Africa, being one of the fastest evolving demographics in the world, has seen increased acceptance, and use of e-commerce platforms, leading to a fast growing retail industry which is fertile ground for investors. Our analysts forecast that consumer spending in 2020 is set to exceed $1trillion y-o-y, highlighting Africa’s readiness for the expected boom in the e-commerce sub-sector.
Nigeria is not left behind in this new wave of growth. With about 49.7% of its citizens living in urban centers, Nigerian consumers place priority on convenience and comfort when shopping, leading to the rapid adoption of online retailing services.
As the country’s young population continues to rise at the birth rate of 2.6%, its youth demography which makes up more than 60% of the entire populace are aligning with their global counterparts in adopting tech-enabled services that provide convenience and ease of use when shopping.
Across Africa, the three largest economies, Egypt, Nigeria and South Africa, have served as the biggest B2C and B2B e-commerce markets on the continent over the last 5 years. For a nation that has more than 24% of its consumer segment living within the middle class income bracket, Nigeria has continued to record burgeoning increases in the volume of online transactions from online shopping.
Compared to South Africa, Nigeria’s retail market is unsurprisingly small, with players such as Konga, Jumia and Jiji, working to engineer a major cultural shift in retail consumer behaviour. As at 2017, the nation had a total retail space of just about 326,958 square meters, less than one-eight the size retail space recorded by its South African contenders at 2million square meters.
While online retail only makes up a small portion of total retail sales in Nigeria, our analysts at VIZON predict an exponential growth in B2B and B2B2C e-commerce transactions over the next 5 years. At present, the retail sector accounted for about 16.4% of the total GDP and the food and consumer goods sub-sector has recorded a growth rate of $40billion since over a ten year period. It is projected that the African online retail sub-sector will be valued at over $30billion in the next year.
Although about 80% of shopping in Nigeria is still done in traditional shops and open markets, there is still a foreseeable shift towards online retail services, with the greater proliferation of mobile and internet technology, globalization as well as flexible banking services in the sector. Other factors that will power this shift will be the high yearly urbanization rate - about 4% - in Nigeria and improved infrastructure that galvanizes logistics and door-to-door delivery services.
Optimism and positive forecasts alone are not enough to realise Nigeria’s full potential in the e-retail space. Favourable policies and trade frameworks must be put in place to spur development and improve the attractiveness of the sector to investors. Beyond this, we believe that implementing a reduction in the cost of data, providing basic infrastructure and democratizing access to financial solutions are key factors to promoting the rapid adoption of e-commerce services in this nation.