Despite all the hype, profitability is still an unattainable ideal for Nigerian online shopping giants such as Konga and Jumia.

Back in August 2016, the industry was finally treated to an inside account of the trials and tribulations of e-commerce in Nigeria, and Africa in general.

Investment firm Kinnevik, which has backed Konga and DealDey in Nigeria, released a report detailing the performance of its subsidiaries.

The figures with regard to Konga were concerning. The report noted the company had just 184,000 active customers, and was some way from profitability. Debates about the sustainability of e-commerce in Nigeria escalated, especially as main rival Jumia is itself some way from profitability.

The bad news continued into this year, when the African Tech Startups Funding Report noted a significant fall-off in funding for e-commerce companies, as investors steered clear due to sizeable overheads involved with scaling an e-commerce company in Africa.

Things are looking up, however. In a recent opinion piece, Konga CEO Shola Adekoya said Naspers and Kinnevik had pumped more funding into the company at the start of this year,

Meanwhile, the latest Kinnevik report said Konga was heading towards profitability, reaching “break-even before overhead costs in 2016.” All this came as Nigerian financial services comparison platform TopCheck was acquired by South Africa’s Silvertree Internet Holdings for an undisclosed amount.

Of course, 2016 was not without its positive news, such as Jumia’s major funding rounds and Silvertree’s acquisition of DealDey. But industry observers could be forgiven for wondering about the success prospects of companies in the space.

Things seem a little more positive now. Announcing that Konga has raised funding, Adekoya said Nigeria’s huge population and growing GDP meant the prospects for e-commerce have always been good.

However, he said reaping the rewards was not straightforward.

“To encourage Nigerians to make more online transactions, the e-commerce industry must find innovative solutions to the table stakes of online sales, such as fast and easy payments and refunds, and trouble-free deliveries and returns,” Adekoya said.

“Perhaps it’s the passion and commitment involved in bringing Nigeria’s strong trading culture online that makes our country an attractive proposition for investors.”
He said platforms such as Konga needed to be tailored to local customers’ needs, something Kehinde Oriola, CEO of DealDey, noted at the AHUB event in Cape Town in 2016.

“There’s much still to do, especially as our marketplace model continues to evolve around local nuances, but at Konga, we couldn’t feel more positive about the future,” said Adekoya.

“Looking ahead, it is our ambition to bring millions more consumers online to shop for their everyday needs by providing a superior service that means and offers something to everyone. Our latest double digit million-dollar investment from Naspers and Kinnevik will take the business to break even and allow the team to continue improving on Konga’s customer experience across all its offerings.”

Paul Cook, director of Silvertree and a long-term advocate of the prospects of African e-commerce, agrees. He said the chances of success in Nigeria especially are positive given the large population, substantial spending power, and limited access to traditional retail.

There are challenges that need to be overcome, however.

“It used to be Nigerian e-commerce companies did everything themselves, like logistics and pay on delivery. These days much of that can be outsourced,” Cook said.

“The long-term underlying challenge is that it takes a long time for consumers to become comfortable shopping online, and it’s hard and very expensive to accelerate this. So you have to offer great service and push for trustworthiness, and also realise that the market will grow slowly. Many players haven’t realised this.”

Silvertree, and the likes of Konga and Jumia, have. Cook says e-commerce in Africa is “absolutely a long-term play,” though the short-term will be extremely challenging.

“Even the medium-term will rely on the gradual growth of online consumers,” he said. None of these factors look like putting people off, however. The potential prizes are too great.