e-commerce then
Nigeria is the largest country by population in Sub-Saharan Africa and it also has the biggest economy. Both Jumia & Konga online vendors report over 100,000 unique daily visitors, thus helping to grow Nigeria’s online shopping value by 25 per cent; from N49.9 Billion in 2010 to N62.4 Billion in 2011, according to Ngozi Okonjo-Iweala, Nigeria’s then Finance Minister, while presenting President Goodluck Jonathan’s mid-term report. Nigeria’s e-commerce market was developing rapidly, with an estimated growth rate of 25 percent annually as at February 2014.
A recent report by London based Economist Intelligence Unit (EIU), identified industry giants, such as Jumia, Konga and Jiji, as leading the African charge to boost the continent’s growth of online, technology based retail business.
The report, which highlighted countries and metro regions in Africa with the biggest potential for e-commerce growth, as well as the trends and developments in the market, also noted that Nigeria’s three main online retailers; Jumia, Jiji and Konga, serve a mass-market clientele.
According to an online researcher, e-marketer, while e-commerce across the rest of the world is growing at 16.8 per cent, Africa’s e-commerce space is growing at a rate of 25.8 per cent – making it the fastest growing in the world. Nigerians are notorious for their love of shopping. The Euromonitor Nigeria in a 2011 report revealed that Nigerians spent $6.3 Billion per year on clothing. In a recent survey conducted by Philip Consulting; 38 percent of Nigerians prefer to buy products through the internet. Middle class consumers are the biggest purchasers online. Nigeria’s middle class now accounts for 28 percent of the population, and the middle class are well educated, with 92 percent having completed a post-secondary school education. This middle class is brand conscious and tech savvy and their technology of choice is a mobile device.
e-Commerce as a game changer in the Nigerian economy
The evolution of e-commerce in Nigeria and its potentials as a vibrant source of economic growth and development. Its impact on Micro, Small and Medium Scale Enterprises (MSMEs) towards creating jobs and generating wealth.
Since a strong legal framework is crucial to the successful running and regulation of any vibrant and secure e-commerce system, policy makers could find some of these recommendations useful. We can put Nigeria on the world map of e-commerce revolution.
e-Commerce could get bigger and bigger in Nigeria
e-Commerce continues to grow in Nigeria. It’s the same with the rest of Africa and most part of the world. In Nigeria, e-commerce has been growing even faster. Nigerians are embracing e-commerce as their preferred platform for buying and selling of goods and services.
The best part is that Nigeria has a predominantly youthful population. There are presently about 90 Million Nigerians connected to the internet; thanks to the rapid growth of mobile telecommunications. This represents about 50 per cent of Nigeria’s 183 Million people. According to Philip Consulting in 2014, the growth of online based transaction in Nigeria records over $2million, about N320 million worth of transactions per week and about N1.3 Billion a month from the 38 percent of Nigerians who prefer to buy products through the internet.
e-Commerce as contributor to economic growth and development
e-Commerce has started contributing to the growth of the Nigerian economy. First, e-commerce is creating jobs for the country’s over 30 Million unemployed youth, according to the National Bureau of Statistics (NBS). Though the actual jobs created were just 187,226 jobs as at 3rd quarter of 2016.
The ICT industry directly contributed over N1Trillion to Nigeria’s 2016 Gross Domestic Product (GDP). ICT’s contributions to other sectors of the economy is also on the rise.
If more Nigerians have access to the internet, that could positively impact on the e-commerce market. The Minister believes that from the present $13 Billion, online consumption could worth about $120 Billion by 2025.
Impact on Micro, Small and Medium Scale Enterprises (MSMEs)
The e-commerce space is a major part of today’s market. What is the worth of a market without MSMEs. MSMEs are engines of economic growth and development. They make economies more competitive, vibrant, and resilient.
In countries like US, India, Japan, China, and Brazil, MSMEs have continued to create jobs and generate wealth for Millions, particularly the youth population. The success stories have not been just all about the entrepreneurial spirits but the technological support as well.
With the immense value information technology creates, MSMEs’ economic potentials in Nigeria can be amazing.
With e-payment-solution companies springing up in Nigeria, buying and selling online has been given a great boost. MasterCard, InterSwitch, e-transact, and VisaCard are continually improving their services to provide an easier, safer, and faster online shopping experience to Nigerians. This is good for business, and for the Nigerian economy.
Providing a strong legal framework for a vibrant and secure e-commerce system
Law is not as bad as most business people think it is. Law does not only send people to jail; it can be an instrument of social engineering. Law can help you protect your business, regulating your affairs in a safer and happier way; that is exactly what proactive and strong laws can do to e-commerce entrepreneurs. It can help them succeed. To create a safer and more secure e-commerce environment for Nigerians, the right laws must be put in place.
Data protection and intellectual property rights protection are invaluable
Online privacy is at risk without data protection. This is why protecting data is crucial. Since people who buy products and services online are often required to use their e-payment cards, vital information may be exposed to risks.
Hardly can we separate a safe, secure, and vibrant e-commerce system from strong and proactive intellectual property laws. Copyrights protection under the Nigerian Copyrights Act comes to mind; simply categorizing software under ‘literary works’ will not sufficiently protect intellectual property rights owners in today’s digital world.
Even trademark infringements are taking a new dimension online; cyber-squatting (registering or using a domain name with intent to profit from the goodwill of a trademark belonging to someone else) for instance. We need a total review of our laws to bring them in line with international best practices. We must catch up with the rest of the world.
e-Commerce Now
Just as eCommerce companies, both “big” and small, set their sights on claiming their share of Nigeria’s estimated $13 Billion online market, most ambitions have been quickly tapered by the sluggish rate of adoption. And as expected, many critics of Nigeria’s eCommerce market potential have anchored their argument around such performance metrics, which seems to have helped peddle two popular narratives:
- “The eCommerce market is already saturated” and
- “The eCommerce market was never there.”
The factors that helped shape these views are self-evident. One being the two, presumable, behemoths in the form of Jumia and Konga almost solely dictating the public perception of the health of e-Commerce in Nigeria. In reflection, we can point to the occurrence of certain events, specific to these two companies that have affected public attitude towards eCommerce as a whole.
One notable event is the discovery of Konga’s “abysmal active user base” that was revealed in 2016 Half-Year Report. Learning that one of Nigeria’s most funded internet companies, and leader in the eCommerce space, had only managed to garner 184,000 active users was quite disappointing in a potential market of over 90 Million people.
Surely, some part of this disappointment stemmed from the tangible evidence of Konga’s aggressive growth strategy that we had seen unfold prior to the report. However, rather than a cloud of doubt and uncertainty forming around just Konga it seems to have grown around the entire notion of eCommerce in Nigeria.
A peaceful weekend was rattled by news that the Zinox Group had acquired Konga, one of Nigeria’s biggest e-Commerce giants in a sudden swoop. The Zinox Group is a technology company that built Nigeria’s first internationally certified computer system and has large substantial stakes in ICT in Nigeria.
Two months after cutting nearly 60% of its staff, Konga, one of Nigeria’s leading e-commerce companies, has been acquired by Zinox, a local tech firm which manufactures and distributes computers and also manages data centers.
The total acquisition price remains undisclosed, but Zinox spokesman, Gideon Ayogu said the cash-for-equity deal was “way higher” than the $10 Million price that has been widely reported. The deal will see Zinox buying out ownership stakes from Naspers, Africa’s most valuable company, and Kinnevik, a Swedish investment firm.
Over the years, a lack of profitable exits from African start-ups by Investors has often been held up as a reason for funding gaps on the continent. The inability of Konga, one of the continent’s best funded start-ups, to deliver returns on investment for both Naspers and Kinnevik will do little to dispel that notion. For Naspers in particular, running internet business in Nigeria has proven difficult with several ventures, including online marketplaces, messaging apps and classifieds, proving to be more misses than profitable hits. Another example is cited below:
OLX Shuts Down Office in Nigeria
We now have official confirmation from Sjoerd Nikkelen, CEO of OLX in Asia, Middle East and Africa that OLX has indeed shut down physical operations in Nigeria. He however made no mention of Kenya or Ghana.
It was a difficult but important decision in Nigeria to consolidate operations between some of their offices internationally.
Multi-national media group and Investor Naspers has allegedly shut down all OLX offices in Africa except the one in South Africa. Operations in Ghana, Nigeria and Kenya are going to be affected by this announcement. OLX is a global classifieds platform, with physical presence in nearly 40 countries.
Challenges facing e-Commerce: The core of the challenges faced by e-commerce businesses in Nigeria are pretty standard
They are as listed below:
- Logistics
- Marketing
- Business Model
- Technology
- Payment
- Product Sourcing
Logistics is probably the number one challenge. The word “Logistics” used to stand for just about every imaginable problem here in Nigeria. When a platform owner talks about logistics challenges, it is talking about how difficult it is to get products from the sellers/distributors/warehouse to the buyers in an efficient way. This has to do with infrastructural limitations that are taken for granted in more developed markets. Bad road networks makes it extremely difficult to get products delivered to buyers. Lack of warehouse space or an efficient warehouse management system makes it difficult to stock more items and deliver them in a timely manner to buyers. E-commerce players are taking logistics into their own hands. We are seeing players launching their own logistics companies, appointing on-ground sales reps to end their logistic issues.
Marketing – Most of the players in the space are relatively newcomers, they are unknown. To create awareness in a new market, you need to market your brand and your offering to consumers. The cost to do this for small players can be very prohibitive. Building a reputable brand will require working closely with a reputable brand / Advertising agency. Brand building takes time. A brand helps people trust your communication and proposition. E-commerce players need to be ready to be in it for the long haul as the market isn’t mature enough for them. One big mistake many of the players make is thinking online advertising is all that’s needed. Online advertising only reaches people who are online. Having an integrated campaign helps plan communication across a potential customer’s journey – From print to radio, TV and online.
Business Model – The business model of many of the players makes competitiveness with the price and quantity obtainable in the open market impossible. The open market is almost always guaranteed to be less expensive than prices found online (Except you are shopping on a classified ads site like Jiji and OLX). Notice how top players have switched to a marketplace model? This helps them address a number of the logistic issues while also being plagued with new problems like quality and experience. A marketplace model helps increase your offerings and also reduces your warehousing requirements. As a marketplace, you become an aggregator of products and this significantly increases your inventory without burdening your warehouse.
Technology -Probably not as big an issue these days but thought to mention it nonetheless. Everyone uses the same underlying technology. While not a problem, every site looks just like the other and user experience is simply not top notch. You will know what I am talking about if you have shopped on international sites. Building an e-commerce site on wordpress and installing plugins is great for a start but several of the biggest players in the world develop their own proprietary platforms and continue to tweak it based on user feedback. This is one area that Konga was able to accomplish in Nigeria and it came at a horrific cost i.e building their own software for the 3rd world Market
Payment -We probably invented “pay on delivery” here in Nigeria. We had to because Nigerians don’t trust online sites with their cards. This model is extremely tough to sustain. It’s very expensive to maintain but we can make it work. With over 8.4Million ATM cards reported to be active in Nigeria as at 2016 as stated in NIBSS, it only makes sense to try to include those without the cards in the mix. Payment on delivery is not going anywhere anytime soon so we just need to get creative with how we use it. I hear some players are planning to stop using it, would be nice to hear how that is working out for them. Asides the payment on delivery challenge, the experience of paying online can also be very frustrating, sometimes it works sometimes it doesn’t. Sometimes your money is deducted and you still get an error from the platform.
Product Sourcing – How do e-commerce players get their products? Do they get them directly from the manufacturers, a major distributor or in most cases do they just rely on a seller in computer village for example? Many players don’t have a reliable source of getting the right products at a good rate and on time. If your business model is a marketplace, sourcing products might not be your concern. When you run a marketplace it’s also difficult to totally control quality of the same product being offered by several merchants.
The whole world is getting smaller as a result of the internet which has sky-rocketed the effect of globalization. Electronic commerce is an area that we have started exploring in Nigeria. As such, we are also gradually learning about the technicalities involved in Nigeria being a developing country with a low level of technological awareness and expertise is struggling with its numerous problems which have left consumers in e-commerce transactions crying out for protection.
Nigeria has a great potential for e-Commerce, but the negative issues stated above need to be corrected for e-Commerce to fully play a vital role in the business environment in Nigeria. Some of the recommendations to improve the acceptance of e-Commerce in Nigeria include public awareness and making access to the internet much cheaper so that many more people will be able to afford it on their laptops and mobile phones.
E-Commerce sites should also endeavour to use verifiable payment methods and use security certificates, (SSL certificates), for their pages to build customer’s trust. Big and small businesses should also make sites for personalised products and services.
To further prevent online frauds, e-Commerce sites should provide the customers with customised vouchers and generate exclusive codes, offer special discounts, tokens and coupons from time to time. These will attract and retain customers.
Many Nigerians nowadays are joining their counterparts around the world to participate in eCommerce with the opportunities offered by modern technology. You too can tap into these boundless opportunities and start making money from eCommerce.
I once listened to an eCommerce professional on radio and was particularly inspired by his words that ‘if you look at the top five companies in the world today, they are online businesses, meaning they do their business on the internet’. These points below will aid your establishment of your e-commerce business. Note that these are not arranged in any chronological order.
Draw Up Your Business Plan: Just like any other business, you need a good business plan if you want to start eCommerce business. I bring this first because it is the road map that will guide your operation from the set up to doing business proper; else you may deviate from your original plan by alluring opportunities jostling for attention online. A good business plan will also give you a picture of what you are going into. Finally, it might help you solicit funds for your business if occasion warrants.
Rent an Office Space: Are you planning to start eCommerce business? Then consider renting a physical office space. The size of your office for eCommerce business may not be a duplex, but at least a small parking space for your bikes is of utmost importance. A medium sized office of say three bedrooms is enough to start with, but don’t fail to consider expansion because you never can tell what happens in the first 3-6 months, especially if your delivery is speedy and your service of good quality.
Create a Website (Online Store): A website which will act as an online store is very important for those who want to start eCommerce business. That is where customers will be visiting to carry out transactions with your business. Setting up a website is more or less like renting a traditional shop. The cost of setting up a website presently differs depending on the company you are using.
The quality of service and hosting costs also plays a role. There are far cheaper websites, but that is not for a business as complex as eCommerce. Currently the cost of setting up a website in Nigeria lies between #150,000 and #300,000 which we currently offer in Courteville Business Solutions PLC.
Acquire Office Equipment: Certain office equipment are needed to start eCommerce business. You will need to buy some office equipment such as computer, scanner, photocopier, and stationeries. Also, since electricity is not guaranteed in Nigeria, you must also buy a generator. You will also need to buy phones. Dispatch Bikes should also be bought.
Hire Your Staff: You definitely need competent staff to start eCommerce business. eCommerce business is a very complex but fast growing business in Nigeria, so get ready for a continuous hiring process, as you will need more and more staff, especially Dispatch Riders.
Get Your Business Registered: At this stage, you are set to start eCommerce business. The next thing is to register it with the appropriate bodies.
Choose Your Payment Integration: This is very important thing you must consider when you are ready to start eCommerce business. You have to set up easy, safe and secure payment integration for your customers or clients to pay for products or services on your website.
The key to successful start eCommerce business or online store in Nigeria is to know exactly what product you want to sell or what service to offer. This guide also showed that you set up your eCommerce business after you have taken time to study the product or service and improve on your knowledge about the product as per how it compares with the existing trend on the online market place.
https://qz.com/1198123/nigerias-konga-jumia-rival-bought-by-zinox/
https://techpoint.ng/2018/02/03/zinox-acquires-konga/
http://punchng.com/prospects-and-challenges-of-e-commerce-in-nigeria/
https://techpoint.ng/2018/02/05/kinnevik-naspers-konga-investment/
https://www.businessamlive.com/nigerias-12bn-e-commerce-market-seen-driver-growth-near-term/