E-commerce: 76% of Nigerians cite insecurity, accessibility, others as reasons for choosing offline transactions

The Issue

As described in  this article, everyone – including western countries, was seduced by the ‘Africa Rising’ narrative, a promise that emphasised the impact of improved governance in the continent that would successfully boost an emerging middle class amidst a long period of mid-to-high single-digit economic growth and rising income. Using the VAMC estimate (previously applied to Latin American countries) to define Nigeria’s middle class, 20% of Nigerian households qualify as middle class. In this case, it implies that a middle class Nigerian is an individual whose possibility of earning less than $2.70 – $3.02 or N348 – N389  a day is 10% or less.

This is close to the African Development Bank (ADB) estimation, which says that African households that earn around $4 to $10 a day are considered to be lower-middle class. With the GDP rebasing, the Economist referred to the Nigerian economy as Africa’s number one economy, surpassing South Africa due to a solid growth record. The presence of the middle class has always been an indication of, and catalyst for, economic growth.

Essentially, this is represented with new five-star hotels across Nigeria’s urban cities – with more than 10 in Lagos alone. Prices of apartments in fashionable districts of Lagos quickly matched those of Western cities. In places such as Lagos, Abuja, Rivers and Ogun, technology start-up companies began to flourish. Shopping malls, with wireless-equipped coffee shops, showed the rise of the African consumer: The Palms in Lagos; The Jabi Lake Mall in Abuja; The Tinapa Shopping Centre in Calabar and more. 

Along with the rise of the middle classes are coming ‘middle-class values’ more recognised outside the continent: families are smaller; they own their own homes, and heads of households have salaried jobs or run their small businesses.

Another striking example of middle-class growth, which can be traced to basic social needs and immense economic opportunities, is the proliferation of the internet. A previous analysis of the middle class in Nigeria in 2011 reported that the majority (73%) shop at open-air markets and use convenience stores (62%). However, just 13.8% of the population had access to the internet – compared to 50% in January 2021. With the digital landscape flourishing through the largest African population and one of the youngest globally , Nigeria possesses one of the biggest internet economies on the continent.

Mobile ownership has reached almost 50%. In fact, mobile devices are much more frequently used to access the internet than desktop devices. In 2019, over 70% of internet access were recorded on mobile devices, whereas this share was even higher when it came to online marketplace visits. Also, the B2C index value for e-commerce stood at 53.2 points, the fourth-highest in Africa. The B2C e-commerce index measures an economy’s preparedness to support online shopping by taking different indicators into account. Nigeria is among the African countries with the largest number of online marketplaces.

The Question

The economy is gradually becoming cashless as the country continues to implement digital payment, and electronic banking is being implemented in different phases. At present, many transactions can be conducted electronically using several of the emerging digital financial service platforms. Jumia is one of the most popular marketplaces in terms of visitor numbers, which operates in 12 African countries. Other popular online marketplaces in Nigeria are Jiji, Konga, and Cheki. Konga.com, for instance, recorded some 30 million web visitors in 2019, which mainly consisted of a very young audience. Marketplaces for cars are very popular, with 14% of all online marketplaces specialising in vehicles.

Konga, a solid competitor to Jumia, sells a wide range of products from home appliances to groceries. It merged with Yudala in May 2018 but continued to operate under the Konga brand name. In December 2016, Yakata, another competitor, reached over 155,000 orders, valued at nearly $11 million for the month alone. Nevertheless, several factors still inhibit the potential of the country’s digital economy. Broadband coverage in rural areas is still poor and far from the dynamic reality of large urban cities like Abuja, Lagos or Port Harcourt. Additionally, there is a lack of adequate equipment to use the internet, like computers or mobile devices fully. Moreover, the penetration of online payments remains low, only 2.6% of the adult population own a credit card, while some 3.6 percent use it to make purchases or pay bills online.

But with the COVID-19 pandemic becoming an issue last year, consumers learned to do many things to avoid coming into direct contact with others – and shopping was no exception. Culture Intelligence from RED asked its national focus group about their personal experiences with shopping and how they prefer to do it online or offline?

The signs are apparent – the future of the Nigerian market is online. With sustainable economic growth and an increase in consumers’ purchasing power, the act of shopping will continue to transition. The effects of e-commerce already appear in customer service to new product design. But while the evidence reveals that many more Nigerians can willfully engage in e-commerce transactions, improved awareness and security remains paramount to business survival in the sector.

What The Streets Are Saying

Among the focus group, 82% are between 18 – 25, primarily Gen Z consumers with broad access to the internet. 10% is between 26 – 35 years, while the remaining 8% is between 35 – 45 years. On how skillful they are at using the internet, 47.4% explain that they are casual users, 36.8% claim to be expert users, while 15.8% say they are basic.

On whether they preferred online to offline shopping, 73.7% claimed that they preferred offline shopping while 26.3% selected online shopping. Just like every other country, young Nigerians are most likely to spend online. So, while it is understandable that the older customers would still be reluctant, an overwhelming majority (76%) of the Gen Z consumers in the group explained that they still preferred offline shopping, as they indicated issues with accessibility, credit card scam, brand trust, and data security.

While convenience was an essential factor to those who preferred online shopping, comments by those who preferred conducting their shopping offline include “Because I can see what I want to buy”; “Most online stuff are fake”; “I prefer to buy offline so I can confirm the quality and be able to price”; “I enjoy window shopping online a lot, but offline shopping ensures that I do not get any unpleasant surprises”; “Most times, it is not what you ordered that you  get”.

Even with the low popularity of credit cards and digital payments, e-commerce has grown significantly in Nigeria, especially between 2018 and 2019. Online food retail and personal care rose by 50%, whereas the fashion and beauty sector experienced an increase of over 40%. The most valuable e-commerce sector in Nigeria was travel and accommodation, which achieved $3.2 billion in consumer spending. However, the age-long problems facing e-commerce in Nigeria, including logistics and delivery issues, have persisted. Even with the large population, the need for e-commerce appears not to be strong enough, income inequality, brand awareness, and education makes the target market too small, and there are high service delivery frictions.

“We are a country where about 87% is poor, making us the poorest country in the world,” said an expert. “The country also has a middle class that is rapidly falling back down the economic ladder, and millions are slipping into poverty. The potential in the huge population exists when more consumers have more money to spend and have the means to go online to sort through thousands of products to buy what they need. In this case, the consumer will also have to deal with late or false deliveries, or the fear of providing information that cybercriminals can use. At that point, almost everyone wants to avoid the headache”.

“Logistics remains a major challenge for Nigeria’s e-commerce customer,” said another expert. “It is an online trend for customers to always post images with ‘What I ordered vs What I got’ on social media. More than anything, that perceived lack of certainty or trust in the market, especially for a new customer, will affect the market. Besides, the insecurity associated with online transactions is also a major hindrance among businesses and customers. To improve the market, payment providers have to educate customers while providing insurance to Nigerians. Moreover, e-commerce firms in Nigeria have sometimes perpetuated the trust deficit by showing a total disregard for product quality and customer service.

The signs are apparent – the future of the Nigerian market is online. With sustainable economic growth and an increase in consumers’ purchasing power, the act of shopping will continue to transition. The effects of e-commerce already appear in customer service to new product design. But while the evidence reveals that many more Nigerians can willfully engage in e-commerce transactions, improved awareness and security remains paramount to business survival in the sector.

Insights on What The Streets Are Saying are drawn from data collected through in-depth interviews and surveys with our 500-member consumer panel spread across the country, including 100 culture insiders, who are all leading thinkers and doers across media and marketing.

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