The Nigerian startup, DropX, which employed an app-based delivery system, recently declared its closure, marking the end of a tumultuous two-year journey in the industry. This decision aligns with a broader trend of closures impacting several Nigerian startups in 2023, a reflection of the considerable challenges posed by the country’s demanding economic climate.
Founded in 2021 by Praise Alli-Johnson and Oluwatope Liasu, DropX had an auspicious start, with a vision to transform local deliveries in Abuja by creating a seamless connection between businesses and individuals, offering efficient and reliable services.
Despite experiencing an initial surge in interest and successfully enlisting 2,000 users and 500 drivers, predominantly car owners engaged in the gig economy, DropX faced a series of obstacles that ultimately contributed to its demise.
A central challenge for DropX was the discrepancy between driver payment expectations and what customers were willing to pay. In an attempt to address this gap, the company implemented adjustments to its pricing strategy. It refocused its services exclusively on high-value customers involved in bulk food deliveries, luxury goods, and more. This strategic shift prioritized the condition of the items being delivered over cost considerations.
Nevertheless, the geographic dispersion of users throughout Abuja emerged as a considerable challenge for DropX, leading to users outside specific zones encountering a lack of service. Despite concerted efforts to expand operations within high-demand areas and recruit additional drivers, the competition for both time and pricing from other ride-hailing platforms, such as Bolt and Uber, intensified.
In response to surging demand, DropX endeavored to implement a surge pricing model, akin to those utilized by Bolt and Uber. However, this initiative faced backlash from users who frequently canceled their requests. The introduction of a surge model visible only to drivers produced mixed results, prompting the company to cover the price difference to ensure the sustainability of orders.
With the expansion of its user base, DropX recognized that its reliance on car drivers was insufficient to cater to all customer segments. This realization led to the inclusion of more bike deliveries. Despite onboarding independent bike drivers, they encountered challenges in effectively meeting the demands of high-value clients, thereby complicating the delivery process.
A fundamental issue surfaced when users consistently sought more affordable delivery options, leading to a surge in bike requests and a decline in car requests. Even high-value clients, initially drawn to DropX for its car deliveries, began requesting bike deliveries, exacerbating the imbalance between supply and demand.
Efforts to collaborate with the Nigeria Postal Service (NIPOST) to extend bike services through the app proved unsuccessful for DropX, despite numerous pitches and months of negotiation. The envisioned collaboration aimed to integrate DropX’s technological infrastructure and investment schemes for bikes with NIPOST’s bike and driver management, sharing delivery charges within the app.
Additionally, the company grappled with challenges stemming from users engaging in off-app transactions with drivers, circumventing the platform’s system and adversely impacting revenue streams.
Expressing exhaustion and disillusionment, Praise Alli-Johnson, co-founder of DropX, acknowledged the strain and burnout, openly declaring reluctance to carry the venture into 2024. The accumulated challenges and unsuccessful attempts at strategic partnerships played a pivotal role in this decision.
The closure of DropX contributes to the increasing number of Nigerian startups ceasing operations, highlighting the formidable obstacles confronting entrepreneurs within the country’s economic landscape.
