How Big Is E-Commerce In Nigeria?

This week brought news that two of Nigeria’s biggest e-commerce companies, Konga and Yudala, were merging.

Konga + Yudala = Formidable?

The talking point, as always with this sort of deal, was the giant that it was going to create. In this case, the answer was quite significant: Konga, which retains its name after the melding, should snatch the title of largest e-commerce platform in Nigeria away from Jumia, their fiercest rivals. Talking up the duel between these two brands certainly makes for an entertaining business article. But a more reflective approach to unearthing the merger story’s relevance would be to question the size of turf they’re battling each other on (and for). After all, if the market they’re targeting isn’t worth much, it would be inaccurate to describe their battle as a grand tussle. So, how big is e-commerce in Nigeria?

The view from the skies

Jumia, in its most recent report on mobile in the country, says that Nigeria’s e-commerce could be worth $13 billion in 2018. That’s an impressive figure, at least at first glance. The report also notes that Nigeria’s mobile market is Africa’s biggest, with about 162 million subscribers, or 84% of the country’s population. It’s this market that drives a large chunk of e-commerce transactions in these parts; because it’s still growing, we would think that investors would be falling over each other to get a share of it. There’s more feel good information about the sector in Disrupt Africa’s 2017 report on e-commerce in Africa. It reveals that 40% of the continent’s e-commerce businesses are situated in Nigeria; Kenya and South Africa, the more celebrated centres of African tech, are only playing catch up in this sphere. Gabriella Milligan, one of Disrupt Africa’s co-founders, seemed upbeat about what they had seen in Nigeria.

“The country is on the brink of huge e-commerce success,” and is on its way to becoming “the first African country at a similar scale to western markets.” — Milligan

Reality check

But at the moment, e-commerce isn’t all roses and bloom. In fact, the key takeaway from Disrupt Africa’s report was that 70% of ecommerce ventures on the continent – including the Nigerian ones – aren’t making profits. Sadly, this only reiterates a well known fact about the industry in Nigeria. Konga has only recently shown signs that it’s nearing profitability, and this after letting go of 60% of its staff late last year- the same year in which Jumia posted a net loss of $61 million. And Yudala wasn’t expected to begin making sustainable gains until 2020. It’s not hard to see why things are this tough. Asides the usual suspect- poor infrastructure -there’s the brutal truth that’s revealed by looking beyond population sizes to the actual ability to use e-commerce platforms. While there are 100 million internet subscriptions in Nigeria, this number only represents a potentiality. This dawns on you when you find out that only 9% of people in the country (17 million people) use social media. Of course, not everyone who’s on social media buys things online (to put it mildly), so the actual number we’re digging for is even smaller. Swedish company Kinnevik reported in 2016 that Konga, which it had a stake in at the time, had only 184,000 active customers – less than 0.001% of Nigeria’s population that year. When the news broke, it was a nasty but timely correction to an overly sugarcoated industry narrative. Out the window went the story of a dawning age of online shopping propelled by young, sophisticated, tech savvy Nigerians, with its appeal to business journal content creators. It was replaced by the sober truth that local realities could not be bulldozed by western solutions; survival in our region for online stores meant adapting to its peculiarities.

Bright lights on the horizons?

The Konga-Yudala merger is making analysts wonder if Nigeria’s e-commerce is on the verge of finally coming alive. They are still quite cautious about their musings on this, and are quick to point out the frailties of the industry. But it does seem that the only way from here is up. The world is swinging in the direction of tech-enabled convenience and order-from-afar transactions. We will move with it, perhaps not so swiftly, but at our own checkered pace.

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This article was first published on 19th April 2018

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