Our world is moving at a faster pace, and globalisation, actively propelled by technology, is redefining the scheme of things. Technology, right from its inception, has managed to make life easier and faster, bringing astonishing developments previously unheard of.
Perhaps, one of the few things that have advanced technology up to this point is a crisis. No doubt, you’re surprised, but the truth is that crisis has a way of birthing innovation. Just as the saying goes, necessity is the mother of invention.
If the COVID-19 pandemic taught us anything, it’s that humans have a capacity not only to adapt but innovate. It’s a way of defiantly looking at a certain problem and saying, “Is that all you’ve got?”
Like it did in every other aspect of human pursuit, the coronavirus pandemic significantly disrupted global supply chains, among other activities. During that dark period of uncertainty mingled with paranoia, many consumers resorted to online shopping, not necessarily out of choice but to keep safe.
As lockdowns became the new normal, businesses and consumers increasingly went digital, providing and buying more goods and services online, driving up e-commerce’s share of global retail trade from 14 per cent in 2019 to about 17 per cent in 2020, according to the United Nations Conference on Trade and Development.
Reflecting on the powerful global and regional industry transformations recorded throughout 2020, some have predicted that e-commerce is likely to maintain its trajectory throughout the recovery from COVID-19 and even beyond.
As obtainable in other parts of the world, e-commerce has transformed the business and economic landscape of Nigeria. According to Statista, Nigeria’s e-commerce revenue is expected to show an annual growth rate of 11.78 per cent between 2021 and 2025, resulting in an estimated market volume of approximately $10bn by 2050. I’ll touch on this point later.
Curiously, ours is a country where both the extremely wealthy and the impoverished display a voracious appetite for e-commerce, despite Nigeria’s less than desirable economy. One factor I can attribute to this is the phenomenal increase in the number of Internet users in the country.
Between 2001 and 2008, there was a 90 per cent increase in the number of Nigerian internet users; as of January 2021, there are 104.4 million Internet users in the country. With the growth in the number of Internet users comes an exponential increase in online financial transactions over the years.
One interesting aspect of the evolutionary e-business landscape in Nigeria is that from inception, online stores generated excitement and brought benefits – chief among them is convenience. For the youths, online shopping was not only a means to purchase items but to have fun and appear to be polished.
While I can go on and on about the appeal of e-commerce, it’s more important to delve into the sector to evaluate its current realities in Nigeria.
I remember that when Nigeria’s technology ecosystem was at its infancy stage almost a decade ago, e-commerce seemed to be the choicest business idea for newbies to explore. Unfortunately, in recent times, some of these e-commerce startups have struggled to stay afloat while others have given up the fight. Even worse, funding in the sector has become inconsistent.
Conversely, in other African countries like Egypt and Kenya for instance, the e-commerce space is not doing badly. While Kenya’s is expected to surge to $2bn by 2024, Egypt’s e-commerce is projected to grow 33 per cent annually to reach $3bn by 2022.
In line with this estimation, one of Egyptian e-commerce startups, Homzmart, secured a $15m Series A investment in May. No wonder Egypt is touted as one of the most active e-commerce countries in the MENA region.
To survive, e-commerce businesses in Nigeria are beginning to diversify and expand their offerings. Some, like Jumia, are going as far as tweaking their business model to improve profitability.
Jumia’s recent financial results for the first quarter of 2021 showed that while it generated €27.4m in revenue, there was a six per cent drop in its earnings from the €29.3m that it reported in Q1 2020. For some reasons, the company attributed its drop to the effects of the COVID-19 pandemic.
This is not to say the e-commerce scene is completely falling apart in Nigeria. After all, we still have a number of local startups that have recently raised funding – the likes of Pricepally and Rabawa.
E-commerce is a fragmented sector where 80 per cent of transactions is done online. Also, we cannot deny that a chunk of this percentage is driven by social media marketing. It’s becoming a norm for companies to leverage their influence on social media sites like Twitter, Instagram, Facebook, and YouTube to reach their customers, engage them and push sales.
As the pandemic proves to be a key component of the marketing mix to online social platforms, could Nigerian e-commerce players fully leverage the power of social media in their operations? That’s something to think about!
Undoubtedly, e-commerce is riddled with pain points that range from a poor delivery system to trust issues.
More than anything, e-commerce ventures thrive on a robust infrastructure network of rail systems, roads network, and safe waterways. As such, a business’ success, or lack thereof, is hinged on a reliable delivery service.
In Nigeria, e-commerce platforms are circumventing the challenge by working with digital last-mile logistics providers such as GIG, Gokada, Max.ng and O-Pay to deliver products to consumers.
Lack of trust between merchants and buyers is another crucial factor that could hinder the successful workings of an e-commerce business. For example, getting a product that is lesser in value and quality than what you paid for is a major turn-off. Some have even suggested that potential customers feel more ease shopping from international e-commerce giants like Amazon and Alibaba than local alternatives.
That said, e-commerce platforms need to reassess their operations and focus more on changing customers’ negative perceptions of their brands.
E-commerce players must exist in a symbiotic relationship with the local manufacturing sector, even thinking of ways to encourage it. This will allow them to deliver value at scale by amassing a large set of merchants and drive price advantage because of seller competition.
I earlier mentioned that Nigeria’s e-commerce is expected to reach $10bn by 2050. The statistics give a good prognosis of the continuous existence of the sector.
While Nigeria’s drive to accelerate the digital economy bodes well for the multibillion-dollar industry, actors in the e-commerce industry need to up their game to attain eventual growth and sustainability.
ICT Clinic by CFA is published weekly in the Sunday Punch