Of eCommerce Growth and Digital Economy

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Emma Okonji examines the growth and sustainability of e-Commerce business in Nigeria in the era of digital economy

Today, with the impact of globalisation, digitalisation and social media, the engagement with e-commerce across the world keeps changing. Many companies and advertising players are forced to implement new consumer and business models and apply innovative business strategies. Social media marketing has become a norm for most companies with significant use of social media sites like Twitter, Instagram, Facebook and YouTube.
Since its diffusion, online communication has become one of the most commonly used methods of communication for people of all ages, genders, nationalities. Currently, major companies rely very often on the power and effect that the new media have on their brands and proactively try to use these tools in order to create a positive image of their businesses. Thus, it is natural to think that marketers should seek to attract fans and create awareness of their brands through these platforms. By utilising the social aspect of the web, online marketing is able to connect and interact on a much more personalised and dynamic level, all in the name of e-commerce.

Growth trajectory
E-Commerce, also known as e-Business, or electronic business, is simply the sale and purchase of services and goods over an electronic medium, like the internet. It also involves electronically transferring data and funds between two or more parties. Simply put, it is online shopping, as it is commonly known.

Consequently, brands across the world have invested billions of dollars in this venture to ensure they connect with their target audiences on different locations. By monitoring the market trend, many brands have gone ahead to design what they refer to as “market specific” advert messages, with very critical attention paid to media selection, simply to ensure that they do not miss their potential consumers.

This aspect of advertising trail through e-commerce is creating new directions for the future of e-commerce in Nigeria. E-commerce companies are now actively developing strategies to explore this model while discerning advertisers who are planning to reach more of their target audience are plugging in to take advantage of the opportunities.

The reasons for these moves may be connected to recent reports on the digital economy in Nigeria. According to reports on export.gov, Nigeria’s economy is gradually becoming cashless. At present, the adoption of electronic transactions is continuously increasing, with Automated Teller Machine (ATM) transactions dominating the volume of electronic transactions and the Nigerian Inter-Bank Settlement System (NIBSS) Instant Payment dominating in value. The cashless policy has resulted in increasing demand for ATM services deployed in major cities and commercial centers across Nigeria to facilitate electronic banking and financial services.

Sustainability
The report further stated that the successful adoption of electronic payments in Nigeria is gradually becoming sustainable, thus encouraging the entrance of payment service providers such as Visa and MasterCard, which see Nigeria as a promising market. Debit cards from many local banks such as Citibank, Zenith Bank, UBA, and Fidelity Bank , are now used by Nigerian travelers to make payment in foreign countries such as the United Kingdom, Germany, South Africa, and the United States. Online wallet services like PayPal are available to residents of Nigeria and all transactions are currently denominated in the United States Dollar (USD).

In addition, the demand for electronic transactions has attracted payment facilitators from Europe and Asia who are investing in Nigerian electronic infrastructure projects. Fast growing youth populations, expanding consumer power, and increased smartphone penetration, strengthen online commerce and financial technology in Nigeria. The current e-Commerce spending in Nigeria is estimated at $12 billion, and is projected to reach $75 billion in revenues per annum by 2025.

A financial technology analyst, Tade Adelegan, once said: “The future of e-commerce in Nigeria is still very bright despite the challenges recently noticed in the industry. It is sad that companies like OLX, DealDey, Efiritin and few others shutdown their businesses in Nigeria claiming non-profitability. I know that few others are also struggling but I believe that should not spell doom for the industry in Nigeria if the industry players make deliberate effort to develop it.”

He stated this while stressing on the sustainability of e-commerce growth in Nigeria.
In recent times, according to streettolz, more than 32.88 per cent of the Nigerian population already has access to the internet and the rate of mobile phone usage increased to 87 million representing an attractive market for mobile commerce. Nigeria’s e-commerce market was recently valued at N225 billion or $1.3 billion due to the 25 per cent in e-commerce growth.
“These are impressive statistics that should not be overlooked. As a strategy for survival, diversification could be the way to go. E-commerce owners must be deliberate and put into adequate use the data they have on consumer behaviour to invent other services that would continuously grow their clientele. Such services could be new or be an expansion of the existing ones,” Adelegan advised.

Jumia’s contributions
One company that is already looking in this direction is Jumia. The company recently announced its decision to open its platform to more advertisers who wants to link up with their audiences.

Speaking about Jumia’s contribution and drive towards e-commerce growth in Nigeria, Head of Growth and Partnerships at Jumia Nigeria, Olusegun Martins, said: “Our platform is one of the most visited in Nigeria and Africa. We are in 12 countries of Africa, and in each country, we serve consumers everywhere. We are much more than e-commerce, we have hotels, flights, restaurants, classifieds portals, and many more platforms, which give us even more data and more ability to target the right audience for brands looking to reach a wider and more targeted audience.”

According to Martins, “We decided to open our platform starting from last month (October). There is a huge opportunity for brands to showcase their services and products to our audience and that is why we opened our platform. The way we want the brands to look at it is to think of Jumia as a search. Every day, more users access Jumia and use it as a source of research, inspiration and shopping.

“No other platform is growing faster. Jumia is adapting the model of leading e-commerce platform in the US, Amazon. Over the last seven years, Jumia had remained one of the top 10 most visible websites in Nigeria. The clamour by customers for an advertising platform from Jumia is on the increase, hence the decision by the company to give it a trial this year.”

Konga’s milestone
Konga, which has also contributed to the growth and sustainability of e-commerce in Nigeria, was acquired by foremost technology conglomerate, the Zinox Group, in January 2018. Two years down the line, Konga has maintained leadership position in Nigeria’s e-commerce space. One of the strides recorded is the roll out of brick-and-mortar stores in various Nigerian cities which have grown its physical store presence to more than 30 nationwide.

Today, Konga is nearest to the customers as a result of its ubiquitous physical stores across Nigeria’s landscape. Interestingly, these stores also serve a very important dual function; not only as ordering centres but equally as fulfilment centres where customers can pay and collect their items, including those ordered online.

Head, Corporate Communications at Zinox, Gideon Ayogu, said: “By virtue of the fast-expanding retail store roll-out, Konga has further succeeded in growing consumer confidence in e-Commerce in Nigeria. Indeed, the proliferation of Konga stores in Nigeria’s nook and crannies align with the shopping predilection of the average Nigerian who desires to see, touch, feel and/or experience the product in action before parting with hard-earned money. Also closely related to this is the warm, human interaction that comes with engaging with a retail store staff and the confidence-inducing attributes of having an identifiable outlet for shoppers to visit for enquiries, actual window-shopping, pick up items at short notice or even just to complain.”
According to him, Konga also made critical infrastructural investments with the set-up of major regional warehousing facilities. The warehouses, he said, were strategically located in various parts of the country, and they have helped to increase Konga’s carrying capacity and speed of reaching the customers, whether in metropolis or in the hinterlands.

The challenges
Despite the contributions of Jumia and Konga that are operating in Nigeria, the e-commerce industry is faced with challenges that have slowed down the growth rate of e-commerce business in the country.
Logistics remains an issue, although both Konga and Jumia have made critical investments in this area which should resolve this challenge in 2020. Also representing a challenge is government legislation including the proposed online tax which may turn out to be a disincentive for online shopping.

Aside logistics, another major challenge as identified by both Jumia and Konga, is the issue of weak online patronage by Nigerians who still prefer to shop in physical market locations that are close to their neighborhoods.

According to feelers from Konga and Jumia, over 70 per cent of Nigerians still prefer to shop in open market space. For some of them, the idea to shop online, using their data and mobile devices, will cost them more money, despite the convenience, while others are scared about the delay in logistics, especially in the area of delivery of items purchased online. Logistics has become a serious issue, especially at peak periods like festivity periods, where customers experience delay in the delivery of items bought online.

According to the Social Media Marketing Industry Statistics, social media use is set to change the way in which many marketers conduct their businesses. One of the reasons is that consumers’ ratings of brands on social media platforms have become one of the most credible forms of advertising.

Speaking on the challenges, an IT Consultant, Tega Ebitimi, said: “In Nigeria, the challenge with electricity persist, the cost of data remains high compared to that of countries in the same space. The issue of trust is also roving around the success of the e-commerce industry. These challenges must be addressed with deliberate polices by the government to ensure ease of business, while organisations should be creative in providing solutions.”

Although the statistics still favour the existence of e-commerce and to a larger scale, digital economy drive in Nigeria still provides glimmers of hope for the multi-billion-dollar industry, however, how well players in the industry demonstrate willingness to grow the e-commerce business, will determine its eventual growth and sustainability.