Stakeholders in Nigeria’s e-commerce industry have identified pay-on-delivery (POD) as a fundamental mistake now hindering the sector’s growth.
Speaking during the E-commerce and Payment Forum organized by the Lagos Business School (LBS), the stakeholders noted that the practice started at the onset of the industry and is now becoming difficult to stop.
According to them, the fear of losing customers to another player in the market has kept the likes of Jumia and Konga going on with the practice despite its threat to the sustainability of their businesses.
Pay-on-Delivery is the practice of allowing customers to pay for online orders at the point of delivery instead of at the point of ordering.
Specifically, the Chief Operating Officer of Konga Group, Dave Omoregie, said that while pay-on-delivery is working in other markets, it is not working in Nigeria and Africa because of the peculiarities of the market.
“At the point when e-commerce was introduced to the Nigerian market, there were some fundamental mistakes, and one of them was putting forward pay-on-delivery.
“Pay-on-delivery works outside Nigeria, but doesn’t work in Nigeria because by context, the way we think is very different.
“Somebody comes on my platform and checks out a product. You are calling him on the day of delivery. It is at that time he tells you that he was expecting his salary yesterday and it hasn’t come,” he explained.
“When we say trust, I think sometimes we also underestimate how trust could work. Sometimes, we have to force someone to try something to get them to realize that this thing could actually work. And sometimes there’s also a fear factor coming, I think, from the retailers,” she said.
Sarouk added that turning off pay-on-delivery for e-commerce in Nigeria would not work except all the players agree to do so.
In his opening remarks, the Executive in Residence at the Lagos Business School, Mr. Olu Akanmu, said the e-commerce players in Nigeria are now facing several external challenges, one of which is the intense and more visible entry of global players like Temu.
He added that e-commerce players are also facing economic pressure caused by the devaluation of the Naira and crash in customer purchasing power and its effects on the size of shopping baskets.
“Thirdly, we see increased competition with increasing tendency of the e-commerce industry to commoditize, becoming more generic where players in the same categories and sectors tend to do the same things and price becoming the basis of competition with subsequent erosion of margins that further puts pressure on industry profitability,” he said.
According to him, all these challenges necessitated the need for e-commerce players in Nigeria to re-strategize.
Despite the hurdles, a recent report by PYMNTS Intelligence projected that Nigeria’s e-commerce transactions will surpass $33 billion in 2026 from the $15 billion recorded in 2023 in business-to-consumer sales.