Nigerian entrepreneur, SimShagaya, had long recognised the prospect of Amazon-style online retailing in Nigeria, in spite of the obvious systemic pitfalls that could prevent successful execution of the e-commerce model in the country. With a background in ICT – having worked as Head of Google’s Africa operations and launched several technology start-ups including digital outdoor advertiser E-motion and online retail bargain site DealDey.com, with varying degrees of success, Shagaya set out to establish a reliable online retail network in Nigeria. This resolve led to the founding of Konga.com in July 2012, starting out with a modest workforce of 20 employees in a four-bedroom apartment office space.
Konga was conceived as a one-stop internet superstore that offers a wide variety of consumer goods at competitive prices, with a flexible payment system that allows customers pay cash on delivery for items purchased. At face value, the business model seemed similar to the globally acclaimed Amazon. However, since many Nigerians were still not familiar with the concept of online shopping and e-commerce in general, it was clear that Konga had to devise strategies adapted for the local environment rather than merely replicate Amazon’s model.
Although initial financing for Konga came from Shagaya’s own savings, the early signs of promise the company evinced soon attracted investment from a number of venture financiers, notably the Swedish investment firm Kinnevik and the South African emerging markets media group, Naspers. Indeed, Naspers’ investment in Konga is particularly instructive and indicative of its endorsement of Konga’s business model, since it has earlier discontinued its own e-commerce service, Kalahari, in Nigeria because ““the performance of the service has been below expectation since the launch and reaching profitability was not a reasonable near-term prospect”. Konga’s logistical efficiency and particularly its emphasis on customer service were some of the key factors that drew the attention of Naspers to the company. “Customer service is our North Star”, says Shagaya. “That is one of the main reasons Naspers found Konga and invested in us”. Although other foreign investors turned down Konga’s initial investment proposal, Naspers came across several tweets and blog posts testifying to Konga’s good customer service. The testimonials were overwhelming, and proved to be one of the strongest forces that pushed Naspers to make a substantial cash for equity investment in Konga under a non-disclosure term. Much of the investment was used for extensive offline marketing, improving logistics, investing in people and IT, and pushing out more sorting centers to deliver more orders, more quickly and more precisely.
It did not take long for Konga to begin to make waves among regular internet users in Nigeria. With a massive online advertising campaign targeted at Nigerian IP addresses, many Nigerians surfing popular websites such as Yahoo Mail, Facebook, and other widely visited Nigerian websites began to see the eye-catching Konga advertisements guaranteeing free delivery of items ranging from fashion products to mobile phones and electronics bought on the Konga.com website.
One of the key concerns that have been holding online shopping back in Nigeria is web security. Consumers have long harbored fears about having their credit information stolen and their funds taken in the course of buying items online. Konga recognized that this perception would constitute a hindrance to its operations. To convince consumers about trying out its online store, the company emphasized the pay on delivery option which meant that customers had the option of paying for an item ordered in cash or with a debit card only when they received the goods. As Konga’s founder and CEO, Shagaya, points out, “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,”
Another strategy that Konga used to make consumers more comfortable with the idea of buying goods on its website was to create a sense of human contact – between the company’s representatives and customers. After customers place their orders online, they receive a call from Konga’s customer service agents to assure them that the order has been received, and give them an idea of when it might be delivered. Demonstrating his knowledge and sensitivity to the needs of the market, Shagaya suggests that, this kind of human contact is essential in a young e-commerce market such as Nigeria. As he tells africanglobe.com, “Business is transaction with individuals, not machines or assets. “You want to build a connection with people. They still want to feel that there are human beings behind the system”. However, this is mainly an early phase strategy, as Shagaya believes that as the industry develops, the need for such human contact will gradually diminish. Even then, Konga recognizes the need for a strong physical presence that assures habitually skeptical and wary customers of its ‘realness’ and trustworthiness. As Shagaya further points out, “The internet is an enabler of a business in Nigeria. “But you still need an offline component and strong logistics, and you still need to be able to have a physical presence in front of your customer so that the customer believes you are real and here for the long-run.”
Konga has its central distribution center in Nigeria’s main commercial city of Lagos, which warehouses all its inventory. The company also has two sorting centers in the federal capital city of Abuja and in the Southern hub of Port Harcourt which act as regional depots. From Lagos, products are transported to the sorting centers to meet orders coming in from around the different regions, before being delivered to consumers. The frequent traffic congestion in Nigeria’s major cities, particularly Lagos, is a major impediment that can hinder efficient and quick delivery of orders to customers. However, Konga’s unique solution to bypass this difficulty is to send out deliverymen on motorbikes and specially built tricycles to deliver customers’ orders. In addition to being more cost-effective than conventional delivery vans, these modes of transportation allow the deliverymen greater flexibility to navigate their way through traffic and save valuable time. Furthermore, because of the reluctance of many customers to pay electronically via credit or debit cards, Konga introduced the incentive of a standard one percent discount on all orders that customers pay for with their bank cards. This strategy has proved effective, as the company claims that the number of cashless transactions on Konga have increased considerably over the last one year.
In order to expand its service offering, ensure a wider array of options, and increase avenues for profit, Konga has also modified its business model to incorporate a marketplace where third-party Nigerian businesses and merchants can sell their goods and services online via the Konga platform. This giving them access to over 50 million potential Nigerian shoppers among individuals that currently have access to the Internet. This platform, known as Konga Mall, is already adding value to both customers and business owners who now have unlimited access to goods and customers respectively from all over the country. Konga is also making considerable revenues from this platform, as the company handles warehousing and delivery on behalf of the third-party suppliers in return for a commission. Giving third party traders the opportunity to benefit from Konga’s website traffic and its logistics infrastructure is seen as a potentially lucrative strategy that would constitute one of the key revenue channels for Konga in the foreseeable future. As Shagaya puts it, “Imagine you are that Nigerian businesswoman who travels to Dubai and buys merchandise. I’ve seen sellers go from office to office all day selling things. Direct selling is a big channel in Nigeria. But imagine if you can bring that merchandise to Konga’s warehouse, and we can open up your merchandise to nationwide distribution, and then take a humble commission. This is a model that will prove very interesting for us in the long-term, and it will be a big part of e-commerce in Nigeria”.
In response to increasing competitive pressures from its largest rival, Jumia.com – as well as a number of small online retailing startups – Konga is also paying attention to its pricing to retain a strong position in the market. One of the key strategies the company has adopted is the so-called “Konga Price Match Guarantee”, which claims that Konga customers will always get the lowest prices for electronics anywhere online in Nigeria. According to the terms of the initiative, if a customer orders a qualifying item (particularly electronics) on Konga’s website and finds an identical item on another retailer’s website for a lower price within 48 hours, Konga will match that price and refund the customer the difference. This strategy complements the other strong points of Konga’s service offering – such as effective customer service, fast delivery, and high quality of goods, and enhances Konga’s competitive advantage….