E-commerce a pillar for the services sector

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Monday, November 30, 2015 10:32AM / FBNQuest Research 

Although broadband penetration in Nigeria is still very low at 10%, the country is likely to experience steady growth of 3G access. The 3G network enables access to the internet over mobile devices at a data speed of 2Mbps.
 

As access expands, it should have a transformative impact on Nigeria’s growing e-commerce market.
 

According to the Nigerian Communications Commission (NCC, the regulator), active internet subscription via GSM was estimated at 97.1 million in September, equivalent to penetration of 57%.

The retail trade industry is benefitting the most, with digital goods accounting for 47% of monthly sales while clothes, shoes and fashion accessories account for about 39% on a monthly basis.

 Foreign suppliers are penetrating the Nigerian market gradually via e-commerce platforms. This year, a major UK fashion brand (New Look) partnered with Jumia.

 Small and medium-sized enterprises (SMEs) stand to benefit immensely from the online market space as it is more cost effective and a faster way to increase their visibility and reach.

The SMEs are a growth engine for Nigeria’s economy; leading online retail platforms are already incorporating SMEs to drive their businesses.

 Delayed delivery of goods due to horrid traffic conditions and poor road networks is one of the roadblocks that the industry faces. In Q3 2015, the post and courier services segment contracted by -16% y/y.
 

Despite accounting for less than 1% of total GDP, the importance of this segment as it relates to the rate of growth of the e-commerce sector cannot be overstated.

 In an attempt to support Nigeria’s e-commerce industry, DHL has announced plans to invest US$20m across its key divisions in Nigeria.

 E-commerce is also playing a pivotal role in Nigeria’s hotel and travel industries. Based on data from Jovago (a leading hotel booking company), 27% of Nigerians use online platforms to book and pay for hotel rooms while 73% pay on arrival.

In addition to this, 51% of Nigerians prefer to book less than a week in advance while 31% book hotels on the same day of their arrival.

 As for Nigeria’s travel online space, Wakanow is arguably the most dominant player.

 The expansion of this industry could stimulate the much needed growth of Nigeria’s non-oil economy and contribute to its diversification in the medium to long term.

 

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