As the quest for economic diversification intensifies, the need to draw more attention to the great potential of technology based economic solutions has united experts in the field of e-commerce.
In most countries today, businesses are using the internet to manage almost every business process, from product sourcing and purchase to financial management, sales, marketing and distribution, cutting down on costs and reaching new markets. Virtually anything can be bought and traded on the internet.
Electronic commerce commonly known as e-commerce or e-business is primarily the buying and selling of products or services over electronic systems such as the internet and other computer networks. It is seen as the exchange of information across electronic networks at any stage in the supply chain, whether within an organization, between businesses, between businesses and consumers or between the public and private sectors whether paid or unpaid.
Following various recent reports, internet penetration in Nigeria as at 2016 stood at 46.1 percent from 28.4 percent in 2011. In fact, by the end of 2015 there were over 92 million internet users. The reports also note that consumers spent about $1 billion in 2016 an increase from $380 million in 2011 in online purchases. Foreign direct investment from the sector in 2016 was estimated at over $300 million. Revenue is projected to grow to $75 billion by the year 2025.
In 2014, Jumia was valued nearly at $550 million, including a EUR-120 million investment in November 2014 by Rocket Internet, a German-based global e-commerce investment company. Euromonitor International estimates that the value of retail is set to expand by 74 percent in real terms over the 2014-2018 period.
To paraphrase a point from the International Trade Centre (ITC), “E-commerce platforms have emerged as an equalizing force between large and small companies to offer the tantalizing potential for enterprises from Nigeria to reach profitable segments in international markets.”
Anthony Idigbe, Managing Partner Punuka Attorneys & Solicitors, in a presentation traced the early beginnings of E-commerce industry began in Nigeria to the mid-nineties “when the internet and telecommunications industry started becoming popular. Its growth was slow until the advent of internet banking at the beginning of the twenty-first century.”
Presently, Nigeria has a plethora of e-business platforms. The major ones being Konga, Jumia, OLX, Iroko, Jobberman, Wakanow, Paga, Heels and so on. The services of these online-based companies have been enhanced to a large extent by services like the Electronic Cash Transfer with packages like Western Union, Moneygram, etc.
Ikenna Okonkwo, CEO of www.heels.com.ng highlights the main drivers for the rapid growth to include “MainOne’s exploits” which has made transactions online faster and cheaper. Second is “Government interest” said to be also been growing over the years because of the potential of the industry. The government patronage has led to the establishment of platforms such as CCHUB and IDEA. The third is “Influx of foreign talent/innovations” that is changing the game in the sector. Finally, “Change in cultural paradigm led by Jumia and Konga’s market sensitization efforts” and “rising indigenous hope or belief in the power of technology” have also contributed to the growth experienced in the sector.
On his part, Wole Faroun CEO of Netplus, stressed factors such as the social media adoption, telecommunication and mobile penetration and the cashless policy of the Central Bank of Nigeria as drivers of the growth.
Notwithstanding the growth, teething challenges still plague e-commerce in Nigeria. The first is what experts have identified as the slow migration from internet usage to online shopping. Out of the over 92 million internet users in Nigeria, 94 percent, 93 percent browse the internet on their mobile phones and 94 percent of Nigerian consumers use social network sites. But only 65 percent of internet users shop online as at 2014. However, 24 percent of internet users are expected to do so in the very near future, according to Wole Faroun. As much as 89 percent internet users are potential online shoppers.
Undeveloped payment channels should also be addressed. There is a need to know which payment model is suitable for e-commerce in Nigeria based on factors such as security and ease of use and these models have to be fully developed. Idigbe points out three payment models like digital cash which entails the use of a digital wallet where invoice or receipt of payment is kept and cash is withdrawn. Transactions are completed immediately and parties remain anonymous because they are not expected to exchange personal details. Second is credit card where a card holder is granted a revolving credit line with a limit to which can be spent. The credit is usually settled at the end of an agreed period of time. Third is electronic fund transfer that involves a buyer entering digits on the check, a clearing house is responsible for transferring the money from the buyer’s account to the seller’s account on completion of transaction.
Maturity of payment systems is also another challenge faced by e-commerce platforms. There has to be innovation to check failure of card transactions in relation to internet banking, debit card payments and other payment systems.
The case is made by Okonkwo for the restructure of logistics. Movement of products from buyer to seller should be seamless, faster and at less cost to the consumer. There should be more intelligent dispatch of goods. Intelligence should also incorporate safety and security measures which are a main concern for dispatchers, online firms and consumers. The volatile nature of the cyberspace with major platforms being hacked constitutes potential financial implications for the industry and for the nation.
E-commerce firms should also collaborate at certain levels as unhealthy competition and perception of an undersized market has led to “opportunity hoarding” according to Okonkwo. Collaboration should be prioritized over the preoccupation to survive.
