Nigeria’s e-commerce sector searches for new strength
Across the globe, businesses are going online. This has been championed by the Internet technology. The Internet value chain, estimated to worth $5.8t, has brought with it a lot of opportunities in all spheres of life. Economically, socially, and culturally, the Internet continues to greatly impact on nations, communities, institutions, and individuals, as seen in new ideas like e-governance, e-learning, e-banking, and of course, e-commerce, among others.
Indeed, Nigeria’s Information and Communications Technology (ICT) is currently finding strength in eCommerce, a sub-sector estimated to worth N3.06t ($10b), according to market observers.
While e-Commerce continues to grow, the same is seen with the rest of Africa and most part of the world. More and more Nigerians are embracing the online shopping system as their preferred platform for buying and selling goods and services.
Online platforms such as Jumia, Konga, Dealdey, Yudala, Payporte, Vconnect, Kara, Fashpa, Gloo.ng; OLX; Wakanow, among others have pushed the frontiers for Internet businesses in the country, getting about 400,000 online orders every 24 hours in Nigeria.
eCommerce has become a thriving global industry. A recent report released by the Oxford Business Group revealed that retail sales hit a whopping $22b figure globally in 2016, with online shopping figures accounting for a major part of this outlay. In advanced climes where access to the Internet and of course, literacy levels stand at appreciable levels, eCommerce has become a lifestyle for many.
Interestingly, global retail sales, of which eCommerce makes up a major part, is projected to rise further to an estimated $27t by 2020. Chief Executive Officer of Konga, Shola Adekoya, said the platform kicked off 2017 with a multi-million dollar investment from Naspers and Kinnevik, and it gave reason to reflect on the progress of both Konga, and the wider eCommerce industry in Nigeria.
Adekoya said Nigeria boasts the largest population in Africa, which is set to increase from 180 million today to 440 million by 2050, with GDP expected to grow between 4.5 and nine per cent each year in between. He stressed that with larger percentage of Nigerians now connected to the Internet – a figure that’s on the rise fueled by a growing middle class, eCommerce industry clearly has potential.
He however, said reaping these online rewards isn’t straightforward. According to him, to encourage Nigerians to make more online transactions, the ecommerce industry must find innovative solutions to the table of online sales, such as fast and easy payments and refunds, and trouble-free deliveries and returns. “Perhaps, it’s the passion and commitment involved in bringing Nigeria’s strong trading culture online that makes our country an attractive proposition for investors.
“When we started Konga in 2012, we knew we had to innovate to be successful. Today, I am proud of the progress we’ve made. We are a homegrown Nigerian business, tailored to our local customers’ needs and committed to delivering the highest standards of service in the market. We’ve significantly grown our marketplace to service local seller and customer needs, and we’ve built much of our own nationwide delivery network from scratch, empowering 80 local franchisees in the process, as well as, building a proprietary third party logistics and warehousing service. We’ve also launched KongaPay, which has materially increased our prepaid orders and reduced friction in the payment process,” he stated.
Average Nigerians Are Still Traditional Shoppers
From Yudala’s perspective, the Head of Corporate Communications, Gideon Ayogu, said the eCommerce sector could provide a major lift for the economy, if adequately strengthened.
He lamented that despite the growing appeal of the initiative, available data shows that the shopping behaviour of majority of Nigerians is still largely traditional – with many preferring to see, touch or experience the product in action before making the buying decision.
According to him, despite the huge strides recorded in the eCommerce landscape, especially with the massive awareness for globally celebrated shopping festivals such as Black Friday and Cyber Monday, among others – the average Nigerian is still an unrepentant traditional shopper.
“This traditional shopping behaviour goes a long way to justify the unique Yudala model of combining an online store with physical offline stores located nationwide. Cases abound of most walk-in customers actually admitting to having checked out a particular product online, but still preferred to physically visit the store to see the product before purchase,” Ayogu stated.
Challenges Limiting Ecommerce Growth
The Guardian gathered that some factors limiting eCommerce growth, include lack of trust, poor or no Internet connection in some major areas; unsavoury experiences from delivered orders.
Commenting on the issue of lack of trust, Ayogu said many Nigerians live in constant dread of online fraud and will do anything to avoid using their debit card to process payments electronically.
According to data from the Nigerian Inter-Bank Settlement System (NIBSS) the year 2014 saw 1,461 reported cases of electronic or e-fraud, with actual losses grossing N6.216b. In 2015, about 946 attempted e-fraud cases were also recorded by banks, Other Financial Institutions (OFIs) and Mobile Payment Operators (MPOs), resulting in an estimated loss of N5b.
Recently, the Minister of Communications, Adebayo Shittu, indicated that about N78b is lost yearly in Nigeria to all forms of cybercriminal activities. “This reality has stunted the growth of e-commerce in Nigeria.”
It is an open secret that eCommerce is driven by access to the Internet. However, Internet access for many in this part of the world is an expensive venture. Worse still, the number of Internet users seems to be declining. Going by the most recent statistics released by the Nigerian Communications Commission (NCC), the number of Internet subscribers dropped to 91,274,446 in January, as against 91,880.032 users recorded in December 2016, showing a decline of 605,586. This is one of the major reasons why the average shopper remains seemingly stuck in his largely traditional shopping ways.
An online shopper, Bimpe Akindele, also raised the issue of unsavoury experiences from delivered orders. She said the eCommerce experience in Nigeria has been stalled by the action of some online retailers who end up disappointing the customer with the delivery of items different or inferior in quality from the one seen or ordered online.
In such a case, she stressed that the customer has to bear the inconvenience of having to either navigate the thorny process of seeking a refund or waiting an extra lengthy number of days to get the right item. This is why ensuring that “What you see is what you get” remains a unique selling point in the e-commerce market.
A telecoms expert, Kehinde Aluko said a recent report revealed that the Nigerian eCommerce industry recorded a handsome $1.9b figure in 2016 and the figure is expected to reach an estimated $3.9b in 2020. “However, e-commerce in Nigeria remains a predominantly urban phenomenon. For many in the hinterlands and rural communities hobbled by the absence of the most basic infrastructure, e-commerce will remain an abstract concept for a long time. To reach these ones, siting a physical store not too far from their location remains the best bet,” he stated.
Seeing And Touching Syndrome
Ayogu wondered why many shoppers with access to the Internet still end up carrying out most of their e-commerce purchases in physical stores? For many Nigerians, seeing and being able to touch the item beats just seeing it on the screen of a mobile phone or laptop. Majority still want to see, touch, feel and/or experience a product before they part with their money.
According to him, commerce in Nigeria originated from a traditional standpoint, stressing that nothing feels better than haggling with a seller face-to-face and eventually securing a bargain. The glint in the eyes of the buyer and renewed spring in the steps are a sight to behold. “For now, at least, e-commerce will struggle to completely wipe away this culturally-ingrained shopping behavior.”
Chief Executive Officer of Jumia, Juliet Anammah, in an Interview with The Guardian, said: “Apart from providing adequate security in the country, the things that could be done are pretty straightforward and seemingly simple, take Nigerian Postal Service (NIPOST) for instance. In most countries, the public national postal service like NIPOST serves as the biggest logistics partner in eCommerce because they are in every city. If NIPOST was working efficiently, which I believe government can do with some determination, we would not need to invest at all in logistics. I would only get a warehouse, assemble my products and get them to the nearest NIPOST office where consumers can pick their items. With this, the cost of distribution or delivery will be grossly reduced.”
According to her, the entire infrastructure network really affects vendors mainly, saying apart from Lagos; other ports in Port Harcourt and Calabar are not functional. “If those ports were functional, everyone will not be shipping through Lagos. We are now compelled to serve our customers in Benue or Yobe State from Lagos inventory. If those ports were functional and with Calabar – Ogoja- Northern road functional, we can reduce the period of delivery from four to two days. All these are linked to infrastructure – seaport, road and rail network and all these things are what government can do.
“The third thing is related to the foreign exchange market. The foreign exchange market requires certainty, especially for foreign investors, importers and exporters. They must be sure that this is the rate and it is applicable to everyone, more so if they want to source from the market they can be sure of the process to follow. It’s one thing to liberalise the foreign exchange market and another to build certainty into the process of liberalisation. This will help the average manufacturer and vendor who need raw materials to produce goods they can sell online. There are really many other things government can do but these are certainly the urgent ones.
Head of Digital Media and Strategy, VoguePay, an online payment platform, Oluwole Ogunlade, wants the trust issue resolved, saying it remains a big challenge in the eCommerce industry, reason the sub-Sector is experiencing hitches.
He noted: “This is the reason a customer would want to pay for products on delivery. Nigeria is still a cash-driven economy. There is the need to develop and encourage the cashless Nigeria project, which will reduce the incidence of carrying cash around.”
Ogunlade said the country would do better if the initiative becomes robust, advising online platforms to always ensure that the products they put up for sale are genuine and match specifications. “This is where the issue of trust also comes in,” he added.
No comments yet