SMEs are driving e-commerce growth in Nigeria as they seek to tap into Nigeria’s booming online marketplace amid connectivity and cyber security concerns in the country.
SMEs in the country are now seeking innovative ways to grow their businesses and the online marketplace has become a platform of choice due to cost and marketing advantages.
More SMEs are now bypassing the need to put up physical shops and opting to start online shops instead as more Nigerians are now embracing e-commerce as their preferred platform for buying and selling goods and services.
According to the Nigerian Communications Commission (NCC), in February 2015 the country had over 83 million active internet subscriptions. This presents a huge market for online trade – one that SMEs in the country are keen to exploit.
The e-commerce marketplace is taking off like never before, and it’s largely powered by a small number of platforms bringing together buyers and sellers. Its reach and accessibility has lured a large number of buyers and sellers towards it – providing a springboard for SMEs and also aiding their growth in different ways.
Juliet Ehimuan Chiazor, Country Manager, Google Nigeria in an interview, was keen to express her delight. She noted that internet is particularly essential for businesses as it serves as a gateway to global customers. Already, there exist in the country currently IT companies which provide cost-effective web-based solutions to, especially SMEs for managing their businesses in line with global best practices, thereby making them credible organisations with better access to bank loans, Chiazor said.
“It’s an exciting time we are seeing in Nigeria today where we are seeing innovative migration from offline to online platform both for businesses, individuals and governments Ministries Departments and Agencies (MDAs),” Chiazor added.
Online e-commerce retailers like Konga and Jumia have recently started turning towards SMEs to find unique products for their marketplaces. The battle for the e-commerce space is occurring between Konga and Jumia – collectively backed by over $300 million in VC funding. Konga has yet to release financials but claims revenues grew 450 percent in 2014 whereas Jumia had $28 million in net revenues, with $32 million in losses.
Konga launched its market place called Konga Mall last year – a revolutionary Marketplace platform created to expose Nigerian entrepreneurs with the opportunity to reach a bigger and wider audience. The zero-commission based marketplace is the first of its kind in Africa and will be a force to truly unlock the potential of Nigerians according to CEO, Sim Shagaya.
Shagaya views Konga “less as online retail” and more “a digital platform to get entities trading,” he said in a recent interview.
“What’s going to dominate the African e-commerce reality is millions of SMEs trading in countries and across borders. Our future operating system will be some kind of hybrid of Ebay, Uber, and Paypal”, Shagaya added.
Last year, Jumia Nigeria, the Rocket Internet-backed venture also launched its online Marketplace, where SMEs can leverage on its online presence to sell goods and services to bridge the gap between consumers and access to products.
At the launch, MD, Jumia Nigeria Jeremy Doutte said, “we are glad to be empowering other businesses like us to grow and definitely increase their sales. Retail in Nigeria has seen a major change in recent times and we are glad to be part of that change. In the next few years, online retail with marketplace will be a major success story that will contribute largely to the Nation’s GDP.”
The International Monetary Fund (IMF), DHL and Deloitte have affirmed that SMEs hold the ace to Africa’s economic growth. Corroborating the prediction on SMEs sector’s potential, an online report stated that the growing internet user penetration in Africa also provides a massive opportunity for SMEs and as Africa continues to adopt e-commerce as a way of life, businesses are able to leverage this online marketplace and thus reduce traditional customer acquisition costs.
However, failure by the FG to provide stable and high-speed broadband speeds continues to stifle e-commerce growth and adversely affect overall commercial growth in the country. Broadband speed in Nigeria remains quite abysmal when compared to other frontier economies – “National average broadband speed is now 4.7Mbps up from 1.0Mbps in 2011”, according to Communications Technology Minister, Omobola Johnson in a recent interview.
While cybercrime is a financial cost for small businesses, it has wider repercussions for Nigeria as a whole. Recent study conducted in Nigeria by Ipsos, a global market research company, on behalf of PayPal shows that security of online payments and delivery costs are among main concerns preventing consumers from conducting more online shopping.
DAN OJABO
