Online Retailing in Nigeria: Prospects and Future

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When God created the world, I imagine God commanding the earth ‘Spin continuously…and let everything in thee be subject to continuous change’. The human race has always evolved new methods about the way we live our lives and do our business. From trade by barter, to the era of money, methods of buying and selling has always been changing. The evolution of internet has taken our business method up a notch by reducing the physical presence. Buying and selling is now a prominent online activity. A key participant in the production and consumption process is the retailer. Retailers help consumers to get commodities in small bits from the manufacturers or wholesalers. Online retailers takes this a step further by making these commodities available for purchase over the internet and delivered to the customer at the customer’s location.

Online retailers tend to create a shopping experience for customers without having to visit the mall physically. This is the crux of online retailing. Some call it e-commerce, e-trading, mobile commerce; it all addresses more or less the same thing, that is, the buying and selling of commodities over the internet. Online retail and e-commerce may be the next big revolution in Nigeria since the launch of GSM in August 2001. Barely two years since indigenous online retailing started in Nigeria names like Jumia, Konga, Kaymu, Hellofood, Carmudi are gathering fame for their online retail efforts in Nigeria.

  • How does online retail works?

Online retail is becoming so widespread these days that many of us fail to realize how it really works and what actually goes on behind the screens. It may seem simple to us – the user clicks the order button, makes a payment and the item is delivered. In reality however, the logistics that need to be addressed when providing an online retail service can be quite daunting. Logistical steps in the online retail process are summarised below:

  1. Online Sales
  2. Warehousing
  3. Packing & Transport
  4. Consumer

Online sales involve the consumer selection of the preferred product on the retail site. This stage is followed by the finding and preparation of the product by the warehouse workers. Next is the packing and transportation by the delivery agent, who takes the product to the final consumer. The retailers’ process of getting the goods from the wholesaler at best prices is somewhat similar to that done by the large physical retail outlets. Although, many online retailers are evolving retail contracts with wholesalers in order to reduce their carrying costs and increase their profit.

  • What are the prospects and trends?

The rapid birth and expansion of online retailing in Nigeria over the past two years is only about to get bigger. These are some of the trends and prospects to be expected

1: Diversification of large retail stores into online retailing.

The next few years may witness the diversification of large retail stores like Shoprite into online retailing. Business and technology trends have always come in pairs. The direct consumer connectivity provided by the internet thus induced e-commerce to change the world. The established physical shopping malls will not be left out of the transition. With their established goodwill and patronage, they will be tempted to making their commodities available online. This will help them to withstand the strong competition that the online retail stores will bring in the form of price tactics and buyer convenience.

2. ‘Appification’ of online retailing.

There will be a rapid increase in mobile applications for online shopping. Despite the poor internet infrastructure in Nigeria, blackberries and androids are used very widely and serve as a good angle to boost mobile applications for online retailing. In fact, this increased mobility is of greater advantage to online retailers as it brings the seller closer to each and every potential buyer. With phones, your customers can shop from anywhere. Anywhere is actually where they want to shop from.

3. Strategies for improving customer experience.

For online retailers to sweep the market and get established there is a need to look beyond just automating the buying and selling processes. Retailers will strive to bring about new selling ideas and customer experiences that buying and selling have never experienced before. Consumers may begin to enjoy additional online features such as virtual testing of dresses or other body wares. The customer uploads his/her pictures and the dresses are tested on the clothes. This can be the same for spectacles, shoes and other body items. Customers usually like to compare brands, and prices. This may explain why online shoppers may prefer to visit general retail sites than specific producers’ e-commerce sites. New web features that will enhance brand comparison are expected to be on the increase. Shoppers will also begin to enjoy seamless shopping experience with access from any channel, integrating merchandizing and personalized interaction.

4. Reduction in and more accurate lead time.

As the wings of online retail grow, the average time between when the customer orders and when the goods get delivered will gradually reduce. This lead time which is currently given within a range by most retailers will also begin to get more exact. Currently most Nigeria retailers take about a week to deliver the purchased goods to customers. Future trend may witness the movement of delivery time range into more exact time details. As the options for online purchase increases consumers will tend to favor retail sites that can give a more concise delivery period.

5. Increase in government focus on retail VAT.

The existing VAT regulations in respect of VATable goods and services, VAT exemptions and VAT payable will continue to apply. All VAT remittance are paid to the FG through the FIRS so the issue of relevant of which relevant tax authority to remit VAT on sales in different states will not occur.

The large increase in online sales and payment will call for the focus of the FIRS on ensuring that these taxes do not escape their net.

6. Increase in e-payment as payment option.

The prospect of online retailing is boosted by the increase in online banking in Nigeria. Currently, online retailers have a lot of payment options due to the situation of the country’s internet infrastructure. They allow the buyers to pay on delivery, which lots of the online buyers fail to use. This may be due to the general low level of internet education or the infamous African paranoia about virtual methods. The use of debit and credit cards, e-money, is bound to increase as Nigerians will see more reasons to finally accede to their banks numerous adverts on e-money services. The payment mechanism for online retailing will further aid in promoting the cashless policy of the FGN.

The recent increase of the cash reserve ratio of the FG from 50% to 75% will further boost non cash payments for online transactions. The current events in the finance sector of the economy, the public sector financial reforms like the e-government projects create a better environment for e-commerce growth.

The Population prospect

Nigeria has the largest population in Africa and has a large potential for online retailing. This prospect overshadows the obvious challenges of illiteracy and poor internet infrastructure.

Between 2000 and 2008, Internet subscriptions have grown in Africa by 1030.2%, versus the world’s average of 290.6%. Nigeria recorded a 2900% growth in internet users within 2000 to 2008, with 7% of the entire population users of the internet i.e. about 10 million internet users.

In 2013, Nigeria was said to have more than 56 million internet users, emerging the largest in Africa. This is more than the sum of users in the next two countries and more than the entire population of South Africa. Of the 115 million mobile telephone subscribers in the country, 35 million use their handheld devices to access internet data services.

Conclusion

Online retailing is filled with so many exciting prospects and opportunities that warm the heart. It’s time for us all to embrace this great innovation. It’s time for us all for create a niche in this new phase business has moved to. So, next time you visit that site and see a retail add-on. Remember it’s the new wind of change that is saying hello to you!

Please feel free to post your views, comments and opinions. You can contact me directly @: dotunjay@yahoo.com; +234-7033746752

Meet ‘Dotunjay’: Adedapo Adedotun Japheth is a young man, with a passion for generating and implementing business improvements. A creative thinking addict with a vision of making a positive difference. ‘Dotunjay’ – is a graduate of Management and Accounting from Obafemi Awolowo University, a scholar and student of the Institute of Chartered Accountant of Nigeria and currently a NYSC member at NEPC Abuja.