DropX, a Nigerian delivery startup has confirmed the end of its business after 2 years of operation. This news is coming amidst the several closedowns happening in the business world due to the bad economy and it is more alarming because the startup has barely scratched the surface.
DropX was founded in 2021 by Praise Alli-Johnson and Oluwatope Liasu in Abuja to fix the problem of logistics. For starters, the delivery company did excellently gathering more than 2000 users and recruiting 500 drivers, primarily individuals who were already involved in the gig economy as car owners working for ride-hailing platforms.
The announcement of the shutdown was made by the founder of the delivery service, Praise Alli-Johnshon via a post he published on Linkedin saying “We threw in the towel.” He went on to analyze the tough times they went through struggling to keep Drop X together and in the game.
“At DropX, we set out to build a hyperlocal delivery platform, connecting businesses and individuals needing to deliver any item with independent delivery agents. Unfortunately, it felt like taking one step forward and three steps backward,” he shared.
Praise Alli-Johnson also listed the areas that posed huge problems during operation:
- The balance between driver pay expectations and what users were willing to pay.
- High Demand
- Expanded User Base
- Hyperlocal and Ubiquitous was a lofty ambition
- People problem:
- New signups started getting less exciting
- The problem of options:
- Possible government collaboration
One of the biggest problems as listed above was that drivers wanted more money than what customers were willing to pay. To fix this, the company changed how they set prices. They focused on serving important customers who needed a lot of food or expensive things delivered. They cared more about making sure the items arrived in good condition than making the delivery cheaper.
Another issue was with the high demand; DropX struggled with increased competition from other ride-hailing platforms like Bolt and Uber. To manage the rising demand, DropX tried using surge pricing, similar to its competitors, but this led to users frequently canceling their requests. They also tested a surge model that only drivers could see, which didn’t work well, forcing the company to pay the extra costs to keep fulfilling orders.
Praise Alli-Johnson said “While navigating these challenges, we continued funding delivery differences just to stay afloat. We even found ourselves relieved on days with low delivery requests.”
This explains how tough it must have been for the management. The founder of the hyper-local delivery company said he would not say “they failed” but instead “they gave up”.
“I’d say we just give up. We chose to avoid the sunk-cost fallacy. The concept of hyperlocal delivery on demand sounds great, but it demands more than just a great app and technology. I’d say we got tired; as the user base grew, so did our spending on nearly every delivery. That’s nothing to smile about,” Praise confessed.
Furthermore, he shared that they could have approached things differently as a company. For instance, they considered the possibility of starting as a traditional delivery firm supported by an advanced app for order management and tracking, although it lacked the excitement they were seeking. Another option was to enhance their collaboration with NIPOST, but the changing landscape due to elections hindered their long-term plans.
Being extremely truthful, Praise said if they would have really done anything different, it would be ” Not to start at all.”
