NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, January 9, 2006

The name EthioGift might not ring a bell with the majority of Ethiopians who live in this country but it sure does have some value and has a bit of popularity among those in the diaspora. It is valued by them because it is a means that enables them to connect with their family and friends back home here. What EthioGift does is to charge them online through their credit cards for the gifts that will be delivered to whomever they choose.

“Our gift list consists of flowers, sheep, Hilton and Sheraton cakes, spirit drinks and we have what we call ’holiday Specials’. Our customers order whatever they favour out of these gifts and we charge them more for the extra services we render. By extra services I mean the money we pay for the purchasers and deliverers and transportation plus telephone costs. We get to pay the purchaser for the transportation (fuel) and for the deliverer, which is all done by us,” said Melaku Ejigu, administrative assistant at Ethio-Link, which is the main company and that holds Ethio Gift under it.

Ato Bekele Serbessa, its managing director, explains that EthioLink works as a facilitator of EthioGifts, which is registered as a foreign (American) company since it mainly gives service to those abroad.

According to him, five-year-old EthioLink does web development and hosting and its existence had helped it stay for so long. Otherwise, EthioGift would have had a hard time coping on its own, since the financial profit is gradually minimal.

Ato Bekele likes to stress the idea for what EthioGifts does rather than its profit. “The gifts are meant to be of sentimental value to the recipients and, particularly, my personal interest is to connect the diaspora with Ethiopia,” he said. “Even if some of the Ethiopians abroad are economically incapable to send money frequently or to visit their families and friends back here, at least by sending these gifts through us they will manage to renew their bond,” he added.

According to Ato Bekele, holidays are the prime time for their business but at other times the gift are sent to remember anniversaries and birthdays.

“It means a great deal to parents that their long-gone son remembers their anniversary or to a kid that his elder brother in America remembers her birthday. The idea is to send things that are of sentimental value, not things that have practical and lasting use,” said Ato Bekele. He added that flowers are most preferred in this case and that 25 percent of their customers ask for it.

Generally speaking, Ato Bekele’s opinion is that their company can contribute in creating and strengthening this bond and reducing the vast distance in between. “Moreover, even if it is a small amount we contribute to the country’s economy since the dollar is brought into the country,” said Ato Bekele.

However, besides fulfilling the aim, which is connecting people, both Ato Bekele and Melaku said that there are many problems that deter EthioGifts from making financial profit. “Primarily EthioGifts is purely e-commerce and this concept is somewhat new not only to this country but also to the whole world. It might be possible in the long run but I don’t think any-body can be a millionaire through this. It is simply not a lucrative and fast money-making business,” said Ato Bekele.

According to him, the majority of the customers are Ethiopians in the diaspora and they have a tendency to think the prices are too exorbitant. “If a bouquet of flowers is worth 10 dollars they think of it in terms of the Ethiopian birr and usually have a hard time accepting the price. So they only ask for our services on holidays and special occasions,” he said.

“Many of them have gone out of the country a long time ago and they aren’t aware that the price of sheep and cakes has shown that much increase. They think we extract too much profit and are hesitant to become our customers,” added Melaku.

Melaku said that even though they have permanent suppliers, the price on the market fluctuates and this makes it hard for them to change their prices every time these vary.

“We are more interested in the quantity of our customers. So in order to keep them we narrow our price margin and try to maintain a fixed one. But if the increase is too high, we also add a bit on our price list,” he said. According to Ato Bekele, they get 25 percent gross profit but when taxed it wouldn’t be much higher than ten percent. “If there was a courier system in Addis, it would have been better. But now we have to hire the delivery people and the purchasers. In addition, we pay for the fuel and telephone services. A single delivery consists of all these. So there is much to invest in this business,” he said.

Melaku said that they have different prices for the sizes and kind of the gifts they deliver. For example, their prices for sheep vary from 59 to 73 dollars. And when they purchase it the price varies from 200 birr to 600 birr.

However, Melaku said that besides the problem with profits, there are other social constraints that make their work difficult.

“First there is a problem with awareness,” he said. “Many people, especially elderly ones, don’t understand how somebody abroad can send them sheep and flowers. They undermine the value because the culture of exchanging gifts isn’t that strong in our country,” he said.

Melaku and his other colleagues also said that there is a problem of cultural influence. “When a sheep is ordered, our customers only choose its size by pound, but when we deliver it some recipients complain that the sheepskin is too dark or that its horn is too ugly or that it’s too skinny. They simply fail to appreciate it as a gift,” said Melaku.

Ato Bekele said that there is a problem with the address set-up of the country. “When our customers order the gifts they want them to be a surprise but since it is difficult to locate a house in our city, we have to call the recipients and ask them for the exact location. When we ask their address, we also have to explain why and this somehow spoils the surprise element which was the whole point in the first place,” he said.

According to Melaku, informing the recipients that they have some thing to receive heightens their expectations and will become a problem by itself. “Many become disappointed when they realize it is only a sheep or a flower and even ask us to give them the money instead,” he said.

“These gifts are meant to have sentimental value but the extreme living conditions in this country incapacitates us to afford such luxury. Many people expect money from their relatives abroad and in this case also prefer the money,” added Ato Bekele.

Ato Bekele said that even though it isn’t practical to establish a business that works within this country, he is optimistic and believes that they will be some change following the trend of the rest of the world. It can’t work in this country because the business is e-commerce and can’t exist where there is no credit card system.

“Even for those who have credit cards, it wouldn’t make much sense to use our services within the country because a customer already has access to the recipient and the gifts with a much lower price,” said Melaku. In addition, if it is within the city, the customer has to pay an additional amount for VAT since EthioLink is a VAT-registered company.

While doing it in the country isn’t feasible, Ato Bekele said that they have plans to strengthen what they already have. “Recently we have started making dinner reservations and adding additional items to our gift lists,” he said.

According to him, EthioGift is accessible to customers in America, Canada, and Europe but excludes the Middle East. He said that even though there are many Ethiopians in Arab countries, it can’t work there since they don’t have a credit card system.

Ato Bekele said that he is optimistic that this system will further flourish worldwide and Ethiopia will also be included in the long run. “It is a slow process but what I value most is that we have managed to serve our purpose and the fact that the awareness is spreading day after day,” he concluded.