MallforAfrica: evolve or die – Ventures Africa
Starting a business in Nigeria is not for the weak. If you could walk the streets of Nigeria’s startup ecosystem, you would come across many dead bodies. With 61%, Nigeria has the highest startup failure rate among the main technological poles of Africa. Some businesses fail for external reasons, such as difficulty accessing loans and poor electricity. But for others, their frustrations were self-inflicted. This type of business failure is not exclusive to Nigeria – 88 percent of the Fortune 500 the companies that existed in 1955 no longer exist.
Recently, MallforAfrica, a leading e-commerce platform, announcement a halt in operations. Its mission was to act as an intermediary for Africans looking to purchase items on foreign e-commerce platforms such as Amazon. The company gave no clear reason for its closure, leaving room for speculation. However, his response to customer orders indicates that Nigeria’s volatile forex and âcertain CBN policiesâ prevent him from taking orders.
Five minutes of fame?
Mall for Africa was founded in 2011 by two Nigerians: Chris and Tope Folayan. The company’s start was a happy one as it had the backing of notable investors, partnered with reputable US and UK stores, and within a few years became one of the most popular e-commerce platforms in the world. ‘Africa. Private equity firm Helios Investment Partners revealed on its website that it raised an undisclosed sum of money during a fundraiser for MallforAfrica in July 2013. MallforAfrica has partnered with stores like BestBuy , eBay, Macy’s, Barney’s and Bloomingdales, up to $ 17 million of sales in 2014.
In 2015, Fortune named the company – alongside Jumia and Konga – as African champions of e-commerce. In 2017, the company announced a partnership with logistics giant, DHL, to continue cross-border deliveries, and in 2018 they teamed up to launch marketplace.com, a fashion shopping platform that now works offline. In 2018, Mall for Africa was present in 17 African countries. But the company’s rise to prominence was short-lived as it joined other defunct ecommerce platforms such as Efritin.com and Gloo. In addition, DHL has to close Africa eShop, an online platform developed using technology from MallforAfrica.
Exchange rate vs. a struggling business model
MallforAfrica says exchange rates are hampering its business model. This can be deduced from their response to customer orders. It’s not hard to imagine, as there have been several complaints of excessively high fees among customers. The naira has suffered several devaluations since 2015. In 2020 alone, the currency was devalued twice by the Central Bank of Nigeria. MallforAfrica does not own the goods they sell but helps with the supply. As a result, they must strike a balance between keeping profits and prices affordable.
But exchange rates aren’t the only problem. Like many other companies, MallforAfrica was founded on the premise that the African middle class wants to buy Western products from their homes. Because Africa is still largely untapped, it’s easy for investors to be optimistic about its growing middle class. However, this model is at the mercy of the economy. For the model to thrive, the middle class must grow as fast as investors want it to be, and it must have sufficient disposable income to patronize the business. With volatile exchange rates and high inflation rates, the economic model is under threat.
In addition, the âmiddleman modelâ has a flaw: it expires once the value chain bypasses them. As Africa’s internet economy grows, the rest of the world is looking for ways to bring its products and services to the African market. Therefore, e-commerce platforms such as Amazon and eBay have made it possible for Africans to buy directly from them. In this way, intermediaries such as MallforAfrica are eliminated.
âMallforAfrica has not been able to adapt to the changing Nigerian e-commerce landscape,â said Adebobola Yarwyck, a tech business expert. âWhen they first hit the market, platforms like Amazon were not accepting Nigerian payments. So it was great to be an intermediary. But as it grew, these foreign e-commerce platforms also started to lean into the African market. The risks now seemed lower since AliExpress was doing it. Gradually, the problem that MallforAfrica was solving started to disappear.
The new face of e-commerce in Africa
With the growth of the internet economy, e-commerce in Africa has evolved into a new ecosystem. People are now actively looking for ways to solve their problems with the Internet. As a result, they adopt alternative methods of e-commerce.
Jumia, the only e-commerce in Africa Unicorn, is strive to be profitable today, which proves that it does not adequately meet consumer expectations. This shift in consumer mindset has led to the growth of dropshipping and peer-to-peer e-commerce. E-commerce sites like Jiji simply provide a marketplace for buyers to meet sellers without interfering in transactions. âDropshipping sites meet the needs of consumers who want to shop outside of Nigeria cheaply,â Yarwyck said. âDropshipping sites can help with sourcing and delivery for as little as $ 5 / lb. The costs of using MallforAfrica were just too high.
Ecommerce startups today face much greater competition as the market is increasingly decentralized. Social media makes it easy for anyone to start selling online and gain market share. E-commerce platforms such as Jumia are adapting to this decentralization of the market by focusing on a third-party market and collecting commissions on the items listed.
Written by Oluwatosin Ogunjuyigbe