Recent findings from Business Hallmark reveal that online shoppers are increasingly opting to visit pick-up centers or shop in physical stores to avoid the soaring delivery fees charged by e-commerce platforms. These high delivery costs have compounded the challenges in the e-commerce sector, which has seen a sharp decline in sales and revenue, stalling its once-rapid growth.
The financial strain is evident in the performance of e-commerce leader Jumia Technologies AG, which reported a $20.2 million operating loss in Q2 2024—a 17 per cent revenue decline year-over-year. The company’s third-quarter results echoed this trend, with an $18.3 million loss and a 13 per cent revenue drop, largely attributed to weaker consumer demand in its key African markets, including Nigeria and Egypt. Meanwhile, other e-commerce platforms like Konga and Jiji are similarly affected but have not disclosed their financials publicly.
The sector’s struggles are exacerbated by a drastic hike in fuel prices, following the removal of fuel subsidies announced by President Bola Tinubu in May 2023. Fuel prices have spiked from N195 to over N1,025 per liter, leading to escalating transportation costs, which in turn drive up delivery charges for e-commerce businesses. For example, Jumia and Konga delivery costs in Lagos have surged from N400-N1,800 per delivery in early 2023 to a range of N950-N2,800 for smaller items post-subsidy removal.
This rise in costs has led consumers to reconsider online shopping. Shoppers report frequent situations where delivery fees now constitute a significant portion of their total order costs. In response, some buyers are increasingly opting for the “pick-up” option instead of home delivery to reduce expenses, while others have moved away from e-commerce platforms altogether in favor of direct purchases from local markets.
The higher costs have also revealed structural issues within the e-commerce logistics model, where items ordered from different vendors are shipped separately, increasing delivery costs. Industry insiders note that some e-commerce firms have yet to adjust their logistics frameworks to reduce these delivery charges effectively.
Adding to the strain, suppliers are struggling with increased fuel costs, which, according to one vendor, have quintupled from N14,000 to N73,500 to fill a 70-liter tank. These rising input costs are further squeezing margins and threatening the profitability of the e-commerce sector.
The ongoing economic headwinds have cast doubt on earlier optimistic projections for Nigeria’s e-commerce growth. Research agency Statista had predicted the market would reach $9.02 billion by 2023, but with the sector currently facing severe challenges, the e-commerce market may struggle to meet these expectations.
Industry stakeholders express hope that the economic situation will stabilise, allowing Nigerians to return to online shopping. For now, however, Nigeria’s e-commerce sector remains hindered by high delivery costs and weakened consumer purchasing power, resulting in lower sales and increased financial pressure for many operators.
Between Depleting Workforce And Declining Productivity