Why e-commerce will define Nigerian market space in future

Electronic commerce (e-commerce) is gradually changing the face of marketing, especially in Nigeria – one of the late bloomers coming into the world of internet marketing.

Gone are the days when a market is defined as a “static” place where buyers and sellers meet directly to trade goods and services. E-commerce has redefined the marketing transaction process to involve a wider and diverse audience on a global scale (beyond your proximity) as both the buyers and sellers do not have to be physically present before transactions are made.

By definition, e-commerce or online shopping, as it is often called, involves the purchase of products and services from a seller over the Internet.

In Nigeria, Africa’s largest economy and population of about 170 million people, e-commerce is gradually taking over the market space, replacing physical stores and malls.

Compared to what we have at the turn of this century when only few people knew about the Internet and the advantage it possesses, the introduction and ubiquity of smartphones and the increasing internet penetration has continued to help usher in innovative business ideas such as e-commerce.

The possibilities and the opportunities presented by this new form of marketing are incredible and all-encompassing.

Since e-commerce was introduced in Nigeria, it has brought about innovative and exiting business deals that are now changing the conduct of everyday trade. It has been used to sell fashion products, mobile phones and services such as restaurants and spa deals.

The growth of the online shopping sector in the country is directly linked to increased access to the Internet. It is not surprising that when the world started taking a good look at investment opportunities in Africa, Nigeria was one of the major markets they set their eyes on.

The evidences are in the expansion and launching of smart technology gadgets by multinational technology companies like Tecno, Samsung and Microsoft.

E-COMMERCE AND THE NIGERIAN CONSUMER MARKET

While the number of those shopping online are still low, compared with those shopping offline, prospects and statistics show that e-commerce may take over Nigerian market place in the future.

In Lagos where there are at least 17 million people (about the size of Kenya, which has more than 10 shopping malls), there are less than six shopping malls. In Nigeria, there are about 25.

While investors such as Shoprite continue to expand their business in Nigeria, the competition is likely to shift quickly from shopping mall versus formal retail market to e-commerce versus shopping mall, at least if today’s entrepreneur wants to meet the needs of the growing tech-savvy generation.

A recent survey by Philips Consulting, a business management and consulting firm in Nigeria, revealed that 38 per cent of Nigerians who make up the growing middle class in Nigeria prefers to buy products through the Internet. This bulk of people, it said, spend about $2m per week and as much as $1.3bn on internet purchases monthly.

Global consulting firm, McKinsey, predicts that Nigeria’s large consumer market will be valued at $1.4 trillion by 2030.

Based on an expanding consumer class in Nigeria, McKinsey projects that consumption could more than triple, rising from $388bn a year today to $1.4 trillion a year in 2030, an annual increase of about 8 per cent.

It also projected a growth rate of roughly 7.1 per cent per year through 2030, a feat that could raise the country’s total GDP to more than $1.6 trillion, making Nigeria a top-20 global economy, with a larger economy than the Netherlands, Thailand, or Malaysia in 2030.

WHY E-COMMERCE WILL TAKE OVER

A decade ago, the prospect of online marketing seemed anomalous in Nigeria given the low internet and broadband penetration.

Today, the story has changed, summarily due to growing internet penetration. Digitxplus, a company that deals with market research and statistics, says Nigeria recorded a 200 per cent growth in internet users between 2009 and 2013.

The introductions of tech hubs such as CcHuB and SPARKs have also aided the growth of technological services for everyday needs in the country.

In 2012, Rocket Internet, backed by Swedish investment firm Kinnevik launched Jumia, today’s leading on-line market place in Nigeria and its largest e-commerce operation in Africa.

Rocket Internet has launched other franchise in Nigeria after that. This includes Easytaxi, a smartphone-powered taxi hiring service; Carmudi, an online automobile marketplace; and Jovago a hotel booking portal.

These businesses are gradually becoming multi-million dollar businesses.

International e-commerce payment and money transfer platforms like PayPal and MasterCard ignored internet-related challenges such as cyber crime to launch in Nigeria in the first half of this year.

Some banks in Nigeria have even launched e-commerce portal for small businesses. An example is First Banks’s social e-commerce portal and Guaranty Trust Bank’s ‘The SME MarketHub’, which enable Nigerian entrepreneurs migrate their business online and take advantage of the vast international and local scale of opportunities.

E-commerce and the future

Today. internet penetration is growing faster and there are hundreds of new Nigerian online stores in the cyberspace.

While many of these online businesses still face several challenges, such as availability of nationwide delivery system, under-stocked items, consistency in wide variety of products and services, poor customer service culture and  issues of internet security and fraud, the traditional physical market, it seems, may no longer be able to sustain the increasingly sophisticated and tech-savvy shoppers in Nigeria.

This is because the growth of internet penetration has created a silver lining for entrepreneurs to launch their businesses online.

Broadband expansion, increasing spread of the internet to rural communities, changes in population statistics and a growing middle class will continue to change the lifestyles of the Nigerian consumer; and e-commerce, in the nearest future, will not change not only the way trade is conducted but also the way other marketing systems operates, including producer and consumer relationship.