Consumer demand continues to fuel e-commerce market

E-commerce has grown to become a very lucrative industry, with billions of money being generated annually through online sales. Unfortunately, not every e-commerce venture will end up being profitable. Many have even failed to survive beyond one year of business.

Hence, the impact of retail business globally cannot be overstated given its impact in driving any economy. Globally, retail trade accounts for 27 percent of the world’s Gross Domestic Product (GDP), employing 17 percent of global workforce.

With a population of over 150 million people, consumption pattern in excess of $100 billion annually and a fast emerging middle class, Nigeria remains a promising market on the African continent.

While Nigeria’s retail sector has attracted over N250 billion in the last two years, it has emerged a major driver of economic growth, job creation and wealth generation, creating enormous opportunities for existing and new investors to take advantage of.

Interestingly, the nation’s electronic commerce (e-commerce) market is experiencing an emerging trend with online retail companies like Konga, Jumia, DealDay, Buynow, Gloo, etc, expanding their business across Nigeria and battling for consumers’ attention.

The access to huge customer base, limitless boundaries and innovation continue to guide customer satisfaction.

Nigeria’s e-commerce is expanding rapidly as online sales grew 25 percent in 2011 to N62.4 billion, up from N49.9 billion in 2010. Expectations are that the figure would double by 2014. Some industry analysts believe that this upward trajectory would soon slow down if the e-commerce industry does not expand its scope of business to accommodate a broader spectrum of the Nigerian population, not just the middle-class.

In the United States’ online platforms such as eBay, Amazon, reach out to millions of people.

“The middle/upper middle class numbers are still too small to really give online businesses in the country a boost,” Abayomi Phillips, an entrepreneur, told BusinessDay.

“If you target African middle-class, the buyer is always the cheap-uneducated servant most of whom are employed for house works, buying food, paying energy bills, etc,” Mawuna Remarque Koutonin, founder of Goodbuzz.net, said.

Interestingly, Nigeria’s N150 billion electronic commerce industry is set for significant growth in the next few years, riding on the back of sustained efforts by the Federal Government and the private sector to enhance broadband availability, analysts have said.

Affordable data cost offered by mobile operators as well as consistent acquisition of smartphones have also been identified as major factors that would drive e-commerce adoption.

Twenty-five percent of Nigeria’s over 116 million mobile subscribers use smartphones, according to global market research company, TNS. Industry analysts expect online sales to reach N1.25 trillion by the end of 2013. Besides, online sales grew 25 percent in 2011 to N62.4 billion, up an additional N12.5 billion from N49.9 billion in 2010.

Analysts are optimistic that this upward growth trajectory in online sales will not recede. This, they added, is because electronic commerce companies are increasingly channelling their energies and resources towards providing locally-relevant solutions to Nigerian customers.

The preceding year has seen e-commerce companies move away from merely cloning international brands. In view of this, investor confidence in the e-commerce landscape, according to industry analysts, is growing tremendously.

Jumia.com, a leading online retailer in Nigeria, raised $35 million in fresh funding from Millicom to expand its domestic market and move into a new 90,000 square foot warehouse located in Lagos, commercial nerve centre of Nigeria.

Industry watchers have, however, accused e-commerce companies of not reaching a broader spectrum of the Nigerian population, not just the middle-class. The middle-class makes up about 23 percent of the Nigerian population, according to the African Development Bank (AfDB).

“As an internet company, we distribute our catalogue on the mobile devices and personal computers. These mobile devices must be in the hands of people along with the internet connection and payment channels to enable them shop on Konga or other online retail stores,” Sim Shagaya, chief executive officer of Konga, an online retailer, told BusinessDay.

According to him, the capacity of e-commerce firms to serve lower-income Nigerians largely depends on the affordability and availability of mobile devices and internet connectivity.

Victor Alaofin, chief executive officer, Ryte Internet Technologies Limited, the firm behind Rytedeals.com, said e-commerce is growing very rapidly. According to him, the industry is growing not less than four or five times the average growth of the Nigerian economy.

“We have seen estimates that put expected volume done by e-commerce in Nigeria as at 2012 at about N75 billion and if that is correct, what we are saying is that another four or five years we will be looking at N150 billion and that is over $1 billion. With an already thriving e-commerce market, Nigeria is becoming a game-changer in African e-commerce,” Hennie Heymans, managing director, DHL Express South Africa, said in a report.

In the same vein, Olumide Olusanya, chief executive officer, Gloo.ng, an e-retailing firm, told BusinessDay that e-commerce firms should be given ample time to evolve and scale their businesses.

“You also need to be aware that new technology adoption has a typical adoption curve where you have early adopters and late adopters,” he said. 

“What you see, as was demonstrated by recent evolution of telecoms and e-payments industries in Nigeria, is that the early adopters are typically the middle-class, before these new services percolate to the general populace, who are generally more circumspect about adopting them.

There is a flurry of activities in Nigeria’s e-commerce market in the mould of new investment drive, strategic partnerships, all geared towards taking advantage of the country’s budding middle-class and massive online population of about 45 million.

Anne Agbaje