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Nigeria flexes e-commercial muscle

By , Portals editor
Nigeria , 24 Mar 2016

Nigeria flexes e-commercial muscle

This week the acquisition of Nigerian online shopping platform DealDey by Ringier Africa Deals Group, a joint venture between Swiss-owned Ringier Africa AG & South Africa-based Silvertree Internet Holdings, placed the West African country's e-commerce ecosystem back in the public eye.

The drop in oil price globally and the impact of economic downturn on local currencies in African markets is a challenge to businesses, and online trade is no exception.

Sefik Bagdadioglu, Managing Director of e-commerce site Kaymu Nigeria, is of the view that the economic difficulties have actually presented operators with the opportunity to look inward at home-grown product rather than source product externally.

Competitors including Gbolahan Fagbure, co-founder of online grocery store, and Chris Folayan, co-CEO of MallforAfrica, have attested to the strength of Nigeria's e-commerce ecosystem – and mentioned the powerful influence of Lagos.

In February this year Kaymu Nigeria celebrated its third year in operation and marked the anniversary with a revamp of its desktop website – focussing on the fusion between a social network and a traditional marketplace.

In December 2015 the company released a white paper E-commerce in Nigeria: Market Trends and Consumer Behavior, which focused on the purchasing habits of e-commerce consumers in Nigeria.

Several trends were highlighted in the research, including the majority of internet users (48%) are within 25 – 34 age group, 59% of users are men and 41% women, dresses and shoes are the number one product category, followed by jewellery and watches, with mobile phones and tablets in third position.

Search engines represent the top traffic channel for ecommerce in Nigeria with 33%, with social media and display channels each scoring 20%.

Sefik engaged with ITWeb Africa and shared his view of the state of Nigeria's e-commerce ecosystem and the realities of operating in an increasingly competitive environment.

Q: Lagos has been mentioned as the most influential region when it comes to Nigeria's e-commerce market, do you agree?

Sefik Bagdadioglu: Lagos is the commercial hub of Nigeria, so it is only expected that it would also be the most important hub for e-commerce. This is due to the population density, internet penetration, infrastructure development and other factors that differentiate it from other states.

Q: What are the strengths and weaknesses of Nigeria's e-commerce ecosystem?

Sefik Bagdadioglu: One of Nigeria's biggest strengths is the potential of the market. The increase in internet and mobile penetration in urban areas and people's willingness to embrace online technology also contribute to Nigeria's promise for e-commerce. In terms of the weaknesses, infrastructure continues to pose a big challenge for e-commerce, especially when it comes to operations and logistics. Additionally, consumers' lack of trust and comfort with online payment methods are also weaknesses for the industry.

Q: To what extent does connectivity, access to the internet impact on the West African country's e-commerce market?

Sefik Bagdadioglu: Internet and connectivity are fundamental to e-commerce, but we are working on ways to bridge the gap between online and offline and overcome the barriers to access posed to people who are not yet connected to the internet. One such initiative is the Kaymu Village, a unique offline experience that enables buyers and sellers to meet and make transactions in person and to familiarise themselves with Kaymu and e-commerce.

Q: How much competition exists in the market and is there a way for consumers to effectively evaluate the level of service from providers?

Sefik Bagdadioglu: Competition in the e-commerce space in Nigeria is fierce - which is a good thing, especially for consumers, because it forces companies to innovate, differentiate their services, and constantly deliver better services. With more choice, consumers have the power to demand better services and easily switch between the different companies. E-commerce creates an unparalleled convenience, gives buyers the power to make price and product comparisons, it improves dissemination of information and partially solves the principal agent problem.

Q: What is the general mind-set of consumers when it comes to e-commerce and security?

Sefik Bagdadioglu: There is still a lot of mistrust when it comes to making online payments, which is why over 90% of transactions happen through pay on delivery. Through our partnership with Interswitch and through creating our own KaymuSafePay payment method, we have managed to overcome some of the trust issues buyers have. However, the general attitude is one of distrust since online transactions are relatively new in Nigeria. Buyers tend to prefer the pay on delivery option because it gives them more flexibility in changing their mind or ensuring that their product is in their hands, as they saw it on the website, before they commit to purchasing it. Over time, we expect the numbers to change as people become more accustomed to e-commerce.

Q: How does Nigeria's e-commerce ecosystem compare to that of other key hubs in Africa, like Kenya?

Sefik Bagdadioglu: Nigeria is bigger and more mature than most of the sub-Saharan countries we operate in, even though infrastructure is more developed in countries like Kenya. When it comes to North Africa, income and education levels are higher which favours e-commerce. South Africa is certainly ahead in terms of development and e-commerce is no longer new there. Overall in terms of sub-Saharan Africa, and with the exception of South Africa, Nigeria is definitely at the forefront in terms of the e-commerce ecosystem.

Q: What game-changing trends do you foresee impacting Nigeria's e-commerce ecosystem going forward?

Sefik Bagdadioglu: We are looking at great improvement and innovations in online payment systems through the rise we are already seeing in FinTech startups and the penetration of mobile money. There is also a big push in the improvement of customer service standards, which is applicable to all service and commerce industries. This will definitely continue to drive developments in e-commerce and raise the standards for all actors.

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