Delivered by DHL
As Africa’s most populous country with 174 million people, Nigeria presents an increasingly attractive market for consumer-facing companies. While Standard Bank estimates only about 4.2 million households annually spend US$8,500 or more, this figure is expected to swell to over 12 million by 2030.
But with a fragmented retail landscape, reaching the bulk of Nigerian consumers is no easy feat. About 98% of sales are done from informal markets, street stalls and table top retailers. And while there has been growth in western-style modern shopping malls, these remain relatively few and far between.
Online retail offers an attractive value proposition for Nigerians, not only in terms of pricing (online products tend to be up to 15% cheaper) but also for the convenience it provides as shoppers no longer have to sit in traffic snarl-ups to get to markets or shopping malls.
A recent study by Ipsos conducted on behalf of PayPal, found that 65% of Nigeria’s 50 million internet users have shopped online. The expansion in e-commerce is closely related to deeper mobile phone penetration, as 90% of online shoppers who own a mobile phone said they’ve made purchases from their handsets.
The study also found that 47% of online shoppers bought digital goods in the past year, followed by 39% that purchased clothing and accessories. Some 33% bought physical entertainment such as books and CDs. And one in every four Nigerian online shoppers purchased consumer electronics.
“As a logistics partner to various e-tailers, DHL can attest to the rise of online shopping in Nigeria. Online retailers are also increasingly opening up their platforms to third-party sellers, which basically allows any company or trader to sell their products on the internet, unlocking a world of commercial opportunities,” says Sumesh Rahavendra, Head of Sales for DHL Express Sub Saharan Africa.
Despite its relatively nascent stage, Nigeria’s online retail industry is already fiercely competitive with numerous players in all shapes and sizes. Two of the most prominent are Jumia and Konga that offer a full range of products, from mobile phones to fashion, even rice. Supermart.ng is like a personal shopper that picks up your groceries from local supermarkets, and delivers them in as little as three hours.
But running a successful online retail business in a country like Nigeria comes with various challenges. A general distrust of transacting online means e-tailers need to allow customers to pay cash on delivery. And developing the logistics and warehousing infrastructure for distribution across such a vast country requires significant investment. No wonder Sim Shagaya, founder of Konga, describes building a Nigerian e-commerce company as a long-term “epic journey”.
According to PayPal’s survey, 53% of respondents who have shopped online before said faster delivery of goods would encourage them to buy more regularly, while 40% highlighted the need for safer payment options. Some 31% said lower prices would make them shop more often.
“As the industry grows, consumers will demand greater product assortment with shorter delivery times. E-tailers will also need to consider how to effectively service outlying areas as the e-commerce value proposition is even greater for these customers due to a lack of brick and mortar stores. And this highlights the importance of selecting a reliable and reputable logistics provider that understands the local operating environment,” concludes Rahavendra.