| Nigeria | Jan 13, 2016
The national e-commerce market is valued at $1 billion per year and has emerged as one of the most resilient and dynamic sectors. The burgeoning middle class and their increasing […]
The national e-commerce market is valued at $1 billion per year and has emerged as one of the most resilient and dynamic sectors. The burgeoning middle class and their increasing online presence have created a demand for online goods and services, and the need for a reliable and efficient platform for Business to Consumer (B2C) transactions. Currently, 85% of young Nigerians have a Facebook account, and the population is expected to grow to over 440 million by 2050. With GDP steadily rising and the internet becoming a part of everyday life, e-commerce entrepreneurs are scrambling to carve out a position for themselves.
Western-style shopping centers have been slow to catch on in Nigeria. High costs and scarcity of suitable land in cities like Lagos have curtailed retail development. In this vacuum of bricks-and-mortar stores, online retailers have thrived. Many Nigerians have refrigerators, clothes, and iPads delivered to their doorstep. Platforms such as Konga and Jumia provide this service, creating a formalized online shopping experience without the hassle of having to leave the house.
One of the first challenges faced by Nigeria’s e-commerce B2C companies was ensuring safe delivery of the product to the customer. The lack of a reliable postal infrastructure forced online retailers to provide both the platform for B2C transactions and their own logistical solutions. Many e-commerce companies have their own fleet of vans or mopeds. Konga, for example, has depots in the capital, Abuja, Lagos, and Port Harcourt and promises to deliver anywhere in the country within five days.
Secure payment was another issue. Nigerians were wary about making purchases online. Fear of cybercrime is especially valid in Nigeria, which has been ranked as the third most fraudulent country in the world. In 2005, PayPal closed all Nigerian accounts and denied registration to any user traced to a Nigerian IP address. However, last year Paypal partially re-entered the market. The number of sign-ups in the first week was in the tens of thousands. Nevertheless, almost all transactions on e-commerce sites in Nigeria are transacted through cash or POS on delivery.
The Central Bank of Nigeria has been receptive to changes in the market and has launched policies such as CIBSS, which enables online financial transactions across local banks, to support ecommerce. Likewise, new e-commerce payment platforms such as a partnership between the United Bank of Africa and Ixaris offer a pre-paid card option for online payments. The private sector has also been active in surmounting these barriers, developing apps and platforms that allow customers to pay for goods and services, such as taxes and mobile phone bills.
With the shops established, delivery secured, and a reliable payment system in place, the remaining challenge is to get more people through the virtual door. Unlike their Western counterparts Nigerian e-commerce companies heavily rely on mobile technology. By the end of 2014, over 120 million Nigerians had mobile phone subscriptions, due to low prices for handsets, low tariffs, and faster network technology. This allowed e-commerce providers to reach a higher number of customers through smartphones. The number of mobile subscribers is expected to rise to almost 170 million by 2017. As it stands, around 43% of web browsing is done via mobile devices; in North America this figure is 14%.
Much remains to be done. Logistical problems, such as ensuring quick and reliable delivery to rural areas, are challenges that can only be met by more widespread infrastructural developments. Likewise, telecommunications companies have to get more of the population online. However, the potential is there. The appetite for shopping is growing and e-commerce entrepreneurs are ready and willing to adapt and capture a significant portion of this burgeoning consumer market.