E-retailers turn to micro SMEs for growth as competition thickens

Driven specifically by the need to deepen profit margins in a highly competitive market, electronic retailers in the country, are aggressively embracing an innovative business model, which involves the careful development of strategic mechanisms on their platforms to accomodate potential sellers and buyers of products. This implication of this innovative strategy is that e-retailers are no longer just in the business of selling, but now grant access to other businesses to trade on their platforms. Omobola Johnson, minister of communications technology, had said that the country’s e-commerce market has a potential value of $10 billion with about 300,000 online orders currently being made on daily basis. Market observers are of the view that e-retailers are keen on further expanding the scope of the market beyond its current potentials by targeting the nation’s 17.6 million Small Medium Enterprise (SMEs).

With the online marketplace, e-retailers are fostering entrepreneurship by positioning micro-SMEs before a large homogeneous audience to generate better sales. “We realised that for our services to be really valuable to society, we had to build a platform for anyone, not just Konga, to sell and prosper. Konga had to build a platform that allowed every entrepreneur and business in Nigeria and beyond equal opportunity to reach millions of customers”, said Gabriel Gab-Umoden, head of marketing, Konga.com. Konga launched its marketplace called Konga Mall last year and within the first three months generated a sales revenue of over N600 million, according to Sim Shagaya, the company’s chief executive officer, in an interview with BusinessDay recently. Konga mall basically acts as an online marketplace for sellers and buyers alike to compete against each other for a variety of items.

Online shopping in Nigeria, Africa’s largest economy by GDP, has indeed caught on like wild fire, with the proliferation of e-commerce platforms operating different business models. According to Phillips Consulting, the local online shopping sector grew from N49.9 billion to N62.4 billion between 2010, and 2011, and from N62.4 billion to N78 billion between 2011 and 2012, representing a 25 percent increase in each period. Local e-retailers are already engaged in a heated battle for online shoppers, with many of them, providing attractive pricing, easier delivery options, as well as aggressive marketing techniques to beat competition. Seeking greener pasture, many e-retailers are plugging into the global trend of online marketplace, which really entails the deliberate transition from Business to Consumer (B2C) to Business to Business (B2B) services. “In the next few years, online retail with marketplace will be a major success story that will contribute largely to the nation’s Gross Domestic Product”, Jeremy Doutte, managing director, Jumia.com, in a recent report accessed by BusinessDay recently.

The company foresees e-commerce contributing up to 20 percent to Nigeria’s GDP, riding on the back of rising internet access, budding middle-class and a proloferation of mobile devices. Nigeria has about 74 million mobile internet users as at November 2014, says the Nigerian Communications Commission (NCC). On the global scene, e-retailers such as Amazon, eBay, Alibaba, Konga.com including online classifieds like Online Exchange have all created platforms that not only enables people to buy but to also sell as well. Recent data on marketplaces of some giant retailers like e-Bay and Amazon show that they have over 116 to 117 million active users on their marketplace platforms. China’s e-commerce king, Alibaba has over 500 million active users on its marketplace. In Nigeria, online marketplace like Kaymu readily comes to mind as it has provided Nigerians with its platforms to buy and sell.

Online Exchange, Olx has also been offering such services through its online classified platform, olx.com.ng. The country’s e-commerce industry has also witnessed the entry of MoboFree.com, a social marketplace. “Our strategy is to have a clear differentiation from our competitors”, said Cristobal Alonso, co-founder and chairman of MoboFree, in an interview. According to him, “Mobofree.com offers to its users, sellers and buyers, a unique social market place, where buyers and sellers interact and transact thus creating trust. That is the value we offer and strive to maintain against our competitors.” E-commerce in Africa is currently growing at 25.8 percent rate against the rest of the worlds 16.8 percent – making the continent the fastest-growing e-commerce market. This upward trend shows no sign of slowing in 2015. Konga, Jumia and OLX saw accelerated growth towards the end of 2014.

 

Ben Uzor