Nigerian delivery startup, DropX, shuts down after 2 years of operation

A Nigerian startup using an app to facilitate deliveries for businesses and individuals has shut down after two years of its operation.

DropX adds to the growing number of Nigerian startups shutting down in 2023 as the realities of the harsh economy bite harder.

For this startup, several factors culminated in the founders’ decision to throw in the towel after pushing the business for two years.

Founded in 2021 by Praise Alli-Johnson and Oluwatope Liasu, DropX entered the scene with ambitious goals—to transform local deliveries in Abuja by connecting businesses and individuals with swift, reliable services.

The concept garnered early traction, onboarding 2,000 users enticed by free initial deliveries and enlisting 500 drivers, predominantly car owners already engaged in the gig economy via ride-hailing platforms.

How DropX’s problem started

Announcing the closure of the company via a statement, Alli-Johnson, said the problem started for the company when there was a gap between driver pay expectations and what users were willing to pay.

• “To address this, we aligned our prices with those of Bolt and catered exclusively to high-value customers dealing with bulk food deliveries, cakes, luxury goods, etc. This market segment cared more about the item’s condition than the cost
• “It quickly became apparent that users were scattered across Abuja, from Wuse 2 to Kubwa, from Apo to Gwagwalada. Users outside of Wuse 2, Maitama, Asokoro, and environs weren’t getting responses as they were too far apart. Over 2000 users meant nothing. We worked on getting more users in town (Wuse 2, Maitama, Asokoro, and environs, and around the Garki area). We hired corp members, and we all hit the street.
• “Since our drivers also worked for other ride-hailing platforms like Bolt and Uber, we found ourselves competing for time and pricing. Demand surged from 2 PM in the City of Abuja, leading to increased delivery requests on the DropX platform. We attempted to fix this by implementing a surge model like Bolt and Uber, but users disliked it, often cancelling their requests. A second attempt, making surges visible to drivers only, was met with mixed success. We ended up paying the difference just to keep orders going.
• “As our user base expanded, we realized the car driver model couldn’t accommodate all user segments; we needed more bikes. We hit the street and got independent delivery bike drivers onboarded. Despite onboarding independent delivery bike drivers, we soon learned they couldn’t serve our high-value clients adequately.”

Users want cheaper deliveries

Alli-Johnson added that the problem became compounded because every user on the platform wanted cheaper deliveries. This saw requests for bikes skyrocketed, and requests for cars dropped.

• “Even the high-value clients that started using DropX, because we were using cars, were requesting bikes. At this point, bikes weren’t enough, so we are back to the problem of high demand and failed requests. After calling to beg users to try the car option when they can’t find a bike, we decided to find a solution while we throw money at the problem again — we paid drivers the difference,” he added.

While noting that DropX was meant to be an Uber for logistics and not supposed to manage assets like bikes, cars, and drivers, he said the company explored the option of independent off-takers, speaking with existing customers who showed interest.

It was able to get TVS to supply their small 100cc bikes and everything seemed promising until 100cc bikes were banned in Abuja due to government policy.

People problem

The founder disclosed that some users also engaged in off-app deals with drivers, taking cash off the app.

• “Same users call to complain, thus snitching on themselves. Initially unhappy about losing revenue, I found a silver lining as we didn’t have to cover the delivery difference,” he said

Failed collaboration attempt with NIPOST

Alli-Johnson said the company was contacted by the Nigeria Postal Service (NIPOST) to explore the idea of collaboration but several pitches to the Service to get bikes everywhere through the app failed.

According to him, the idea pitched was for DropX to provide the tech infrastructure and bike investment schemes to get more bikes into the system, while NIPOST manages bikes and drivers, and they both share in-app charges for delivery.

• “We pitched and pitched to different groups within NIPOST for months on end. This is the end of 2023, and I am burned out, not seeing myself doing this in 2024,” Alli-Johnson said.

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