Business In The Digital Age -By Ifeanyi Uddin

Filed under: Economic Issues |
Ifeanyi Uddin

Ifeanyi Uddin

 

What to do, when one of the country’s leading online retail shopping outlets suddenly insists that for orders above N100,000 patrons are now required to pay 50 percent upfront before items may be shipped?

Another uniquely Nigerian quirk. In other places, customers pay off their credit/debit card as part of the ordering process. Indeed, I am told that Amazon’s model has it benefitting from supplier credits, and so payments off the cards guarantee it a useful cash float until it has to pay its suppliers. Here, though, the online retail business has had to device the “pay on delivery” (PoD) model to get its business off the ground.

With few domestic shoppers willing to pay as part of their online orders, two features of our domestic business environment strengthen the PoD’s value proposition. A weak, and easily suborned (for folk with the wherewithal) criminal justice system means that domestic contract enforcement procedures are near non-existent. Both of these then conspire to erode the sense of “trust” without which economic entities cannot easily enter into relationships.

Secondly, as an economy, we are only just making the transition from cash to plastic; and the cultural holdovers remain. Indeed, for the greater number of card users in the country, not too subtle blandishment by the central bank (“cashless Nigeria”) was a key consideration in completing the cut-over to payment card use. That a greater part of this cohort should loathe using their cards for transactions that might compromise their accounts only makes sense. So most stick to collecting cash off ATMs and paying at checkout counters in those physical retail outlets where point-of-sale machines are available.

All these hurt businesses. In the case of online retailers, in result, they do not have access to the cash float that such businesses have in more “normal” climes. Moreover, for a business where constant change (to operating and product/service value propositions) to keep in touch with the needs of some of the most fickle customers anywhere is a sine qua non, lack of access to such monies invariably limits their ability to grow.

That is at one level. At a further remove, our online retailers face a problem of a different order.

Large returns of ordered items. It would take some understanding to figure out the cause(s) of this particular quirk, but two possibilities suggest themselves. First is that oftentimes, the delivered goods do not look anything like they did on the retailers’ websites. In spite of this possibility, there is also the wanton mischief that a louche contract enforcement system would inevitably conduce to. Any which way, the retailer then bears the cost of haulage, and possible spoilage (open box) that “returned” goods imply, having already lost float from implementing the PoD policy.

Enter the 50 percent cash deposit before shipment policy? Not before understanding how a difficult to fathom slovenliness on the part of our online retailers continues to hurt their business models, and the chances of growing their businesses. On one hand, they have been known to advertise as available on their websites, products that they have not the foggiest ideas where to source from. In one example with which I am familiar, the online retailer offered to parlay payment for such items into the customer’s “wallet”, from where he may then shop for any other item that he was interested in. It took forever to persuade the retailer that the initial purchase intent was not whimsical and that only a full refund would do.

Then there is the case of a third party seller who was vending ripped-off software. Rather than return the customer’s funds into the card from which payment was made, it ended up in the retailers’ online wallet from which the customer could buy “any other item of his choice” ―short, in this case of the N500 delivery charge.

Caught between Scylla and Charybdis, the 50 percent deposit before shipment for supposedly big-ticket purchases is conceptually flawed. Today, our online retail outlets sit on deep mines of data on buyer behaviour across the country. Properly mined, these data should help define not just the online retail space, but help with the introduction of new service propositions. At the very least, these databases should yield customers who despite insisting on the PoD for the fulfillment of their orders, have never defaulted in their transactions. Amazon has these “prime” customers category; who are entitled to all manner of perquisites because of the consistency of their patronage.

The least that our online retailer could have done, at least initially, was to have trawled its database and excluded its “prime” customers from the 50 percent pre-shipment payment requirement. For the whole point of online retailing is the delivery of mass-customised services. No, the whole point of businesses that now run on today’s information and communication technology-enabled platforms is the possibility of delivering bespoke services to their prime (if not all) customers. To continue recourse to “one size fits all” service delivery policies in the digital age is the clearest evidence of how our businesses may themselves be unfit to do business in these much changed times.

 

Comments

comments