By midday on Tuesday September 4th 2018, a remarkable development, whose reverberations are still felt today, shook the e-commerce world and the whole of Wall Street.
Amazon, an American e-commerce giant, had followed Apple Inc. to become the second U.S. company to reach $1 trillion in market value after the company’s shares climbed 1.9%, briefly topping the $2,050.27 needed to push the company’s value above $1 trillion.
To put this in sheer perspective, it is fitting to bear in mind that Nigeria’s current external reserves is pegged at $42.3 billion (as at October 25th), a figure which amounts to less than five per cent of Amazon’s worth.
Available data shows that it took Amazon only about 165 trading days to grow its market value from $600 billion in January 2018 to its valuation of $1 trillion in September 2018 – an astronomical rise that saw it put daylight between it and the likes of Microsoft and Google’s parent company, Alphabet. Conversely, Apple needed about 183 trading days to hit the $1 trillion mark after it reached $900 billion in November 2017.
Amazon’s rise can be put down to its unalloyed status as a disruptive force of commerce, with analysts and other Wall Street watchers predicting the company’s imminent overtaking of Apple as the biggest and most valuable company in the United States.
Indeed, the identity of the first five companies on the list of the world’s most valuable companies – Apple, Amazon, Alphabet Inc., Microsoft Corp. and Facebook Inc. – further goes to demonstrate the pre-eminence of tech companies and the undeniable role of technology in the emerging world order of digital wealth where oil, previously the most valuable resource, has been relegated to the back-burner.
Despite its disruptive business model and series of high-profile acquisitions which have undoubtedly boosted its revenues, Amazon remains an e-commerce company – a sector that is fiercely indigenous.
With the backdrop of all the arguments against some of its unfair business practices, Amazon remains a hit with a large segment of the American populace who are traditionally at home with online shopping. According to research, an estimated 79 percent of Americans shop online, a figure that amounts to about eight in 10 Americans.
While Amazon can be reckoned with as a global e-commerce behemoth, there is no denying the fact that, it will struggle to replicate the brilliant success it has enjoyed in other climes.
As part of its expansionary plans, Amazon has spread its operations to over a dozen countries including the United Kingdom, India, China and Singapore. While sales outside the United States amounts to about a third of its total earnings, the company has also come to learn that selling abroad is not easy. In addition, it has also come to the realization that, e-commerce is best left to the indigenous players who understand the terrain and idiosyncrasies in each country.
Though it has enjoyed a fair measure of success in India where it has attempted to take on FlipKart – the country’s predominant indigenous player – with lower prices, Amazon has been almost an abysmal failure in China – the world’s fastest growing e-commerce market. Alibaba, Pinduodo, Taobao and others are deeply entrenched in the country owing mainly to their understanding of the complex vortex of persuasions influencing the shopping habits at play in that country. Today, Amazon struggles to retain a foothold in China, whereas Alibaba enjoys over 50% of the market share.
Considering the immense financial resources and spending power at its disposal, one will expect that Amazon will conquer every market it berths in. However, the incontrovertible fact remains that, to succeed in any market requires more than just financial power, but a large dose of street-smartness, an understanding of the people and a business model that is realistic and suited to their local circumstances.
Here in Nigeria, the reality is not much different.
Ingrained in the cultural complexities of a society or people are certain peculiarities or predilections, all of which contribute to shaping their every tradition, including their shopping habits.
Despite the growing popularity of online shopping, the average Nigerian, try as hard as you can, will never shake off the practice of preferring to see, touch and/or experience a product before parting with hard-earned money, thereby justifying the increasing relevance of brick-and-mortar stores in Nigerian e-commerce.
Trust also remains a major issue.
In spite of the large strides recorded in the e-commerce sector, many Nigerians are still understandably reluctant to drop their credit card details online due to the real and ever-present potential of cyber-fraud. Others, who have managed to embrace the e-commerce revolution, are still keen to put their trust in the confidence-inducing personal touch that the patronage of a physical retail store inspires. What about the millions of unreached or under-served Nigerians in the hinterlands, devoid of a reliable internet connection and the basic requirements to embrace e-commerce?
It must be stated here that the e-commerce industry also has the capability to unmask mere hype from substance.
Since Nigerians got bitten by the e-commerce bug, the country has seen several foreign players, many of them backed by angel investors and venture capitalists. These fancy new shoes emerge on the scene by painting a larger-than-life picture of overwhelming boom only to fade away after a while and exit the country quietly.
The scenario is a simple but vicious one: the investors are buoyed by projections of Nigeria as Africa’s biggest market, blessed with a youthful, aspirational population on the verge of cracking the e-commerce conundrum and exploding into a money-spinning investor’s dream.
But what happens?
These foreign investors, for all their good intentions, remain what they are famous for: profit-seeking, short-term oriented business impresarios. Once they get tired of seeing their investments fail to yield the promised returns, the patience wears thin. Once this happens, it is only a matter of time before Nigeria counts the many-faceted costs of another failed venture.
History and statistics have revealed worldwide that, only a truly indigenous e-commerce company backed by its own people has the staying power to stick and stand the test of time, irrespective of the regulatory, operational and industry-specific challenges that may arise. Indeed, only a locally-backed e-commerce company with a realistic business model that is not short-term in outlook, can invest significantly in infrastructure and care sufficiently not to embark on random job cuts, all in a bid to satisfy the cravings of impatient venture capitalists.
Nigeria boasts perhaps only one of such powerhouses in Konga – which recently combined its operations with Yudala, another bold player with a futuristic but realistic e-commerce model which has been widely aped by other global e-commerce companies, Amazon inclusive.
Where an e-commerce company proves itself adept at adapting to local circumstances; when it has the boldness to accommodate or fuse online shopping with cost-intensive offline stores nationwide which cater to the needs of the unreached, thereby bringing the convenience of e-commerce home to them; when a business invests considerably in massive regional warehouse facilities; refrains from retrenchments or down-sizing even in the most harsh business cycles and quietly goes about empowering more Nigerians with employment opportunities through its expansionary and ambitious projects, then you are closer to building an e-commerce giant that can rival the Amazons and Alibabas of this world.
Konga owes it to every Nigerian to remain in business forever…
*Contributed by Dr. Ajit Singh, an international trade lawyer spoke in Lagos on a short visit to Nigeria
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