The e-commerce boom has kicked off in Nigeria with hundreds of new online stores and services coming on board every year. Ecommerce is hardly rocket science. It is first a business and the ability to implement ideas triumphs over innovations alone.
In my opinion based on personal observation, hardly up to 20% of new online stores survive beyond the third year. Going forward, one should expect similar patterns of easy entry, easy exit as investors find out that ecommerce is no holiday. Beyond this, we expect the following trends coming into play in Nigerian Ecommerce.
1. Business is local
Despite frequent rumors of a coming great invasion, there have only been three major incursions of foreign investors into Nigerian ecommerce. Four if you count Jason Njoku’s Iroko Partners. Foreign investors like Naspers (Kalahari.com.ng) and Startup Partners Africa (sunglasses.com.ng, glamour.com.ng) are proof that Nigeria is no easy safari.
Local players on the other hand, are not burdened with expatriate overhead or fancy corporate offices. We expect local entrepreneurs will continue to dominate the market space in numbers and aggregate turnover.
2. Growth of online malls
As the saying goes, when there is a gold rush, sell shovels.
Many of the early operators of online stores in Nigeria soon discovered that rather than being burdened with inventory, they could set and provide ecommerce as a service to traders. Nothing as fancy as SHOPIFY; most are just customizing open source multi-store software. Still, the growth of the number of these online malls would have value if they are providing a useful service in helping traders to go online.
Konga.com, an established local brand that is taking up this business model is a clear model in this regard. Banks, like UBA and GTB have also launched their own stores.
3. Ease of payment integration
As recently as five years ago, a major Nigerian payment switch was charging $1000 to integrate merchant accounts. Now it costs about $450, but there are signs that prices are falling. Some banks even waive integration fees all together. A new startup and license payment processor, SimplePay, is also offering free website payment integration. What is still missing is the provision of payment extensions to popular open source software like Magento, Oscommerce, PrestaShop and WordPress/WooCommerce.
4. Credit easing
Easy credit, in the form of credit cards, is the grease that lubricates online commerce, allowing buyers to act on impulse and buy now, pay later. A few years back, Ecobank introduced such a product but later rolled it back. While the challenges of managing small credit is noted, this market is a whale sized opportunity that perhaps small loan lenders like Ren Money can address.
5. Beyond Lagos
While local tech press celebrates Lagos as a key hub, the opportunities for ecommerce are growing all over the country, beyond the main cities of Abuja, Port Harcourt and Warri. Now, there are online stores as far north as Maiduguri.
The trust deficit that hindered initial ecommerce growth plus customers demand to pay cash on delivery is creating advantages for ecommerce stores beyond Lagos.
6. Outsourced delivery
The greatest single factor affecting customer satisfaction is the timeliness of deliveries. While the bigger ecommerce stores and malls are investing in their own vehicles, smaller ventures have to depend on courier companies that are not very efficient and not designed to cope with the operations of ecommerce. Additional services like accepting payment on delivery, expediting returns, insurance and authenticating effected deliveries are late in coming.
Currently, courier companies are making some of these arrangements on a bilateral, ad-hoc basis. In the near future, we may see tailored products being rolled out that target ecommerce stores and offer lower cost based on expected higher turnover volumes.
7. The coming legislation
Nigeria does not have a specific ecommerce law, although many sections of current legislation arguably cover adequately most aspects of online business operations. As is often the case, the legislature is taking a top down approach to work on a cyber security bill with more inputs from foreign funded NGOs and lobbyists than actual local operators.