Nigeria’s Konga pivots, switches to prepaid only structure

Nigeria’s Konga pivots, switches to prepaid only structure

A tipping point has just been reached in Nigeria’s eCommerce as Konga, a major eCommerce startup in Nigeria has announced that it has just switched to a prepaid only service.

This means customers will have to pay for anything they order before they get it delivered to them. This is exactly was and is still obtainable across major markets where the eCommerce business became a big thing for customers.

In an email statement issued by Konga’s public relations company, the eCommerce startup said “its decision to become a prepay only platform. This decision was taken as part of its measures to become more efficient and to focus on the orders that consumers really want”.

“Providing further explanation on the decision, the CEO, Mr. Shola Adekoya said: “In recent years, we have explored several solutions for payment and ecommerce in Nigeria and concluded that prepay is the necessary approach for our business and the market. Given the cost of inflation and increasing challenges managing payment-on-delivery, as well as the resulting level of order cancellations on the platform, we had to take this decision. 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.”.

However, things gets more complicated as Adekoya revealed that Konga ha “transformed to a prepay only platform in mid-November 2017, and there has been a solid shift towards online payment by customers. “Since we switched over, we have seen a marked increase in online payment which is a much more seamless experience and we sincerely appreciate all our customers who have trusted us enough to begin paying online for their orders” said Mr Adekoya.

He said “This decision means that we can run a more efficient business and focus our energies on orders that we are sure customers want. It also means that our operating costs will be lower, putting us on a better track. In line with this new approach, today we are announcing an internal restructuring to align our operations with the prepay only model and our intention to stop warehousing activities. Unfortunately, this will result in a headcount reduction. Letting go of colleagues and friends is not an easy decision, but one that naturally stems from these changes”.

“Our Customers, Merchants and Franchisees should expect to see an improvement in service quality, which continues to be the core of our business approach. We hope that the financial industry, which has made significant improvements since when we started in 2012, will work with us to find simpler solutions for customers to make payments online”.

While this is a right and expedient decision for the company, it is a turning point in the history of eCommerce in Nigeria and it will further be ‘a break or make decision’ for Konga and Jumia its closest rival in the business.

An eCommerce analyst told PageOne.ng that the prepaid model is more or less the last ‘joker’ available to Jumia and Konga as they have more or less tried every possible means to increase revenue and remain viable.

The adoption of pay on delivery (PoD), was a decision that the Nigerian market and system either received out of context or with a pinch of salt. The moment people know they can order products and can reject it during delivery using any excuse was the point eCommerce companies should have known they were backing the wrong horse.

There was also the problem of trust, the major reason Konga and Jumia opted for the model. However, analysts argued that eCommerce companies were their own undoing as they pandered to populist opinions that PoD was a bespoke model for Nigerians and Nigeria given the lack of trust and all other issued attached to buying and selling online.

To make the model work, various structures would have to be in place such as a functional escrow system, proactive customer service and conflict resolution mechanism. This is because various issues would arise along the line. Also, the fact that ‘old habits die hard’ means many customers of Jumia and Konga will have to get used to the new system and Konga has to have the stamina to educate them on how it works.

On its chat forum, while some Konga merchants are praising the move, some others believe the new model will not work out but rather counterproductive.

One Adetoun said:

Finally! Official email came through for removal of POD.
I feel relieved and more confident in the system now.
Every single order in the last 1 week has been delivered SUCCESSFULLY …ZERO RETURNS!

Yes very slow sales but those are QUALITY orders. I will take 5 prepaid orders over 15 COD with 14 returns.

A customer that knows how to log in will learn how to pay with their card. They will learn!

Sales will pick up with time….many people still enjoy convenience, prepayment only instill discipline. KONGA HAS CHAMPIONED THIS MOVEMENT IN NIGERIA.

My staff members have received more whatsap enquiry…we’ve seen some of these enquiries turn into orders….it’s working, please don’t stop. We will on our part ensure that we ship the right items ordered and ship on time….these are crucial to make prepayment work!

Please let this stay permanent.

One Kunle was on the opposite side of the divide predicting that:

i am sure this will be reversed back because konga itself would have known by now that pay before delivery method can not work yet in Nigeria. i just paid my wife store subscription today which i told her i wont do until she sees some results but she insist. for the past 9days, no single order has dropped on her store. women have high hope than men.i believe this is just a test service coz the pay before delivery has made the whole system got more worst and by now konga will be having a rethink. many of the merchants will not renew subscription if it persist and no one will buy materials.those sellers hailing konga steps now will still come back to lament. it is very difficult to convince Nigerians to change from what they are use to. we understood the lost konga bares due to unserious buyers, and huge returns, but it can still be controlled, buyers with huge returns and rejection should be ban either banned or put on compulsory pay before delivery.now some buyers has been contacting my wife on whatsapp of which she will tell them to go and place order on konga, the same buyer will call her back that they are finding it difficult to place orders.i am sure they wont tell the reason but seems looks much easier for them when its POD , and some of them are even stack illiterates and dont even know how online payment works but can place orders. these are part of the reasons why sales has dropped. the POD system should be optional for sellers.i am sure if konga do a survey today and ask all sellers what they prefer either POD or pay before delivery, 80percent of the merchants at this point will go for pay on delivery, the only way this can change is if konga promote merchants products while test running this pay before delivery service and merchants get orders. if you want the merchants to place adverts with this system of pay before delivery, you should know many of the merchants will not run adverts because they are not certain if they will get a single order.

Sampled analysts agreed that the journey ahead would be tough for both Jumia and Konga should they ignore various loopholes that can be used by various stakeholders to pick issues with them.