Chinenye Anuforo [email protected]
E-commerce is the activity of buying or selling products on online services or over the Internet. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems.
These business transactions occur either business-to-business (B2B); business-to-consumer (B2C); consumer-to-consumer (C2C), or consumer-business (C2B). E-commerce covers a wide range of transactions effected via mobile telephones and other devices such as personal computers and tablets, and purchases are often made by using applications and platforms.
In 2017, retail e-commerce sales worldwide amounted to 2.3 trillion US dollars and e-retail revenues are projected to grow to 4.88 trillion US dollars in 2021. While the massive opportunities in B2C commerce are becoming too big to ignore, B2B e-commerce worldwide is growing at monstrous rates, hitting $7.7 trillion in 2017. China accounts for about 30 per cent of global B2C e-commerce and 78 per cent of global B2B e-commerce. Despite these amazing stories of growth in other parts of the world, especially Asia, Nigeria’s e- commerce sector, with internet penetration of more than 40 per cent is arguably estimated at just $13billion.
With such meager e-commerce penetration in the country, the Standard Organization of Nigeria (SON) recently discuss the role of ‘Standards and Quality regulation in Electronic Commerce’ in Nigeria and how to boost the sector. Speakers at the event highlighted the below as some of the ways to drive the sector in the country.
Speaking at the forum, Mr. Oluwadamilare Ogunleye, Chief Executive Officer Survenia.com pointed out that there are obvious infrastructural deficits that need to be overcome for the success and growth of e-commerce in the country. Of these lots, there are five infrastructure deficits that are arguably critical, namely, payments, logistics, local manufacturing, digital identity, and credit.
The importance of seamless digital and highly-penetrative payments is unassailable in e-commerce. However, Nigeria’s unbanked population remains quite high. A report, in March 2016, by Ericsson showed that 47 percent of Nigeria’s population is not in the banking system at all. For e-commerce to really take off there has to be massive innovations in the areas of mobile payments and wallets, digital currencies as well as the adoption of scalable technologies like blockchain, that not only captures the bulk of transactions still happening in the informal company, but also guarantees the ease of exchange of value online.
Another severe constraint on the development of e-commerce in Nigeria is the inefficient logistics systems. E-commerce thrives on a robust infrastructure network of solid rail system, roads network and safe waterways. Citing an instance, he said, “Just over a decade ago, the local logistics system in China was poorly developed, primitive and unreliable, presenting difficulties to the development of e-commerce in China for large-scale B2B and small-scale B2C transactions. The Chinese Post Office was also inefficient and in lack of staff skilled in e- commerce. Today, the turnaround of the logistics industry in China has been nothing short of a miracle. The past decade saw the birth and rapid development of the logistics industry.
Without doubt, government’s aggressive investment in rails, roads and waterways paved the way. Coupled with this was the rapid growth of the manufacturing sector, which led to a boom in 3rd party logistics services, which in turn led to healthy competition in the industry. Therefore, government needs to invest in this regard.
The success and growth of local manufacturing is an important recipe for a vibrant e-commerce economy. E-commerce is a disruption of the traditional distribution channel of conglomerates and large organisations. These channels are huge, and serve as very high barrier to entry for new entrants. E-commerce eliminates this barrier. However, for e-commerce to thrive, it must deliver value at scale by aggregating a large set of sellers and drive price advantage because of seller competition.
This combination can only happen in a manufacturer-seller market, as against a wholesaler-seller market. E-commerce players must therefore see their existence as a symbiotic relationship with the growth of the local manufacturing sector, and think of ways to encourage it. A careful examination of Alibaba’s rural Taobao model may help e-commerce players in Nigeria design a more effective model that factors in local manufacturing and by extension boost the e-commerce space.
One of the most severe restraining factors for the proliferation of e-commerce is the lack of trust between buyers and sellers. The bigger challenge with trust is that, just like justice, trust must not only be established, it must also be seen to be established. Trust-building programs must therefore be understood from the applicable operations of different platforms, and must always be evident to all stakeholders.