DropX bows out. Another e-logistics startup exits the scene

DropX, the Abuja-based startup once envisioned as the “Uber for delivery,” has made a bittersweet exit from the Nigerian e-logistics scene.

It’s another day, and another e-logistics startup is closing shop. DropX, once dubbed “Uber for delivery” has bowed out of the scene. Their story, shared through a poignant LinkedIn post by co-founder Praise Alli-Johnson, offers a window into the complexities and challenges the company faced.

From its inception in 2021, DropX held promise. The company aimed to streamline local deliveries with an app connecting businesses and individuals to swift, reliable services. Initial traction was encouraging. It drew 2,000 users by offering free deliveries and boasted 500 drivers at its peak. Although the drivers were mostly gig economy ride-hailing participants.

Apparently, success was good, but beneath the surface, a web of hurdles awaited.

What were the challenges DropX faced in the e-logistics market?

Balancing driver earnings and affordability proved to be too much. This inevitably led to negative cash flow and founders plugging the gap with their own funds. There was a glimmer of hope with their offering to high-value clientele, but revenue remained elusive.

Abuja’s sprawl presented another obstacle. The company’s dream of hyperlocal efficiency collided with the reality of scattered users. Unfortunately, it only led propelled limited service outside specific pockets. Attempts to consolidate the user base proved futile, highlighting the logistical complexities of the city.

Competition and pricing further muddied the waters. When demand surged, DropX found itself locked in a battle for driver availability and pricing with ride-hailing giants. Strategies like the surge pricing model, which is quite popular among ride-hailing companies, backfired.

The failure to make any headway with this strategy, among others, demonstrates the delicate dance between demand and user satisfaction.

Diversifying the fleet with bikes seemed like a solution. But, it came with unintended consequences. Users gravitated towards cheaper bike deliveries, leaving high-value clients dissatisfied. Government policies banning specific motorcycle models further threw a wrench in the diversification plans.

Human factors also played a role. Off-app transactions and unpredictable user behaviour added to the company’s woes.

Even a potential partnership with the Nigerian Postal Service ultimately fell through. Financial strain mounted, culminating in the founders funding deliveries from their own personal finances until the inevitable decision to shut down.

What’s next for DropX?

DropX’s closure echoes the recent demise of other delivery services like Jumia Food and Bolt Food, highlighting the uphill battle faced by e-logistics ventures in Nigeria. Economic hurdles, razor-thin margins, fierce competition, and infrastructural deficiencies combine to create a demanding landscape.

Looking back, Alli-Johnson reflects on the choices they made and the lessons learned. The absence of a clear product-market fit dissuaded them from seeking external funding, and their commitment to avoiding the sunk-cost fallacy led to a candid acknowledgement of the venture’s limitations.

“We believed we hadn’t achieved PMF. We couldn’t keep burning cash and add someone else’s cash to the fire,” Alli-Johnson writes. “Hyperlocal delivery on demand sounds great, but it demands more than a great app and technology. Fancy route optimisation and device tracking can’t overcome human factors and infrastructure deficits.”

Despite the disappointment, both co-founders are forging new paths. DropX’s story serves as a valuable case study for aspiring ventures in Nigeria’s e-logistics arena, shedding light on the daunting realities and demanding a dose of resilience, adaptability, and a pragmatic approach to innovation.

The journey to revolutionizing e-logistics businesses in Nigeria continues, and while DropX may not have reached the finish line, its startup experience illuminates the path for those who dare to follow.