With a population of over 160 million and growing internet penetration, Nigeria has the potential to be a lucrative e-commerce market.
However, for many Nigerians online shopping is still a new concept, and e-commerce firms need to do more than just copy what Amazon is doing in the West.
One person who knows all about the unique challenges of the Nigerian market is Sim Shagaya, founder and CEO of online retailer Konga.com. Launched in July 2012, Konga sells everything from books to fridges to mobile phones. The company’s main warehouse is in Nigeria’s commercial hub Lagos, while it has sorting centres in Abuja and Port Harcourt.
After customers place their orders online, they receive a call from Konga’s team to assure them that the order has been received. Shagaya believes this human contact is essential in such a young e-commerce market. “You want to build a connection with people. They still want to feel that there are human beings behind the system.” He, however, believes that as the industry develops, the need for such human contact will diminish.
Because many Nigerians are not comfortable with paying for things online, Konga also allows its customers to make cash payments on delivery. “E-commerce arrived in Africa at a very different time from when it arrived in the United States. At the time when Amazon was kicking into gear, there was a culture of credit card use, and the formation of digital payments. But here it is all happening at the same time. Card penetration is still low, people are still getting used to this idea of being able to pay for things electronically – and cash is still king,” says Shagaya.
From the US to Konga
Shagaya was born in Nigeria, but received most of his education in the US. After he completed his MBA at Harvard Business School in the early 2000s, he had an urge to return to Africa. At the time Nigeria was still just finding its feet in democracy, and Shagaya opted for the more stable South Africa where he joined Rand Merchant Bank.
Following a stint at the investment bank, Shagaya moved to Nigeria where he became Google’s head for Africa, developing the search giant’s strategy for the entire continent, excluding South Africa. He then started a billboard advertising business, which is today one of the top players in the industry. After six years of running the billboard company, Shagaya was itching to get back into the online space.
He then convinced the board of the billboard company to invest in DealDey. Launched in March 2011, DealDey is a daily deals website, loosely based on the Groupon model that offers products at highly discounted rates. Shagaya says that DealDey provides a good platform for companies to clear their inventories.
The success of DealDey confirmed that there is a market for online shopping in Nigeria, so Shagaya started to focus all his attention on Konga.com. (He still serves as a board member of DealDey).
Konga was launched in 2012 with the initial financing coming out of Shagaya’s own pocket. However, in less than a year of operation, the company attracted investment from two large investors.
Two months into Konga’s existence, it received capital from Swedish investment firm Kinnevik. Barely a few months after that, South African-based emerging markets media giant, Naspers, also announced a major investment. According to Shagaya, Naspers CEO Koos Bekker, the man who basically introduced pay-TV in South Africa, has taken a personal interest in Konga. Interestingly, in 2011 Naspers pulled its own e-commerce offering, Kalahari, from the Nigerian market. In a statement at the time, Naspers said that “the performance of the service has been below expectation since the launch and reaching profitability was not a reasonable near-term prospect”.