The cashless economy project of the Central Bank of Nigeria (CBN) has received a blow with the pulling out of Nigerian economy by MIH Internet, owners of Kalahari e-ecommerce website.
The company, a digital arm of South Africa media giant, Naspers, shut down due to lack of profitability from the website launched in January 2010.
Mr. Stefan Magdalinski, general manager of E-commerce in Sub-Saharan Africa for MIH said performance of the service has been below expectation since launch, and reaching profitability was not a reasonable near-term prospect.
The South African firm is also shutting down its operation in Kenya which it began in Kenya in October 2009 for the same reason.
He said “Following a strategic review of investment priorities, we will be closing down the Kalahari Kenya and Nigeria operations with immediate effect.” Operations in both countries ceased on October 19, with no more orders being taken.
The sites hope to complete delivery of current open orders. A notice of closure has been sent to all employees of the two sites.
As recently as April, Kalahari appointed Joseck Luminzu Mudiri, former business development manager of M-Pesa at Safaricom, as its new country manager in Kenya. It remains unclear whether he and other high-level staff will be retained by MIH Internet.
Kalahari was an inventory-based e-commerce site based on the successful Amazon models in the United States of America and United Kingdom.
With products listed at set prices, it is differentiated from auction and classified sites, such as Dealfish and Mocality, also owned by MIH, which have just been joined in the market by Google Trader. MIH says Dealfish and Mocality will remain open, suggesting the issues that have forced Kalahari to close do not extend to the auction sites.
The failure of the Kalahari sites, which were branches of the mother site in SA, has been attributed by analysts to high operational and marketing costs. It is reported that advertising in the two markets alone cost the company around $50 000.
Though the site boasted 14 million users and three million products, costs of pan-African delivery and advertising have clearly taken their toll.
Platforms for small advertisements, such as Dealfish, can also face high costs in promotion, but have no need to carry any inventory or incur distribution costs.
There have also been difficulties with persuading Kenyans to trust online shopping, with many preferring to use sites for products they have been unable to physically buy.
Finding an efficient and trustworthy payment gateway has also been a challenge, with credit card uptake in Kenya still low and mobile-to-Web payment systems, like PesaPal, yet to gain mass adoption and trust.