The e-commerce revolution which sparked off in 1994 with a meagre $12.48 worth of transactions, has grown to a whopping $27 trillion market in 2020, according to eMarketer's rating. Although the revolution started in the United States, it quickly extended to many countries in Europe and Asia, coming later to Nigeria in the past decade.
Unlike in the US and Europe, the revolution did not quite hit Nigeria with force as adoption of e-commerce was very slow for obvious reasons like internet penetration, distrust for virtual dealings, poor logistics infrastructure, huge capital requirement and low disposable income. These resulted in the low patronage that, in turn, accounted for the high fatality rate of the many e-commerce platforms that ventured to open shop in the country. In order to overcome most of these challenges, the e-commerce platforms had to find their own way out by singlehandedly creating the environment they needed to thrive.
Jumia Nigeria, Africa's leading e-commerce platform, and a couple of other e-commerce platforms that survived found a way to navigate this less-than-desired rate of patronage to stay afloat. For example, with regards to the issue of logistics, that is, moving the merchandise from their warehouses to their customers, these e-commerce platforms moved away from their traditional buying and selling to logistics operations. Jumia Nigeria, according to its chief executive officer, Massimiliano Spalazzi, entered into strategic partnerships with logistics services providers in order to deliver its customers' orders to them.
“Most of our peers abroad ride on the back of the existing logistics infrastructure in their countries of operation. For example, Amazon, on inception, relied on the US Postal Service for their delivery needs until they were able to develop their own channels. We, in Nigeria, do not have such a luxury as the local postal services are unable to meet our desired speed so we had to create our own logistics infrastructure, albeit the huge capital costs,” Spalazzi said.
To address the country's logistics needs, the government could do well and provide more funding for the revitalization of the Nigerian Postal Services (NIPOST) for greater efficiency. If this is done, NIPOST could provide logistics support to the e-commerce platforms at a much-reduced cost. This will, in turn, deliver greater value to the customer and boost the e-commerce sector in general.
On the issue of trust in the e-commerce sector, the Central Bank of Nigeria (CBN) and the fintech companies are working to enhance the level of trust in the sector by ensuring that transactions are concluded as fast as possible and that, in the case of failed transactions, refunds are made within 48 hours. Although this is an improvement of the seven days it used to take for the resolution of such issues in the past, it is still below the expectation of these customers, who want an immediate refund. To this end, Jumia, according to its CEO, has created its own payment platform, JumiaPay, for more efficient, secure and convenient payment experience.
According to Spalazzi, “Jumia customers, who use JumiaPay for payment of their orders, get instant reimbursement if their transaction fails to go through unlike their peers on other platforms, who would not have to wait for 24 to 48 hours for their refund.”
Another area the government can help to boost the e-commerce sector is to grow internet penetration in the country. For a sector that largely depends on the internet for its operations, a 42 percent internet penetration is a big snag. Worse still, the internet services are poor and unstable at times, and come at very high costs to the users. The government, through its regulator, the Nigerian Communications Commission, should work with the internet service providers to build more infrastructure that will enhance data carriage across the country, and to ensure that such services are delivered at cheaper costs.
A major reason many service providers don't last for long in business in the sector is the huge capital requirement for e-commerce operations. In Nigeria, access to finance is highly limited or comes at a high cost, especially for start-ups. This, coupled with lack of logistics and internet infrastructure, makes the e-commerce business a nightmare for existing and prospective operators. To address this access to financing issues, the government may consider creating financing windows for operators in the sector.
Although some of these challenges, especially that of access to finance, are not peculiar to the e-commerce sector, the call for some kind of special intervention in this sector is based on the country's coronavirus disease (COVID-19) pandemic experience. The e-commerce sector contributed heavily to the measure of success the government achieved when it issued restriction orders on movement and economic activities in its bid to contain the community spread of COVID-19 in the country. These e-commerce platforms took their customers' orders during the lockdown period and supplied the same to them in the comfort of their homes. They still do this now that we are in the post-lockdown era.
The period of the lockdown was actually an eye-opener as to the role the e-commerce sector could play in the life of Nigerians, on the one hand, and on the economy on the other. Although some Nigerians had partially converted to e-commerce before the COVID-19 pandemic lockdown in the country, the lockdown gave the biggest incentives for the conversion of many Nigerians to online shopping. Restricted by the force of the law and the safety concerns, many Nigerians turned to e-commerce for the supply of most of their essentials.
Consumers were not the only group of people that benefited from e-commerce during the lockdown, and the period after. Some global brands including Coca-Cola, Procter & Gamble, Mastercard etc moved their products and services to the Jumia platform, either showcasing their products on the Jumia Mall or advertising their products on the Jumia Marketplace and benefiting from the Jumia's wide reach and logistics operations.
From the roles that Jumia and other e-commerce platforms played during and after the lockdown days, and the fact that the pandemic is still with us, it is evident that the e-commerce sector deserves a special attention to assist it in achieving its potentials of keeping Nigerians safe, at least, until the pandemic has been defeated.