Booming Online Business in Nigeria

Fri, Oct 24, 2014
By publisher
7 MIN READ

Business

More Nigerians are now doing online shopping thus eliciting a boom in the business which attracted N205.4 billion since 2011

By Anayo Ezugwu  |  Nov. 3, 2014 @ 01:00 GMT  |

DOING business online is gradually becoming a well-accepted culture in Nigeria. Recently, more businessmen and women in the country are using Nigeria’s online space to market their goods and services. The online businesses have continued to grow as some Nigerians and expatriates take to online shopping.  In fact, Nigerians presently buy fairly-used items online like cars, electronics, clothes, books, furniture, equipment, just to mention a few. Online shopping, according to industry watchers, remains one area of business with enormous potential to meet the needs and aspirations of Nigerians and further boost entrepreneurship.

In 2013, Olusegun Aganga, minister of industry, trade and investment, said during the inauguration of the Retail Council of Nigeria that the country has attracted more than N205.4 billion investment into the online retail sector since 2011. He identified the retail sector as a major driver of economic growth, job creation and wealth generation globally, and said Nigeria has great opportunities for existing and new investors to take advantage of.

Similarly, Charles O’Tudor, chief executive officer, Concrete Ideas, said online retailing in Nigeria is on the increase as many Nigerian youths prefer to shop online. “I agree that globally the physical shopping culture is reducing, especially in developed economies with world class supporting infrastructure (power supply majorly, which affects other sub sectors), but the same is yet to be imbibed in Nigeria for obvious reasons. Without adequate infrastructure such as power supply and its drawbacks, the internet, and of course computers, can’t function. This invariably creates apathy and indifference on the part of consumers,” he said.

O'Tudor
O’Tudor

Also, a report by Philips Consulting, a business management and consulting firm in Nigeria, said at least $2 million worth of transactions per week and close to $1.3 billion are spent on Nigeria’s e-commerce terrain monthly. According to the recent survey, 38 percent of Nigerians who make up the growing middle class in Nigeria prefers to buy products through the internet. This is testament to the increasing acceptance of the cashless policy initiated by the Central Bank of Nigeria, CBN, to aid financial inclusion and reduce cash-based transaction in the country.

Commenting on the result of the survey, Evangeline Wiles, managing director, Kaymu.com Nigeria, said economic growth has led to a strong increase in the middle class, and these powerful groups of consumers are demanding quality goods and services. She said they are becoming the foundation of a market-oriented economy and contributing to continued economic growth and social development. Middle class, according to economists, are individuals or households that fall between the 20th and 80th percentile of the consumption distribution or between 0.75 and 1.25 times the median per capita income. The African Development Bank, AfDB, defines them as people whose daily consumption is between US$2 and US$20 daily. The definition is based on the average cost of living of about 1 billion people on the continent. The sector of the population spending $2 to $4 per a day is considered as the floating class, vulnerable enough to slip back to poverty. The remaining population earning $4 and $20 a day is categorised as the stable middle class. The middle class is the key to sustaining economic and social development in a region and country.

Online marketing offers a level playing ground for large businesses as well as small and medium scale businesses to operate in the global market place, and for regional businesses and communities to participate in social economic and cultural networks across the globe. Although the growth of the country’s e-commerce space was down largely to the middle class of the economy, the low-income group is also a potential target for business investors and mass products. Online transactions in Africa’s largest economy is expected to reach N1 trillion ($6.2 billion) by the end of 2014.

Also, a new study released by Terragon Group in August, for the second quarter of 2014, revealed tremendous growth in the state of digital media and users’ online behaviour in Nigeria over the past twelve months. The report which was compiled after a recent survey from a pool of online participants across various locations in the country, showed heightened growth in the area of internet usage, social media participation and e-commerce, and the opportunities the trend presents for marketers.

The comparative study shows 15 percent increase in online purchases from the results of 2013. By the end of June 2014, 63 percent of Nigerian internet users had bought at least one item online. 60 percent of these buyers claimed to have used their mobile phones for these purchases. Eniola Moronfolu, intelligence lead, Terragon Group, while highlighting on the findings explained that, the increase in e-commerce activities is very encouraging for an environment such as ours. It was interesting to note that a huge number of these purchases were mobile driven, and that mobile is the first and major point of access for all internet activities. Hence, marketers need to start thinking first of mobile for online campaigns.

Shoprite Ikeja
Shoprite Ikeja

She said relevant content should be of utmost priority to advertisers and marketers in a manner that the mobile audience feel a personal connection to the brands. “Marketers need to take advantage of the growing usage of smartphones. They need to work with their partners and agencies to develop innovative marketing products and strategies that will keep the smartphone users engaged and loyal to them,” she said.

Other factors considered in the research include 86 percent of respondents who claim to carry out research about an item before making a purchase and 80 percent who pointed at mobile as their major platform for research. These numbers forecast a boom in the advertising and digital marketing industries will approach their marketing strategies over the next twelve months, especially as it pertains to mobile marketing.

Although online shopping is still at its infancy in the country, it remains a niche market in Nigeria. It has also affected the business of shopping malls which is springing up across major cities in the country.  Some experts believed that most consumers in Nigeria see shopping malls as a tourist centre for sightseeing and family outing.  Norman Sanda, chief executive officer, Ikeja City Mall, said Nigeria has huge opportunities for shopping malls. But the problems of infrastructure such as good roads and insecurity pose a serious challenge to shopping mall operators nationwide. “For example, if you have a mall in the UK, people are ready to travel 150 kilometres to shop there, but to do that in Nigeria is difficult,” he said.

 O’Tudor agrees. According to him, investigation showed that half the crowd at mall centres are not there to buy but do sightseeing or watch movies. He said online retailers are gaining momentum at the expense of shopping malls, and some physical store operators have started incorporating online platform. “Online retailers have sprung up in recent times, and many do not have a warehouse, unlike Jumia.com, konga.com, adibba.com and others. They rely on stores at the malls to supply goods.”

Also, Bolarinwa Adedeji, a shop owner at Ikeja City Mall, believed that online retailing is a big challenge to mall centres. According to him, it is high time shopping mall owners considered that online retailing is a challenge. “We may not agree that online retail platform is a challenge but the truth is what is happening in Europe and America is fasting catching up with us. My volume of business has reduced because some of my customers now patronise online retail platforms,” he said, adding that online retailers are fast eating into the market share of shopping malls as a result of challenges such as traffic, insecurity and inconvenience.

The fear is that once this segment of online retailers get settled and own a warehouse, they will severe their relationship with malls. Stakeholders may not agree that the American experience is here yet, but the world is a global village. What happens to Japanese market may get to Nigerian market someday.

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