Nigerian companies go online for survival
An empty restaurant.  Source: Waldemar Brandt via Unsplash

Whenever we get GDP reports from the National Bureau of Statistics (NBS), there are always two major categories: oil and non-oil. 

No doubt, this way of thinking of Nigeria’s economy originated as a result of the importance placed on the oil sector. 

However, for many years now, Nigeria’s growth has been driven not by oil, but by the ‘non-oil’ sector, which was 91% of the total output last year. 

Oil certainly still has its importance, especially for our exports. Stears Business even put out three oil-related stories in the last week. However, today we’re focusing on the real economy, and how they are dealing with the pandemic - no shade to my fellow oil-loving journalists. 

Non-oil has the heavy hitters, such as agriculture (26% of the GDP), wholesale & retail trade (16%), information and communications technology —ICT (13%), manufacturing (9%), and real estate (9%).

Recently, though, the major driver of non-oil growth has been the ICT sector, growing by over 11% last year while the other industries struggled to grow at all. 

 If it wasn’t obvious that technology was the place to be, with the arrival of the pandemic, it’s now clear. 

 

 

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Nigeria's growing e-commerce

In the run-up to COVID-19, digital technology fueled many businesses. 

A major enabler has been the number of internet users in Nigeria, which has grown from 28 million in 2012 to 126 million today - the sixth-largest in the world. 

Nigeria’s Internet market, especially in urban areas, caught the eye of many investors and e-commerce emerged as a winner.  

In 2015, Africa Internet Group (AIG) flourished, offering real estate classifieds portal (Lamudi), taxi-hailing (Easy Taxi), food ordering (Hello Food), travel booking (Jovago), and related e-commerce services. 

AIG has, since 2016, rebranded these old brands in its portfolio to Jumia subsidiaries —Jumia Travel (now Travelstart), Jumia Food, etc. as we know them today.

In an Economist Intelligence Unit (EIU) report Nigeria was tipped to account for a quarter of AIG’s business when all its markets reach equal maturity in Africa.  

As an early player in the e-commerce space, AIG & Jumia quickly understood that digitally inclined consumers increasingly demand omnichannel - different points of contacts - for searching and buying options.

Then came the extra push towards online retailing. 

An understanding of this factor influenced Jumia’s decision to aggregate over 150% more SME retailers on its online marketplace in 2015, doubling the number of products available on its site.

 

 

Weighed down by lockdowns, businesses are going mobile

Although declining oil prices have threatened the economy, consumers have maintained purchases of fast-moving consumer goods (FMCGs) like food.

With lockdowns in place, foot traffic to physical retail stores and restaurants have stalled. Google location data shows that visits to retail and recreational establishments were 40% down mid-May compared to January.   

Consequently, there has been an increased ambition to widen digital activity with consumables in both the retail and hospitality sectors. 

It surprised many when Eko hotel, arguably Lagos’ most famous and conservative hotel, changed tact and went from providing room service to deliveries across the city.

Eko hotel has partnered with Oya Now and offers non-resident customers pick-up and delivery for laundry and food —previously exclusive in-house services. The hotel may be half empty, but it spotted an opportunity.

 

Eko Hotel, Lagos

Source: Peter Vlam via Flickr

 

Like most hospitality businesses, it realised that the stay-at-home orders and travel bans could render it lifeless if it does not respond proactively, given the pandemic might last months on end. 

As explained in our Stears Data report, in a world where most economic activities are put on hold, businesses must prioritise flexibility. It’s the proactive businesses that will make the most of the COVID-19 crisis. 

Without e-commerce, it’s difficult to see how some retail businesses can properly function when consumers are locked indoors. 

 

 

Improving remote service delivery 

No one knows exactly how long the pandemic will last, but it won’t be quick. Re-strategising to survive the coming months is a priority.

Restaurants have been the obvious first movers. 

“For now, Delivery/Take out is all we are doing,” Toni Aladekomo, general manager of Atmosphere Rooftop, a premium casual restaurant in Lekki, Lagos, tells me. 

A key part of the restaurant’s selling point is its ambience and setting on the rooftop. Now, it’s unable to offer a dine-in experience. 

To make business more effective: first, Atmosphere Rooftop streamlined its food menu for quality control. Next, it partnered with a food delivery aggregator. Then, it split its team: those who will work on-ground at the restaurant and staff that work remotely. 

“We had about 55 staff. We try to rotate the staff. But we’ve reduced that to 10 people actually working. Now, we are about six working from home,” she explains. Less front-of-house staff is required now since its focus is deliveries. 

The restaurant also covers less overhead costs in general. Toni explains: “We provided the Internet that covered the entire space, but now, we don’t have to pay for subscriptions. We’ve reduced the number of security since we don’t have customers coming in anymore.” 

Still, there will be challenges with operating e-commerce, especially for the newcomers.

 

 

No one wants stale food or soggy fries

Speed and quality are two major factors customers prioritise in food services. When delivering perishable goods, slow delivery is a major worry in Nigeria. 

“As soon as someone places an order, the bike either has to be there waiting for that order or be able to get there within 20 minutes to pick up the order,” Toni explains. 

Like Atmosphere Rooftop, quality control was also a factor that prevented most upscale restaurants in Lagos from moving towards e-commerce before the pandemic.  

Although restaurants have tried to streamline their food menus to make delivery more efficient, using a third party for food deliveries still presents a downside; restaurants have little control over the customer experience. 

 

 

 

Third party company vs restaurant courier service 

So the question facing retailers and restaurants now is whether to fully manage their logistics or partner with delivery aggregators in the long run.

Food delivery aggregators build their own logistics network, providing for restaurants that don’t have their own drivers; they also double as marketing platforms for restaurants. 

However, each aggregator has its pricing mechanism. Some charge for deliveries per trip, while others offer daily rates. The better option often depends on the traffic of food orders. Toni explains that on slow days, daily rates are a loss for the restaurant. Deliveries per trip are favourable. 

“Another option to be considered is just buying our own bikes and having our own riders, so things are more straightforward that way,” Toni explains. 

 

Source: Time Mossholder via Unsplash

 

 

Instagram for digital marketing 

Beyond investing in food deliveries, developing a closer relationship with consumers is the ultimate aim. 

Before the lockdown, Instagram was a platform for many businesses to conduct operations. Some small businesses without a physical space for catering or dine-ins operated food delivery businesses directly through the platform.

But it was also another channel to get closer to consumers. 

So alongside offering deliveries and take-outs, digital marketing has also been a focus for many businesses. Since the lockdown, companies have promoted a number of deals, including free deliveries on the platform. 

Instagram has been the route for many consumers to access food and beverage menus, and DMs have become customer service centres. 

“Our best days at Atmosphere during this lockdown have been days when someone has posted getting food from Atmosphere [on Instagram],” Toni explains. Now, the general manager wants to focus on getting organic recommendations from people that can drive sales. 

Similar to food deliveries, Instagram is another crucial channel that companies are now using to fill the marketing hole created by the lockdown.

 

It's all about survival

This doesn't mean that the hospitality or retail sector is booming. Restaurants have gone through their share of losses, such as staff salary deductions or forfeiting profits with deals to lure customers. 

But e-commerce will at least help some to break even and survive until the storm is over. “The goal isn’t profit but to get more customers, to be able to pay the staff,” Toni concludes.

Some, like Lagos Continental (previously InterContinental) hotel, have opted to stay closed.  

But for those that are still running, the crisis creates an opportunity to learn new strategies. It presents a case study, a testing phase, putting into clearer focus how best to incorporate multichannel distributions in the long run. 

 

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Fisayo Okare

Fisayo Okare

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