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Why Most Nigerian E-Businesses Fail

E-business in Nigeria

There has been an upsurge in the number of Nigerian e-businesses. It seems Nigerians are gradually waking up to the enormous businesses opportunities available on the internet.
Ordinarily, I should be happy about this development considering that I have always been advocating for Nigerians to exploit the huge business opportunities available on the internet. But, I am not. The reason for my unhappiness is not far-fetched; virtually all the freshly minted Nigerian e-businesses are doomed to failure.
In fact, feelers I get from even the established Nigerian e-businesses are not encouraging; they are virtually all operating at a loss.
So the question is: what should be done to stop the ever-swelling number of Nigerian e-commerce failures. I think the starting point to answering this question is to gain an understanding of why these online ventures fail as accurate diagnoses they say is the first step to effective treatment.

Poor Research
It is one thing to have a fancy business idea; it is another to have a viable business idea. How do you know which is which? Simple, your research. And the internet contains thousands of free resources to help you conduct viability assessment for your e-business. For example, you can use Google Trend to gain insight into what Nigerians are doing online. The point here is that you can and must do a thorough feasibility study before you commit your money to an e-commerce venture.

Wrong Business Model
This a major contributor to the high casualty rate of Nigerian e-businesses. Almost at regular intervals, I get inquiries from Nigerian internet entrepreneurs seeking help from our company on how we can help them increase their ad sense revenue. My answer to them is usually ‘sorry, we cannot help you”. This is because contrary to what snake oil internet consultants may say, it is virtually impossible to make real money from ad revenue. With the notable exception of high traffic Nigerian sites like Nairaland, Linda Ikeji, Punch Online etc, few Nigerian sites probably make N50, 000 a month from Ads.
Simply because this is the way it works: the more quality content you have on your site, the more visitors Google send to your site, the more visitors you have, the higher your prospect of making money from ads. So, if you don’t have the resources, (material, intellectual, time, persistence) to churn out regular great content, forget about making money from Ads.

The biggest casualties of Nigeria e-commerce failures come from the online retail stores. The odds are stacked against their success. A few of the obstacles include:

Poor logistical infrastructure
Online retail thrives on seamless logistics support. This, unfortunately, is hard to come by in Nigeria. Private courier services are usually too expensive while no serious business will depend on government-owned ones. And building distribution and other supply chain infrastructure from grounds up is an expensive undertaking. This costs naturally adds to the cost of goods sold on these Nigerian online stores. The result is either non-competitive prices (compared to the brick and mortal goods) or low-profit markup margin.

Security and Trust Concerns
Very few Nigerians would be willing to make a purchase online, especially from a Nigerian e-commerce site. Nearly every Nigerian knows one person or the other that have lost money to ATM fraud. And ATM being the closest that most Nigerians have come close to e-commerce naturally means Nigerians would be skeptical about making transactions online.
There is also the question of dependability and trustworthiness of our fellow countrymen. The truth is people feel more secured making purchase from a foreign-owned site than from a Nigerian one. This generally can be attributed to the perceived (and unfortunately sometimes justified) belief that Nigerians are unscrupulous.
And then there is the question of the security of these Nigerian e-commerce sites. From phishing to identity theft, these fears are real.

Poor Marketing
No business can thrive without effective marketing. The degree of marketing ineptitude displayed by Nigerian online businesses is appalling. How many of these sites hope to survive without doing any kind of marketing is preposterous to me. They all seem to think all it takes to succeed online is some flashy website (which is not even visible to search engines)
In building an internet business, you do not only build a website but also promote your site, and make sure it’s seen by everyone who is browsing the internet. You also need to make sure that whenever someone searches for something relevant to your website, they will find you instead of your competitor.
There are many ways to promote an online business, Search Engine Optimization, Pay Per Click, Article Marketing, and Affiliate building are just a few of the available options.

Solutions
The obvious solution will be for Nigerian e-commerce ventures to start addressing the gaps itemized above

 

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