying by the day, and changing without notice. In many cases, they are the same permits approved by the state but obtained from a different local authority. Revenue officials often insist on the courier and logistic firms paying for the permits in their (the officials) domain.
All this complicates the operating expenses of the courier and logistics firm, and in order to save costs, they are often forced to sack some of their workers or cut their pay.
Key documents often requested of them by the revenues officials include unified clearance, mid-year paper, radio licence, consolidated permit certificate, vehicle road tax and dustbin permit. Others are environmental sanitation levy, vehicle road tax and state carriage. In some case, they are forced to get the stage carriage of adjoining state (such as Ogun) in Lagos and vice versa.
There are more exasperating situations that put governments in bad light. Some unscrupulous elements in some of these local governments often come up with con schemes, and after swindling the couriers, governments will then come in to say it was a fraud. A case in point occured in June 2020, when the Lagos LCDAs sprang up with Mid-Year Paper for which logistics companies rushed and paid N3,000 for each motor-cycle to avoid obstruction.
Yet, over 500 firms with a minimum of two motor-cycles had already registered for it and obtained their papers. Then you go to another LGA, they ask for the same paper that was said to have been cancelled. To be on a safe side, the companies buy the Mid-Year papers from all sources — both temporary, prohibited and genuine, and you can imagine what this means for a firm with 10 or more motor-cycles, Adamu Sanni, a dispatch rider in a logistic firm in Lagos confided in BusinessHallmark.
The current e-Commerce spending in Nigeria is put conservatively at $12 billion and according to projections; it is bound to reach $75 billion in revenues yearly by 2025.
But in a chat with journalists in Lagos sometime last year, Chairman, Zinox Group, and Konga, Chief Leo Stan Ekeh, said that e-Commerce operators are being on a tight rope by logistics challenges, aside infrastructure decay, and the issue of trust across the country.
Ekeh, who admitted that the prospects for e-commerce is huge in Nigeria, when we look at the market size and the bourgeoning sector, regretted that the issue of poor logistics is a challenge that must be tackled adequately if efficiency must be achieved.
Ekeh, whose Zinox Group is the parent company of Konga, said the e-Commerce platform has invested hugely into logistics to ensure smooth operations, including opening new warehouses at strategic locations across the country for improved distributions, investing in logistics companies for onward and faster distributions.
According to Kole Aderogba, a e-commerce watcher, some couriers firms decided to leave the sector, while others have continued to weather the storm, struggling for profitability, thus making them have a rethink in business models.
He told BusinessHallmark that in spite of the discouragement the couriers firms are facing, both infrastructural and logistics and the heavy load of multiple taxes, “some of these firms have exhibited surprising resilience against the huge odds which is paying off as eCommerce companies are getting more attention.
Take for example, TradeDepot, with its unique B2B model, had raised $13 million in two years. In 2018, Ibadan-based eCommerce startup, Foodlocker, averaged a monthly revenue of $30,000 and has since reached more milestones.
Olumide Olusanya, founder of Gloo, once said the e-commerce seemed to have come too early. He stated that the need for eCommerce is not strong enough, the total addressable market is too small, and high service delivery frictions.
Online firms like Jumia, Konga, DealDey, and Gloo commenced e-commerce operations when the Nigerian market was a virgin land, and totally unfamiliar with online shopping; even as Internet penetration levels were quite low, and the logistics sector was not as developed as it is today.
For e-Commerce and logistics companies, two principal problems include getting the required goods and finding the customers.
Making sure a customer gets their order delivered is a big challenge. One of the big challenge according to Investigation has to do with the nature of Nigerias street naming and house numbering system; which leaves much to be desired. Even in major cities like Lagos and Abuja, it is always challenging to find some streets, and when theyre found, sometimes houses are not numbered.
Samson Adebimo, a dispatch rider told BusinessHallmark that deliveries are normally done with the aid of WhatsApp, text messages, and phone calls.
“We make sure the buyer can receive calls. When we get to a particular landmark, we call, and they come out to meet our riders, she explains. But in most cases, he said: We make use of Google Maps, but the Internet is not reliable all the time, so we always make sure we always have enough airtime to call customers.”
Nigerias poor addressing system has had a negative effects on eCommerce and several other services, such as healthcare and other essential deliveries, across different sectors.
Olukayode Kolawole, Head of Jumia PR, in a recent interview said that Jumia does not experience those problems so much as it has outsourced most of its deliveries to partner companies. The companies, according to him, have been building their databases and understand the Nigerian terrain a lot.
