How e-commerce innovations are growing Nigeria’s economy

Clare Hopping

Wednesday 8 February 2017

Nigeria may not be well known for its online retail sector, but that’s about to change. Innovators are coming up with new ways to get locally manufactured products to the masses.

Traditionally a service-led economy, Nigeria is shifting its focus to technology and e-commerce, enabling its population to buy anything and everything online.

As one of Africa’s largest economies, with a huge retail sector as well, the ground is fertile for Nigerians to start moving high-street shoppers online. Over the Black Friday weekend, Konga revealed its sales reached 3.5 billion naira, more than tripling 2015’s results, while Jumia said visitors to its website also tripled, to 7.5 million, proving that e-commerce is certainly on the up.

The country’s rapidly increasing broadband penetration is a contributing factor, jumping from 10 to 14 per cent from 2015 to 2016. The Nigerian Communications Commission expects this to more than double in the next 12 months, with 30 per cent of Nigerians benefiting from a faster internet connection – ideal for online shopping.

Payments as an e-commerce enabler

Although e-commerce has great benefits for those who choose to shop online, as well as the businesses behind the stores, Nigerians remain sceptical about buying over the internet, according to KPMG, preferring to make payments in-store rather than online.

Additionally, cash on delivery is seen as the most common way for paying for goods, with Jumia claiming this payment type still accounts for 85 per cent of all payments on its website.

Working closely with e-commerce businesses and technology firms, deposit money banks are helping to set up the infrastructure and payment capabilities to ensure consumers have the facilities to pay online and retailers receive payments promptly.

This has helped drive adoption of online shopping, with more people willing to buy online if their bank or a well-known financial institution has helped build the payment infrastructure.

As well as encouraging Nigerians to shop online, giving consumers more choice and helping them save money, it’s resulting in increased revenue for all companies involved in e-commerce, whether the retailer, the platform, the technology firm that developed the tech behind the retailer or the banks that charge for processing payments.

Reducing the cost of business

Online retailers are realising the benefits e-commerce can have on their bottom line, significantly reducing the costs of business ownership. For starters, there’s no expensive shopfront rent or utility bills.

Although they still have to pay overheads, such as web hosting and development costs – and of course they will still need a premises from which to operate their company, plus warehouse space to store goods – the costs of running the online business are significantly lower because they needn’t be situated in the more expensive city centre.

As a result of lower overheads, e-commerce businesses can pass their savings on to consumers, making prices more competitive than is possible in brick-and-mortar stores.

More skilled jobs

Although by removing the shopfront you also eliminate the need for staff on the shopfloor, e-commerce retailers still need staff to manage orders, ensure the site is running smoothly and deliver goods, whether they use a delivery firm or have their own in-house couriers.

They also need to employ customer service staff, just in case a customer wants to change their order, chase up a delivery or return an item. Crucially, as it’s a phone or online-based role, talent doesn’t have to be located where the company is, opening up the whole country to find the most skilled customer service representatives.

This shift also provides more opportunities for training specifically in digital skills, which will lead to growth of the STEM (science, technology, engineering and maths) sector, further boosting Nigeria’s economy.

Fostering technological innovation

One of the biggest impacts e-commerce is having on Nigeria’s economy is that it’s increasing the demand for technological innovation, helping local tech firms work with both local businesses and companies outside Nigeria to help them build better solutions together.

For example, the Lagos Chamber of Commerce and Industry (LCCI) and Russian Federation launched the RuNiTrade e-commerce platform at the beginning of last year, boosting trade between the two countries and offering new ways of receiving customer payments and offering business, using Russia’s more mature experience on a buoyant e-commerce sector.

Mobile e-commerce has overtaken computer-based shopping, with 69 per cent of Nigerians shopping via their mobile rather than computers. This opens up another opportunity for mobile developers to make the experience of shopping online more seamless, whatever the device customer.

Nigeria’s e-commerce sector may be on the rise, as demonstrated by encouraging Black Friday sales figures, but with a number of major barriers in the way, including resistance from customers to make payments online, innovation is the only way it will continue to grow in line with Nigeria’s overall economy.