With India taking no chances at slamming its foreign direct investment (FDI) policy hammer on the world’s largest e-commerce firm, Amazon, some who have long nursed the dream of the company making real entry into Africa’s largest economy have started amplifying their reasons.
The arguments are that even though the challenges for both countries are similar, the retail giant appears undeterred in fixing those problems in the case of India.
This is evident in Jeff Bezos, its chief executive officer’s aggressive-penetration approach which last year saw $5 billion channelled to consolidate Amazon India’s infrastructure and growth, after already having 42 fulfilment centres, 150 delivery stations, and 25 sorting centres, according to Forbes citing of a Citi’s research.
In its six-year entry into India, it grew its worth to $16 billion and controls 30 percent of the market but has not made profit, yet, keeps faith in the sector’s potential to hit $202 billion in few years.
But now, India has embarked on the implementation of an e-commerce policy banning platforms like Amazon alongside competitor, Walmart from holding exclusive sales and prevents it from selling products on platforms they count as investors which applies to restrictions on discounts and cashback promotions.
It means Amazon cannot simultaneously have equity participation in e-commerce marketplace firm or its group companies, and sell its products on the same platform.
With these hiccups, many already think it’s time Amazon put action to exploring the opportunities in Nigeria, which will likely not consider such policy restriction anytime soon.
“Sure, we know why these companies do not want to enter Nigeria with the same zeal and energy but yet India has the same challenges as Nigeria except trust and the American firms are investing to fix those issues,” said Ndubuisi Ekekwe, an analyst. “I call on Amazon and Walmart to open stores in Nigeria.”
If it has operations in Nigeria, Amazon could really improve the delivery system, help build new airports that can facilitate the movement of services on a big logistic programme across the country and fix the postal system.
Moreso, it could really boost content creation rather than mere aggregation, meaning artisans like shoe makers in Aba for instance could be opened up to a huge big shoe market.
But for obvious reasons of high cost of operation, difficult logistics, and low return on investments, many e-commerce retailers have struggled to keep things running and some have resorted to shutting operations.
And for an emerging market to be the toast of retail companies, it should display the sort of potential spotted in India.
The country has 1.3 billion people, with about six percent of the adult population in possession of credit cards and grows 25 percent annually. India has 480 million internet users, which expands at five percent as well a massive market with huge opportunities for e-commerce retail.
As at 2016, India’s aggregate household expenditure stood at Rs42.2 trillion, out of which Rs22 trillion were spent on essential consumption goods including fast moving consumer goods, clothing, and footwear.
Rural households collectively outspent their urban counterparts with a 59 percent share of household expenditure, according to data from a nationally representative consumer survey.
Acknowledging that the fundamentals of the Indian economy outweighs that of Nigeria, Gbolahan Ologunro, a research analyst at CSL Stockbrokers however states that Nigeria will still make relevance for investment choice in Africa as it still holds considerations in population growth and demography.
So looking outside the immediate unattractive growth rate of the economy which has been taking toll on the middle and lower class purchasing power, he thinks the long term potentials were still bright enough for a giant retailer like Amazon.
“India is an economy that is growing at about 6 percent compared to Nigeria struggling to attain over two percent,” Ologunro said. “It explains why amazon is bent on being able to secure their market in India. But if the government is able to improve the growth of the economy to scale up employment, income level will generally increase and that should improve their purchasing power.”
By 2030, Nigeria will lead the largest consumer markets in Africa, followed by Egypt and South Africa, according to Professor Landry Signe, a global economist in a report dubbed Africa’s Consumer Market Potential.
Consumer expenditure on the continent which has grown at a compound annual rate of 3.9 percent to reach $1.4 trillion in 2015 is expected to reach $2.1 trillion by 2025 and $2.5 trillion by 2030.
Although Nigeria’s economic growth rate is reiterated as unimpressive with other African countries outpacing it in recent years, including neighbouring Ghana, recent compound annual growth in fast-moving consumer goods (FMCGs) is second on the continent behind Angola, at 23 percent.
The report shows that the vast majority of consumer spending on the continent still happens informally on roadside markets but again describes that gap as a huge market opportunity waiting to be tapped.
“This disconnect signals enormous potential for growth as African consumers shift from the informal toward more formal forms of consumption, including shopping malls, supermarkets, and eventually even e-commerce, a process that is already underway in all but the most fragile and underdeveloped countries,” the report said.
Temitayo Ayetoto
