Chinenye Anuforo
Internet technology has been improving rapidly across the globe. Recent advancements in Information Technology Communication (ICT) have also revolutionised the way we communicate as information is now accessible from virtually anywhere. Over the past decade, the evolution of both tech hardware and the internet has had a direct correlation with e-commerce. Just as the internet has grown into the desired medium for marketing, advertising, and purchasing of products, goods, and services; e-commerce has grown to rival traditional shopping in many ways.
E-Commerce is not just about setting up computers and businesses, but encompasses a larger scope. It is about doing business with an entirely different mind-set, using a medium that challenges the very basic rules of traditional ways of doing business. E-Commerce is all about a perfect interface between business management, strategy and technology with a view to serving the customers more satisfactorily.
Preceded by tech giants like Amazon, who joined the space in 1995, and later Google and Paypal that launched their e-commerce initiatives in 1998. The overall journey of online shopping is far from finished but it has undoubtedly accelerated in the last decade.
For instance, 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 business-to-consumer (B2C) commerce are becoming too big to ignore, business-to-business (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 this amazing stories of growth in other parts of the world, especially Asia, Nigeria’s e- commerce sector, with internet penetration of about 40 per cent is arguably estimated at just $13 billion. The National Bureau of Statistics (NBS) projected that in 2018 it could hit N10 trillion. Although, this could be a promising projections, there are evidently great challenges and concerns at the moment.
The sector has players including Konga, which recently merged operations with Yudala. Other operators include Jumia, Gloo.ng, Dealdey, Kaymu, Wakanow, and a host of many others. Already, many have gone extinct due to poor management and inability to withstand competition which is yet to be regulated. Among those that have either closed shop or are having stressful outlook include Efritin.com, OLX and others.
On the basis of its high business potential, Nigeria is in pole position to take advantage of the Africa region’s e-commerce potential projected to reach $50 – $75 billion within the next 5-10 years, according to the latest research by the Economist Intelligence Unit (EIU).
Using a metric of per 100 people, Nigeria scored 80.4 out of 100 to lead the entire continent as the country with the greatest potential within the wider African e-commerce market. Leading the charge for Nigeria, are the three main online retailers such as Jumia, Jiji and Konga, which serve a mass-market clientele. But, Nigerian e-commerce sector took two significant blows early in 2018, both of which raised serious questions about the sustainability of the space, at least in the short-term.
Speaking at a stakeholders forum on the Role of Standard and Quality Regulation in E-Commerce organised by Standard organisation of Nigeria (SON), Mr. Oluwadamilare Ogunleye, Chief Executive Officer of Survenia.com, noted there are a number of factors restraining the proliferation of e-commerce in the country. He classified the the factors into three; infrastructure, trust and regulation.
He said, “There are obvious infrastructural deficits that need to be overcome for the success and growth of e-commerce in the country. Of these lot, 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. Fot instance, Nigeria’s unbanked population remains quite high and many see this as a major impediment on the wheel of the nation’s e-commerce space. 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.”
He pointed out that 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, road network and safe waterways.
Ogunleye also noted that one of the most severe restraining factors for the proliferation of e-commerce in the country, 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.
He argued that e-commerce growth opens up a lot of opportunities. Despite these opportunities, e-commerce buyers (e- consumers) often seem to be at a disadvantaged position compared to sellers or platform operators. “The impersonality of e-commerce weakens the relationship between providers and consumers, thereby increasing consumer vulnerability. The web-based environment is highly susceptible to unfair commercial practices.
Therefore, consumer lack of trust in digital markets is one of the main challenges in the development of e-commerce, hence the need to come up with regulatory framework and standards that protect the e-consumer is of utmost importance. The underlying principle is to ensure a level of protection for consumers using e-commerce that is not less than that afforded in other forms of commerce.”
Explaining the need for trust, Director, Product Compliance Directorate at Standard Organisation of Nigeria, Tersoo Orngudwem, averred that “e-Commerce as an application of the Internet technology is accelerating fast, and reaching out to the huge market, but the law is needed to set the standards in commerce. The law will further regulate social order, safeguard reasonable consumer expectation in cyberspace, and impose punishment for anti-social behavior”.
“Standards are needed to prescribe the limits to permissible conduct, which are to be applied according to the circumstances of each case. Stringent security requirements must be in place to protect companies from threats like publishing attacks (credit card fraud), data errors or they risk jeopardising revenue and customer trust, due to the inability to guarantee safe credit card processing.”
He argued that time has come for operators to come up with technologies that can provide relevant real-time information between retailer and consumer
The SON director added that “Currently, the Internet and its various ecommerce mutations are a very chaotic system. Standards will provide some structure to this chaos. It is expected that this structure will reduce uncertainty and variance in the system, thus boosting organisational and consumer confidence in the system.”
Giving in its position on the nation’s e-commerce sector, United Capital explained in a research that every business/industry is expected to go through four stages of development, from the first product entry to its eventual decline (Start-up, Growth, Maturity and Decline stages). Each stage has its own unique characteristic.
The research noted that “The Nigerian ecommerce industry is currently perceived to be at the growth stage, having seen a number of investments in the space in the past. However, the Nigerian online retailing business, though filled with potential, continues to struggle to break-even.”
Recent data from the Nigerian Communication Commission (NCC) showed a 9.8 per cent year-on-year rise in GSM internet subscription to 100.2 million as at Jan-18. Yet, the growth in the number of internet subscribers seems not to be translating into profit for Nigeria’s online retailers.
“In our view, revenue growth is constrained by “trust” concern on the part of the shoppers, while logistics bottlenecks continue to add to cost pressures for e-commerce players, making profitability a mirage in many instances.
This has led to the recent exodus of some of the sector’s key players. We believe the industry can break past the growth stage if operating environment becomes more enabling, and stiffer regulations are directed at addressing the trust deficiency on the part of the consumers”, they stated.
According to Stan Edom, an online entrepreneur with Startuptips.com, “The peak of the Nigerian e-commerce industry is still many years ahead. With problematic factors ranging from consumer trusts, to high product prices, delivery fees, and more, most e-commerce companies in Nigeria remain unprofitable.”
But, in spite of these challenges, some operators who spoke to Daily Sun maintian that growth in the sector will improve as soon as the state of the general economy begins to improve.
Osamede Evbakhavbokun, who is the Director of online marketplace, Gidimall.com, said inspite of the current realities, he does not think that it is a proof of any threat to the growth of e-commerce. He said: “What is happening, in my opinion, does not mean that the growth seen in e-commerce is dwindling. What is key to note however, is that the volume of sales today is commensurate to the level of disposable income in the hands of our consumers.
We must understand that the reason for this growth is that consumers see great value using e-commerce as a channel for shopping. It is also important to note that as disposable income goes up, e-commerce sales will go up too. If it goes down, then sales will come down as well. This means that companies have to have proper cash flow forecasting done and optimize their costs in line with their projections and market realities.”