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.
Oh, what a battle. All I can say is, ‘don’t give up!’ Your knowledge has certainly become wisdom.
It’s evident that the CEOs of DropX are facing significant challenges, and the situation requires resilience and strategic thinking. The surge in demand for cheaper deliveries and the subsequent shifts in user preferences have posed operational difficulties. The willingness to address problems, even by paying drivers the difference, shows commitment to finding solutions.
Encouragement to the CEOs: Navigating such complex issues requires innovative problem-solving, and your dedication to exploring options like collaborating with NIPOST is commendable. While setbacks and burnout are part of entrepreneurial journeys, your perseverance in seeking solutions and adapting to challenges is a testament to your commitment. Keep pushing forward, exploring new avenues, and leveraging the resilience that brought DropX to where it is today. Your determination will undoubtedly shape the future success of the company.
” collaboration with Nipost is commendable!””? Really? You are not an industry insider obviously!
There was a reason why the likes of DHL, FedEx and UPS relegated Nipost when the government ended Nipost’s monopoly by deregulating the market in the 80s
Again , tech start-ups entering the logistics industry in Nigeria with “cheap rates” that commoditize last mile deliveries is not a competitive strategy.
It does not create sustainable value and more of them will go bust in Nigeria.
Exactly.
Don’t compete on price.
You’re already offering enough value by giving timely dispatch service across all parts of the state, with your vast network of riders.
Imagine the rate of success so far.
They did everything right…govt policy just went against them.
Sell off the 100cc at subsidised rate to rural dwellers….renew the contract with the asset investors.
I am in the same quagmire, here in Abuja.
Indeed, rider expectations and customer expectations isn’t same….and this peak period, no one wants to join an app…they have enough physical items to handle.
You should have just used the riders’ standard to set rate.
Customers will always pay whatever other riders are charging
B2C will always be a difficult task in Nigeria because we don’t have a functioning postal service, not to mention bad transportation network. I have gotten involved in delivery business but didn’t see it through. One suggestion though – what about a secure central location to serve certain areas in a city where you drop off items for customers to pick up.
If you still have your Dispatch bike, we can partner for profitability.
Shoot me a mail Homedelng@gmail.com if you are interested in letting us manage your asset.
The major challenge with e-logistics platforms is they copy and paste technology solutions from other climes and expect it to work for our local market.
They end up commoditizing the market by offering cheap logistics with very little regard for route planning, line haul costs, delivery timelines, courier management, supplier partnerships etc
There is no such thing as ” free shipping” or “cheap rates” in logistics , someone is paying the difference in the cost to serve.
A tech bro is not a supply chain consultant and choosing Nipost as a last mile partner exposed their lack of industry knowledge. No one should be surprised when more e-logistics start-ups fail.
You’re so correct.
I would have been the one offering my HomeDel services to NIPOST, for a discount…there was no need for a contract that would handicap them.
Like you said…industry knowledge is apt.
The lady partner actually has business experience running physical dispatch.
They have done physical asset before…the margin is low compared to what they anticipatedfor the app..
Why not buy your own bike or cars? .. Unless money is the problem .. The best way to fight all these issues is to get a bike or car or even bicycles since delivery is just within Abuja. While bicycles cover deliveries for short distance, bike cover for long distance then cars for more space required products.
Simple.. Do this and you will still be in business.
Just like the Bolt service they are using, they are shying away from owning and managing physical transportation assets and personnel.
What are the Ghanaian Dispatch Logistics service companies doing right?
They have about 5 popular competing app with same business model.