Logistics, data cost and payment infrastructure threaten Nigeria’s e-commerce industry -Rustagi, CEO of Omnibiz

The CEO of a leading e-commerce company, Omnibiz, Mr. Deepankar Rustagi talks with SAMI OLATUNJI on the nature and future of e-commerce businesses in Nigeria.

How? ‘Or’ What would you describe the e-commerce market in Nigeria?

Omnibiz is a B2B e-commerce platform, so I think it’s important to clarify where I’m coming from, although there are certain themes that keep coming up, whether it’s consumer e-commerce or B2B. That said, I would describe e-commerce in general as growing, and the existence of B2B e-commerce platforms is proof of that. If you look back ten years ago when Jumia started, the concept of ordering things online was such a new concept, even though it was more standardized elsewhere. But now, this concept has been adopted and understood enough to be applied to business-to-business commerce and for retailers on the Omnibiz platform; which includes many small neighborhood businesses. So, even though it has not yet reached maturity, it is developing rapidly. This is definitely the wave of the future.

What do you think are the main challenges for e-commerce businesses in Nigeria?

I would say that the sector is affected by all the usual factors that affect any business: rising production costs, inflation, etc. However, for e-commerce in particular, logistics, data costs and payment infrastructure play a bigger role. Given the condition of our roads and transportation infrastructure, it can be difficult to get goods to customers on time. In some cases, this can also lead to loss of customers. The same goes for payment infrastructures: with the rapid proliferation of payment gateways, it’s getting better, although you still have the occasional loss of services when payment platforms have downtime. The final challenge is mobile penetration and data; customer experience can affect whether customers choose to use your services again. It is important to invest in making this process as smooth as possible. how fast your site loads and things like that, but even with all of that, you’re to some extent at the mercy of your customers’ network provider.

How do inflation, poverty and declining purchasing power pose a threat to e-commerce?

I think that in general, rising production costs and inflation affect all businesses. If manufacturers cannot access cost effective methods, the implications are passed on to distributors, retailers and of course the end consumer. When this happens, an end consumer may change their mind about buying the product or look elsewhere. For retailers, they pay a higher price because they still need to be able to make a profit, without scaring away their customers. Their livelihoods are easily impacted by factors beyond their control. This is one of the reasons we focus on retailers at Omnibiz. In addition to being able to have the goods delivered to their doorstep, we actually negotiate the best possible prices from multiple suppliers for them. We also try to support them by organizing packages. Say, for example, you’re a retailer who needs to buy Milo, but instead of the standard wholesale volume of dozens, you realize you need 3.5 dozen a week and half a dozen Ovaltine. Based on the data collected during sales on our platform, we organize these packages with the most popular products in non-standard quantities, always at the best possible price.

The COVID-19 pandemic has disrupted the supply chain, which has been a major setback for many businesses. How can such disruption be avoided or mitigated in the future?

It really is e-commerce. If you look at the businesses that have been impacted the most by the pandemic, those are the ones where physical transactions or the presence of customers was necessary. The more we can digitize the informal sector and supply chains, the better we will be able to avoid such setbacks. In fact, it was this realization that led to Omnibiz in its current form. When we started in 2020, we focused on manufacturers and helping them digitize distribution and inventory management. But then the pandemic hit and retailers were unable to stock goods, even though there was high demand. That’s why we decided to prioritize last mile distribution and retailers actually interface with the end consumer.

Omnibiz plans to expand outside of Nigeria, especially in West African countries. For successful expansion, proper market research is needed for each country. In light of this, how would you describe the business environment in Nigeria compared to any other country in West Africa?

Generally speaking, there are similarities in geographically close markets. There are similarities in West African countries although there are also differences. Given the business environment, you need to be careful how you compare them. You have read that Ghana is putting in place certain policies and it is easy to say “well why can’t Nigeria do that” and vice versa. But there are so many factors that affect this. Nigeria is about three times the size of Ghana, and Lagos’ economy alone is larger than Ghana’s. So your experience of getting things done in both countries will never be the same. However, given the population and the complexity of the supply chain, Nigeria is a very good place to cut your teeth, especially in West Africa. It’s easier to conquer other markets after being successful here because it’s a bigger and more complicated market.

What do you see as the potential of the e-commerce market in Nigeria and how can the government and private sector tap into it?

The informal sector contributes nearly $3 billion to Africa’s nominal GDP. In most African countries, including Nigeria, it accounts for up to 80% of income. That alone should give you an idea of ​​the vast potential here. A report published by SMB Intelligence estimates that around 98% of companies in this sector pay taxes, but most of it does not go to the government. Imagine the potential for better data capture and tax revenue if we can bring even half of this industry online. The same goes for the private sector, be it financial institutions, manufacturers or any other sector. Mobile phone penetration is growing, so more people own a phone than five years ago, meaning the pool of potential customers is growing. Tapping into this industry is really about meeting them where they are and with people who speak their language. At Omnibiz, we acquire clients through agents. When they have someone who is patient enough to sit with them and hold their hand through all the startup issues, they are more likely to use the platform. If they have any problems, our call center is also there to help them in local languages. If they prefer Whatsapp for customer support, that’s also an option. Imagine if we only had one website or only provided support in one language? We wouldn’t have the number of users that we actively use on our platform. Whether in the public or private sector, players just need to create products that make it easier to use than not to use.

How would you describe the future of e-commerce in Nigeria and Africa in general?

I think it will only get better. Adoption will continue to accelerate alongside all the infrastructural provisions needed to see growth. In the consumer e-commerce sector, for example, there are already various platforms where individual small businesses can build stores and make sales without the cost and effort of setting up a site. website. This was not the case a few years ago. Globally, the pandemic has given e-commerce a boost; we are now more aware of how health insecurity could affect us and no one wants to be caught off guard by it anymore. Another thing about digitization is the services you can now offer through it. For example, retailers on our platform can easily manage inventory and payments. Later this year, they will also be able to access credit facilities to purchase more merchandise and sell over-the-counter pharmaceuticals using Omnibiz’s license. I would say the future is quite bright.

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