The strong appetite for mobile data usage as well as increased network coverage has increased the potential of Nigeria's e-commerce market. Based on data from the Nigerian Communications Commission (NCC), mobile network coverage is currently estimated at 103% on the basis of a population size of 198 million. However, internet data penetration via GSM is lower, at 78%. A thriving e-commerce market will improve trade activity as it provides a cost-effective method of connecting producers and merchants directly to customers.
The realities of the COVID-19 pandemic have forced businesses to learn, unlearn, rethink and re-strategise their models. On the back of this, e-commerce has emerged as a primary route to survival, especially for SMEs. The pandemic is moving a key component of the marketing mix to online platforms; businesses need to increase their online presence and grow sales using digital tools.
The financial investment needed for marketing is also covered for SMEs by most e-commerce platforms. This cost is a huge overhead SMEs can eliminate while combating the headwinds triggered by the pandemic.
E-commerce platforms like Jumia generally bear the cost for online and offline advertising, search engine optimisation, and social media exposure for businesses on their platform. There are also special campaigns like Tech Week and Black Friday which SMEs on these e-commerce platforms can benefit from in the form of a boost to sales volume due to high customer traffic.
Consumer behaviour is likely to shift, post-pandemic, towards e-commerce, as health-conscious shoppers are likely to aviod large, crowded markets. This should create more opportunities for direct-to-consumer models with online platforms and third-party delivery.
According to industry sources, the e-commerce market in Nigeria is estimated at USD12bn, with at least 87 Nigerian e-commerce platforms. However, its potential is still largely untapped but could be unlocked if the industry gains strong consumer trust to transact and pay online.
Jumia's volumes through its contactless delivery model, which uses digital payments and includes partnerships with Reckitt Benckiser, Procter & Gamble and Coca-Cola, has increased during the pandemic to reach 6.7 million active consumers in Q3 2020. This is 23% higher than the corresponding period in 2019.
As for logistics, e-commerce platforms are working with digital last-mile logistics providers such as Gokada and O-Pay, to deliver products to consumers. These partnerships have given a lifeline to the okadas (motorcycle taxis), which were banned in many areas of Lagos State from transporting people.
Jumia disclosed that the supply and logistics disruptions encountered in selected locations, which also affected their food delivery business in the first and second quarters of 2020, largely subsided in Q3 2020. However, the development of the virus remains a fluid situation and is expected to drive continued macro and operating environment uncertainty.
For e-commerce to attain its full potential, the government must prioritise the tackling of infrastructure challenges and e-fraud challenges in particular.