Online market places, adding value to SMEs
Through internet service expansions, e-commerce firms in Nigeria have proliferated in recent years adding values to small and medium scale businesses. JUSTICE GODFREY OKAMGBA examines issues, prospects, and challenges in the e-commerce industry.
Globally, the trend of buying and selling of goods and services on the internet through the World Wide Web (WWW) has become fashionable and more sophisticated with many online market places, such as, Amazon, Jumia, EBay, and Konga.com amongst others relishing and rapidly transforming the retail business with huge volumes of transactions recorded on daily basis.
In Nigeria for instance, e-commerce firms like Konga.com, Taafoo.com, Ojashop.com, Fouani.com, Gloo.ng, and kara.com.ng are offering wide range of products, giving business access to over 50 million Nigerians.
This has significantly reduced the barriers in the selling of many products and offering of services. Through wider spread coverage and use of smart phones, e-commerce now provides more opportunities for Small and Medium scale Enterprises (SMEs), especially in rural areas.
Nigeria is one of the fastest growing nations in terms of internet usage, currently ranked 8th in the world, accounting for 40 percent of internet users in Africa, said FBN Capital report on macro economies
According to Economic Commission of Africa (ECA), both SMEs and large businesses have benefited from the adoption of e-commerce in terms of cost reduction in advertisement, limitation of time and space, and shortening of the traditional supply chain.
Specifically, the two Nigerian biggest e-commerce giants Konga.com and Jumia.com have turned out to be huge market places where some SMEs sell their products to the consumers on commission basis. It is also perceived by industry watchers that, through greater access to the internet, the e-commerce, will gain more grounds than any other segment of the retail business by 2017, with a compound annual growth rate of 11 percent each year.
As at 2012, data from Nigeria Interbank Settlement System (NIBSS) showed that the volume of online retail transactions or non store shopping alone stood at N77.5 billion, and had predicted upsurge in subsequent years.
On its part, Phillips Consulting Reports say e-commerce platforms in Nigeria record over 1.3 billion worth of transactions monthly and no less than 500 orders are placed in a day with each retailer nationwide.
The access to internet services are improving and recording significant expansion in recent years, while businesses of many kinds are queuing into online platforms to transact businesses and offer services to customers with much ease and convenience
However, many online market places, in Nigeria, are proliferating; with over a hundred online stores, but unfortunately, 90 percent of online shoppers patronises only a tiny fraction of these stores. “As a matter of fact, 38 percent of Nigerians actually prefers online shopping to the traditional in-store shopping”, noted Phillips consulting in a survey.
It further says that 15 percent of Nigerian online shoppers prefers DealDey, 25 percent Konga.com, and 38 percent prefer Jumia.com.
As the trend continues to boom, not a few new online stores are constantly emerging, while some offline stores are making plans to transform their businesses online and more SMEs embracing the trend.
It has been reported that within the last two years, investors pumped over ₦205 billion into the e-commerce industry in Nigeria. In a report by Jumia.com, the online market giant said it has secured about ₦8 billion in funding since its launch in 2012, while orders placed on their website in 2014, when stacked on top of each other, will be 220 times the height of the tallest building in the world.
Currently, the e-commerce industry is worth $550 million, and is further envisaged to experience further boost to about $10 billion, according to the ministry of communications.
However, analysts are of the view that more internet service expansion and effective regulation will ever remain one of the key drivers of the nation’s economy, observing that, by implication the Nigerian GDP will be positively affected.
“There are no doubts that most SMEs have recorded tremendous feats through the online platforms, there is much more anticipated growth in the e-commerce industry, but this anticipation has been slightly hampered by lack of regulation”, said Nduka Udeh, CEO, Shoptomydoor.
According to him, “the government did not have defined effective regulatory policy framework on e-commerce, for like the Consumer Protection Council. I am not sure if there is any updated law that caters for the e-commerce industry.”
He observed that the e-commerce industry was growing rapidly, but its contribution to the country’s GDP was less than one percent. “If the industry could reach up to three percent, which is the average globally, invariably, that gives about $10billion to the GDP,” Udeh confirmed.
Nonetheless, the prospects in the e-commerce sector seem bright as operators constantly invest in deepening internet services, hence the focus have turned to the business process management and quality of services offered to the customers which have become a very critical subject.
BusinessDay investigations reveal that delayed service deliveries, poor customer services, lack of authentic web display of products, down to unprofessional and unethical practices hamper the effectiveness of online shopping in Nigeria.
“The quality of products being sold to customers, remain a very critical issue, especially smart phones. When you talk about buying smart phone devices from Jumia or Konga, what you will always get is disappointment,” a smart phone expert at Blackberry office, who does not want his name mentioned, told BusinessDay.
“In terms of quality, durability and authenticity of product, Jumia and Konga are incomparable to Slot. Most of the customers who purchase their smart phones from Jumia and Konga bring their devices to this office for fixing. Being an online platform does not give one the licence to sell products that are not of good quality to the customers,” he posited.
However, a report by Symantec Corporation, an American based security and back up company, said that SMEs would become top target destinations for cyber criminals. The number of attacks on SMEs accounted for 31 percent of 69 million attacks that occurred in the 157 countries covered in a survey. This actually represents a 13 percent point rise from the previous year when SMEs accounted for 18 percent of the total attacks, the report further stated.
In order to curb the risk of security breaches which is a notable feature of online transactions, a clearly defined information technology policy should be put in place, so as to avoid unnecessary information leakages that could mar any business, advised Ugochi Ugbomeh, manager, Transit Nigeria.
Speaking recently in Lagos at the connect Nigeria e-business fair, Rafael Afaedor, former CEO of Jumia and the current founder of Supermart, an online grocery delivery shop, said the e-commerce was not different from the conventional buying and selling. What actually changed was the medium through which the buying and selling took place.
“This medium is actually the internet and it has gone a long way in reforming business activities in Nigeria. Anybody around the world could do millions of transactions through the ecommerce platform, what we should be talking is the quality of services these online platforms can render,” Afaedor concluded.