What can a Pizza craving during a pandemic tell us about the need to digitise small businesses in Nigeria?
Ideas.memo | John Edokpolo
At the height of the COVID-19 induced lockdown in Lagos, my wife developed a craving for a triple-decker meat pizza from her favourite pizza parlour. With restaurant services limited to only take out, I picked up the phone to place the order.
The sales rep then told me that I would need to double my order to qualify for free delivery, otherwise, I would have to come pick it up in store. I had no intention of going into the restaurant. Neither did I want to order 2 triple-decker pizzas (yes, it is as ginormous as you imagine it would be!). So, I offered to pay the full delivery charge for my single order, but I was turned down. Apparently, they did not charge for delivery. You simply qualified for free delivery if a customer’s order met a set financial threshold.
Despite my entreaties and a willingness to pay, the sales rep refused to budge and would not even get her manager on the phone. I was furious! Were customers lining up around the block to pick up so many orders during this pandemic that they were willing to do without my cash?! Of course, I ended up driving down to pick up my order, having judged correctly that a happy wife equaled a happy life but that was not the point. I was perplexed at their business model and a lack of customer eccentricity.
The most frustrating part of the experience was not my treatment at the hands of the sales rep. It was the fact that I had to pick up the phone to place the order in the first place. This is 2020! I expected to place the order using a mobile app. I should have been able to make my selection, select my choice of toppings, make the payment, and estimate the delivery time by tracking the delivery bike’s journey without talking to anybody. I did not have to spend 2mins on the phone explaining my wife’s dislike for chopped onions as an ingredient to a nonchalant sales rep.
An app would not have sighed at me in exasperation! As I drove home from picking up my order, I pondered how small businesses like the pizza parlour were going to fare in a world of “digital everything”. As the world contemplates a future of remote-everything and contact-less shopping, how prepared are micro, small, and medium enterprises (MSMEs) to optimize their operations and transform their products and/or services to serve their changing customer base? There was no doubt in my mind that they would need to embrace digital technology for their transformation.
MSMEs or just Small and Medium Enterprises (SMEs) are mostly small entities employing between 5 to 250 people (definition varies depending on the country) but they play an outsized role in the economic development of nations. The World Bank estimates that SMEs account for about 90% of businesses and 50% of employment worldwide. They contribute more than 40% to GDP. In Nigeria, MSMEs employs over 76% of the workforce and contributes about 50% to GDP. 600million jobs will be required by 2030 to accommodate the growing global workforce and most of those jobs will be created by SMEs, especially in the emerging markets where 7 out of 10 formal jobs are created by SMEs. Yet, they are the most susceptible to disruptions like those imposed by the Covid-19 pandemic.
The World Bank says this is because of their limited financial resources and borrowing capacity, and because of their disproportionate presence in economic sectors affected by social distancing measures and transport disruptions. Consequently, a lot of the government stimulus interventions have focused on lending money to SMEs to enable them pay their bills and keep employees on their payroll. But what happens with the next lockdown or crisis? Those stimulus cheques will not keep coming forever. There needs to be an even stronger focus on helping SMEs “crisis proof” their businesses through digital technology.
SMEs have some of the least infusion of digital technology in their businesses, with many relying almost entirely on physical interaction, unlike large enterprises.
SMEs have some of the least infusion of digital technology in their businesses, with many relying almost entirely on physical interaction, unlike large enterprises who adapted quicker to employees working from home and serving their customers virtually. In Nigeria for example, banks consistently have been investing in technology to digitally transform how their employees work (remote work and collaboration), how they interact with their customers and how their services are being consumed (mobile apps). The results are apparent. The Nigerian Bureau of Statistics in the Q1 2020 economic reports state that the Financial Institutions sector grew by 24% while contributing only 3.57% of GDP. The Trade sector (with a lot of MSMEs representation) on the other hand contracted by -2.82% in the same period. These numbers have worsened, as the recent NBS Q2 report shows the sector contracted further by -16.59% largely due to the impact of Covid-19
SMEs need help beyond access to capital and markets. Because of the central role they play in creating economic prosperity, lifting communities, and standards of living, there needs to be more focus on incentivizing and helping them reimagine their business models and digitally transforming their products and services to cater for a changing world.
Most national policies have long recognized the need to adopt technology to maximize SME efficiency and create new market opportunities but more need to be done. There must be a concerted effort between policymakers, financial institutions, and technology providers to create affordably customized solution packages, invest in technology skilling, mentorship, and helping SMEs envision a digitised future.
If we are all truly concerned about lifting communities out of poverty, creating broad-based prosperity for all, and engendering a fairer society, then we have to start with helping small businesses thrive in a fully digitised future.
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