Friday, 11 May 2018

Despite All Odds, eCommerce in Nigeria is here to Stay

In spite of the volatility of the Nigerian economy, eCommerce companies have continued to sail through troubled waters and taken on the daunting task of upsetting the odds of infrastructural deficiency. The same challenges troubling traditional enterprises - such as, inadequate infrastructure, arbitrary levies, low access to cheap funding - have continued to hamper the growth of eCommerce firms. All of these remain high up on the list.

Even though, some eCommerce firm such as Jumia Nigeria are swimming through the dirty waters of infrastructural challenges, survivorship bias won’t distract us from the frequent occurrence of failure.

Reliable internet and efficient logistic systems are two additional issues: the logistic nightmare of negotiating deliveries during fuel scarcity and the misleading statistics that give an adulterated representation of Nigeria’s low internet penetration. To illustrate, the Nigerian Postal Service is not up to full capacity to provide efficient delivery services, and has forced many eCommerce firms to develop in-house logistic solutions - Jumia Express by Jumia, for instance. These in-house logistic solutions increase operating cost and erode the competitiveness of eCommerce players who cannot enjoy the same economies of scale available to their global rivals.

According to a report in Vanguard newspaper, there’s an estimated poverty rate of 67.1% which is in contrast with a population of over 190 million people in Nigeria. The report further hinted that as a result of the extreme poverty level, many cannot consistently afford a data bundle. Even the middle class who can afford data are usually unsatisfied with the level of service because of the networks unreliability and frustratingly slow speed. A quick win will be to increase internet bandwidth, currently at 11.3 kb/s per user compared to 126.5 kb/s in the United States according to a report on Stearsng.com. Although, MTN customers have the luxury of using zero data to browse on the Jumia website but that is not enough to cater to Nigeria’s vast internet subscribers.

Nigeria's trust deficit proved to be a unique challenge. Having witnessed how the likes of Amazon surpass traditional retail behemoths in developed countries, brave entrepreneurs decided to replicate such a successful model in some developing countries. Surprisingly,  they met with a formidable obstacle to running a profitable online business: trust issues. The rise of mobile payments and the Central Bank of Nigeria's sensitisation on "cashless society" have helped to put this challenge to a temporary rest, but not enough to remove the "pay with cash" feature on the checkout pages of most eCommerce sites.

Typically, Nigerians do not trust one another in person and of course, trust one another less online. A generation of internet fraudsters will do that to a society. A Nigerian man will typically count the money he withdraws from the ATM before leaving a bank’s premises. That’s how much trust issues Nigerians have.

One of the ways to turn around the trust deficit is for payment providers to indemnify Nigerians with psychological insurance, such as guaranteed payback for transactions. Moreover, eCommerce firms in Nigeria have sometimes perpetuated the trust deficit by showing a brazen disregard for product quality and customer service. Although, Jumia for example, has tried to recover the trust with the launch of Jumia Pay & also guarantee payback. Yet, the scars from previous experiences are still yet to heal.

All hope is not lost. As simple as it may sound, Nigeria's combination of aspirational capitalism, population growth, and increased mobile adoption has created a fertile ground for eCommerce. The industry may just have to succeed on its own, while waiting for the government.

Mobile payments are growing, and FinTech platforms continue to carve niches out for themselves, helping to build a more sustainable ecosystem for eCommerce firms to thrive. Moreover, the lessons learned by the operators of eCommerce such as Jumia will serve another generation of firms; although Jumia’s continued tenacity is still to be admired, the future eCommerce is still a mirage and it’s high time the Government turned its attention to it.                             

No comments:

Post a Comment