Nigeria’s Konga, an eCommerce company that was acquired by Zinox said it is restarting its pay on the delivery policy.
By its literal meaning, customers can order goods on the website and pay when the products are delivered.
Konga made it known recently while adding that it will also activate more warehouses to enable it to deliver goods faster.
This same policy was retained by Jumia, Konga’s larger competitor owned by Germany’s Rocket Internet.
Konga’s decision to resurrect pay on delivery must have been backed by actual data that shows it’s sales had plummeted after it scrapped the same policy last year before the company was sold off to Zinox for about $2 million (according to people with the knowledge of the matter).
Konga business has since been divided its operations into offline and online and plans to take this step might be backed by a stronger position to serve the customers better.
While the company must have fashioned out its way of reimplementing the pay on delivery, many analysts are skeptical of the strategy of treating pay on delivery as a magic wand to rejig a struggling business.
This is because pay on delivery has not proven to be helpful in any way. A poll of several value chain players in the eCommerce industry shows that the policy only creates a bubble that gives the deception that the market is doing well only to realize after a three months period that less than 30% of all orders end up becoming an actual revenue. The remaining 70% becomes a loss that further bleeds the business.
An analyst counseled Konga to take a different approach to pay on delivery by using pay on pick up since it has offline stores across Nigeria’s key cities. This makes a perfect sense as customers can see the goods before paying while Konga would not lose any revenue in delivery.
One analyst said he feared that Konga’s decision to go back to a failed strategy shows that the new owners do not have better ideas in turning around the business.
Except for India, most markets are strangers to the pay on delivery. Whether it would is very unlikely. For a company that went through major turbulence and lost billions of naira trying to build one of Nigeria’s largest eCommerce company, no risk is worthless.