The rising number of orders being processed by online retailers in Nigeria, along with the attendant need for efficiency in delivery, is opening up fresh business opportunities for Nigeria’s postal and courier industry, market observers say.
Konga, the leading electronic retailer in the country, says, during its version of ‘Black Friday’ sales, it processed N50 million worth of orders every hour. With an estimated growth rate of 25 percent yearly, the sector, which when examined in 2012 was worth $35 million, is currently valued at $550 million and projected to have a $10 billion potential if well harnessed, according to the ministry of communications technology.
With the population of internet users growing rapidly, reaching 48 million, according to the National Information Technology Development Agency (NITDA), online transactions in Nigeria are expected to reach N1 trillion by the end of 2014.
Local and foreign courier operators are already positioning themselves to tap into the huge market potential.
The emerging e-commerce ecosystem is fraught with challenges, one of which is the inefficiency of Nigeria’s postal system. Market observers however say that the Information Communication Technology (ICT) revolution, which has given rise to the use of e-mails, Short Message Service (SMS), among others, has reduced traffic on the postal services.
This has led to massive reduction in revenue generation. BusinessDay gathered that many postal and courier businesses are now forging stronger ties with e-retailers, building new capabilities and putting in place strategies to overcome barriers in order to meet customer demands.
“We are partnering more with courier service providers. With e-commerce, I think there is a bright future for the courier and logistics business in Nigeria”, said Wale Adisa, director, fulfillment operations, Konga, in an interview recently.
A informed source close to courier operators, who spoke on the condition of anonymity, told BusinessDay that some local industry players are already thinking of building international shipment capabilities, as e-retailers gradually prepare to move to the next level of cross-border e-commerce.
The Global E-Tailing study for 2025 initiated by DHL, shows that over the next 10 years, online retail will continue to gain popularity in both developed and emerging markets and as a result, courier and logistics companies will play a critical role in providing vital supply chain management solutions that are able to evolve with consumers’ shopping habits.
Sumesh Rahavendra, head of Marketing for DHL Express Sub-Saharan Africa, said, “Currently, e-Commerce already makes up 8 percent of the overall trading volume in Europe. Depending on the scenario, this share could rise up to 40 percent in developed countries and up to 30 percent in today’s emerging markets.
In a dramatic twist, some courier operators have resolved to diversify into e-commerce business as the number of firms rendering services in the country increases.
Many of the courier companies are seeking to tap into the myraid of opportunities the Internet has to offer, as well as explore other avenues of expansion. Siyanbola Oladapo, president, Association of Courier Operators in Nigeria, in a report, confirmed this development, stating that members of the group had been complaining of low patronage as unlicensed operators were reportedly coming into the business; poor economic conditions and the use of better technology by competitors.
Financial reports have shown that e-commerce is boosting the revenues of postal and courier industries around the world. For instance, SingPost (Singapore Postal Service) recorded creditable financial results for the first quarter of 2014 as e-commerce shipping pushed revenue up 4.8 percent year-on-year and helped profits grow 5.1 percent.
Electronic commerce has also helped SingPost’s Logistics division, which saw revenue grow 4.1 percent to S$97.6 million. SingPost’s eCommerce services and financial services countered declines in the traditional retail and agency services in the Retail & eCommerce division, which grew its revenue by 9.7 percent to S$22.8 million. Mori Baba, Post Master-General, confirmed that the advent of ICT has reduced the volume of hard copy letters posted.
The boom in e-commerce, according to him, holds a brighter prospect for parcel delivery. Baba stressed that collaboration among stakeholders will unleash the sectors’ potential.
A recent surveyshows that the local online shopping sector grew from N49.9billion to N62.4 billion between 2010 and 2011, and from N62.4billion to N78 billion between 2011 and 2012 representing a 25 percent increase in each period, says Phillips Consulting.
The emergence of mega online retail outfits like Jumia, Konga, Wakanow.com, etc has been the driving force behind the push.
According to the World Bank, the country’s middle class has risen by 28 percent while its GDP, based on purchasing power, has increased by 21.67 percent in the last four years.
The rise in consumer spending, as well as the expansion of broadband service, has boosted the growth of Internet-enabled businesses.The surge in online transaction is also attributed to banks adopting platforms where their customers can use phones to make payments, in line with the cashless policy of the Central Bank of Nigeria (CBN).
Ben Uzor
