Opportunities for Nigeria's e-Commerce

Friday, February 12, 2021 / 10:30 AM / by FBNQuest Research / Header Image Credit: iStock

The strong appetite for mobile data usage as well asincreased network coverage has increased the potential of Nigeria's e-commercemarket. Based on data from the Nigerian Communications Commission (NCC), mobilenetwork coverage is currently estimated at 103% on the basis of a populationsize of 198 million. However, internet data penetration via GSM is lower, at78%. A thriving e-commerce market will improve trade activity as it provides acost-effective method of connecting producers and merchants directly tocustomers.

The realities of the COVID-19 pandemic have forcedbusinesses to learn, unlearn, rethink and re-strategise their models. On theback of this, e-commerce has emerged as a primary route to survival, especiallyfor SMEs. The pandemic is moving a key component of the marketing mix to onlineplatforms; businesses need to increase their online presence and grow salesusing digital tools.

The financial investment needed for marketing is alsocovered for SMEs by most e-commerce platforms. This cost is a huge overheadSMEs can eliminate while combating the headwinds triggered by the pandemic.

E-commerce platforms like Jumia generally bear thecost for online and offline advertising, search engine optimisation, and socialmedia exposure for businesses on their platform. There are also specialcampaigns like Tech Week and Black Friday which SMEs on these e-commerceplatforms can benefit from in the form of a boost to sales volume due to highcustomer traffic.

Consumer behaviour is likely to shift, post-pandemic,towards e-commerce, as health-conscious shoppers are likely to aviod large,crowded markets. This should create more opportunities for direct-to-consumermodels with online platforms and third-party delivery.

According to industry sources, the e-commerce marketin Nigeria is estimated at USD12bn, with at least 87 Nigerian e-commerceplatforms. However, its potential is still largely untapped but could beunlocked if the industry gains strong consumer trust to transact and payonline.

Jumia's volumes through its contactless deliverymodel, which uses digital payments and includes partnerships with ReckittBenckiser, Procter & Gamble and Coca-Cola, has increased during thepandemic to reach 6.7 million active consumers in Q3 2020. This is 23% higherthan the corresponding period in 2019.

As for logistics, e-commerce platforms are workingwith digital last-mile logistics providers such as Gokada and O-Pay, to deliverproducts to consumers. These partnerships have given a lifeline to the okadas(motorcycle taxis), which were banned in many areas of Lagos State fromtransporting people.

Jumia disclosed that the supply and logisticsdisruptions encountered in selected locations, which also affected their fooddelivery business in the first and second quarters of 2020, largely subsided inQ3 2020. However, the development of the virus remains a fluid situation and isexpected to drive continued macro and operating environment uncertainty.

For e-commerce to attain its full potential, thegovernment must prioritise the tackling of infrastructure challenges ande-fraud challenges in particular.