Clicks and mortar: Accelerated shift towards online shopping prompts retailers and regulators to adapt to changing consumption patterns

Although informal physical retail sales continue to dominate the Nigerian market, e-commerce has experienced exponential growth in recent years, culminating in a significant push towards online shopping in 2020-21 in the face of pandemic-induced lockdowns.

Market Footprint

Home to two of Africa’s big-five online retailers, the Nigerian e-commerce market was valued at about $12bn in 2019, according to the US International Trade Administration, and was slated to reach $75bn in revenue by 2025 based on pre-pandemic growth trends. Smartphones are a leading channel for e-commerce sales in the country, with 85% of customers on Jumia, Africa’s largest e-commerce marketplace, shopping via mobile web or app in 2018, compared to 15% via desktop computer. Rising smartphone penetration and mobile connectivity have been important contributors to this figure. More than 112m Nigerians had internet access as of 2018, and there were some 36m smartphone users by the end of that year, Jumia reported in its “Nigeria Mobile Report 2019”. “For penetration rates to reach their potential, high smartphone costs need to be addressed,” Juliet Anammah, chairwoman of Jumia Nigeria and Chief Sustainability Officer at Jumia Group, told OBG in an interview in mid-2020. “Ensuring there are no tariffs on smartphones, especially on more affordable models, will help individuals in villages afford the technology. This will encourage people to migrate from traditional mobile phones to smartphones, thus increasing internet penetration.”

While on a par with other sub-Saharan African markets, Nigeria’s smartphone penetration of 30% is expected to increase as smartphones become more affordable. Between 2014 and 2018 average smartphone prices in the country declined from $216 to $95, allowing millions of Nigerians to access mobile internet. Over this same period Jumia recorded a fivefold increase in smartphone sales on its site.

Pandemic Impact

As was the case in markets around the world, the Covid-19 pandemic prompted many Nigerians to make purchases online to avoid in-person shopping and circumvent the closure of many non-essential businesses. Jumia alone recorded a 12% yearon-year (y-o-y) increase in annual active consumers in the fourth quarter of 2020, to 6.8m.

In addition to generating business from new and returning customers, this shift in consumption patterns led to an increase in sales of essential and competitively priced goods. “We had to adapt from a platform where… consumers can buy whatever they want to a platform that primarily makes sure consumers can access basic essentials, such as food, sanitary items and personal hygiene products,” Anammah told OBG.

At the same time the pandemic has led to a rise in digital payments to facilitate contactless delivery – a trend that e-retailers hope will continue moving forwards. Nigeria recorded 1.9bn real-time payment transactions throughout 2020, the sixth-highest volume globally behind India (25.5bn), China (15.7bn), South Korea (6bn), Thailand (5.2bn) and the UK (2.8bn).

Safer Shopping

As online shoppers transition towards digital payments, however, security concerns remain at the fore – particularly given the high incidence of cyber-fraud in the country, which has been exacerbated by the increase in online activity during Covid-19 lockdowns. Between January and September 2020 fraud attempts via mobile channels increased by 330% y-o-y, according to the Nigerian Inter-bank Settlement System’s third quarter fraud report, with more than N5bn ($13.4bn) lost to fraud.

The authorities have taken some steps in recent years to shore up consumer confidence and increase protections online. In 2015 the federal government passed a cybercrime bill to help prevent online fraud, providing a framework for enforcement and penalties, and in March 2018 the Consumer Protection Council published new guidelines for e-commerce platforms, including creating a dedicated customer service apparatus and consumer privacy and data protections.