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Nigeria’s current retail consumption is listed at $388 billion per year and could rise to $1.4 trillion per year by 2030 according to a report by Mckinsey’s Global Institute. To achieve that estimate and sustain it Nigeria’s retail industry is going through drastic change. Retail growth is being fuelled by the increase in the size of the Nigerian population, more than 80 million of Nigeria’s 170 million citizens live in or close to urban areas, increasing disposable incomes among certain segments of the population, and the drive by the government to modernize retailing. International retailers have also helped growth through their investments and the expansion of international retail stores throughout the country. A report prepared by international management consultancy AT Kearney in 2014 labeled Nigeria, along with Gabon, as offering the best retail investment opportunities in Africa.Shoprite

The Nigerian government has played a significant role in the growth of modern retail. Like most African countries, Nigeria has a huge informal economy, with large open markets where items are sold, including food and clothes, electronics, and phones to name a few. There are also many small neighborhood stores, ranging from large to small operators, as well as kiosks, roadside food sellers and street hawkers. Because of high unemployment and other factors the informal economy has traditionally played a large role in Nigeria. Nigeria‘s informal retailing channel is believed to be worth billions of naira, much of which is untaxed and unaccounted for in the nation‘s GDP. The government has made a commitment to place its focus on the formal economy and modern retailing and has implemented new policies discouraging open air street retailing.Crowded Oshodi Market in Nigeria

The new phenomenon for retail in Nigeria is large shopping or “mega” malls. The first mega mall in Nigeria was launched in 2005, when South African grocery chain Shoprite and other retailers began trading from the Palms Mall in Lagos. The mega mall concept has been hugely popular in Nigeria as it has become the place to be seen for aspiring Nigerians. These malls have also further increased the trend towards modern retailing.

Although there are now eight shopping malls spread throughout Nigeria, with others still to come, retailers have found the high rent at these locations to be a major detriment. These malls have shown a steady turnover in merchants. Also many of the Nigerians who love to come to the mall and be seen, cannot afford the products that are being sold at the high end international merchant retail stores that occupy the malls. Mall in Nigeria

Another retail channel that is experiencing high growth is internet retailing, or ecommerce. Mobile phones are ubiquitous throughout Nigeria and more Nigerians are shopping via their mobile devices. Nigeria is the largest mobile market in Africa and the 10th largest in the world. 71 million Nigerians access Internet via their mobile phones according to statistics released by the Nigerian Communications Commission (NCC) and Nigeria was number eight among the top 10 internet user countries in the world. Nigeria’s internet subscriber base rose from 48.2 million in June 2013 to 67.4 million in June 2014. This represents a density of 40 percent, placing the country above the African average of around 16 percent, as estimated by McKinsey & Company.

Ecommerce companies that operate in Nigeria, such as Jumia and Konga, have shown tremendous growth over the last few years. Jumia recently secured $150 million of fresh investment from its shareholders and both companies are currently selling over 100,000 items on their sites. Nigeria’s ecommerce industry is now worth over $1 billion and Nigeria’s Minister of Communications Technology, Dr. Omobola Johnson, has said that Nigeria’s e-commerce market has a potential worth of $10 billion. Even with the ecommerce industry being young and facing logistical issues, this is another potential channel for a retailer to actively engage the Nigerian consumer and see real growth and revenue.

Not all international retailers entering the Nigerian market have been successful. In November 2013, international retailer Woolworths announced it was pulling all of it’s supermarkets and department stores out of Nigeria. Woolworth’s found the environment to be challenging and  failed to lure Nigerian consumers.  Woolworth’s initially entered the market in 2012 but high rental costs, duties, and a complex supply chain process made it difficult to succeed. In order for international retailers to be successful one needs to understand the regulatory environment, the challenges of doing business in Africa, the tastes and habits of the Nigerian consumer, and whether or not your business is a good fit for the market.

Understanding Nigeria is key. The Nigerian consumer market is largely defined by the super-rich and the super-poor. Nigeria is among the most unequal countries in the world in terms of income distribution. Although income inequality limits the overall consumer market by concentrating purchasing power with the rich, there is a booming luxury market in Nigeria. Wealthier Nigerians are attracted to well-known brands which are perceived as being of high status. Luxury car Nigeria

There is also a growing middle class, albeit nascent, with rising spending power. By 2030 Nigeria will be home to almost 12 million middle-class households. Going by the National Bureau of Statistics’ average of 5.7 people per household, this would account for over 68 million people. The Mckinsey Global Institute is forecasting 35 million households to be earning more than $7500 a year by 2030, greatly expanding the middle-income bracket. This provides great promise for merchants looking to enter the market and appeal to a broader segment.

There are tremendous opportunities for modern and westernized products due to Nigeria’s relatively young population and their love of western brands. This young and trendy segment of the population has an intrinsic demand for products that appeal to them in a more modern retail setting or outlet. Sales via informal channels such as open markets will decline, while sales via formal retailing channels will increase with the changing population needs and rising demand for convenience.

The key offering of both kinds of new retailing concepts is convenience: modern retail store channels offer hassle and haggle free shopping in a comfortable environment, while internet retailers also offer stress free shopping. Convenience will be a key benefit as shoppers do not have to brave the heavy traffic of major cities in Nigeria. They can now visit modern retail facilities at malls or buy something online and have it delivered to them at their home. The future of retail in Nigeria is in the here and now and will continue to see an upward trend.

Anthony Bio for Blogs

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Ecommerce in Nigeria
Nigeria is the largest country by population in Sub-Saharan Africa and it also has the biggest economy. By 2030, one in every six Africans will be Nigerians, and Nigeria will have one of the 25 largest economies in the world. One area to look for continued growth and real opportunity is E-Commerce or M-Commerce (Mobile Commerce). In 2014 Nigeria recorded over $2 million worth of online transactions per week and close to $1.3 billion monthly. Nigeria’s e-commerce market is developing rapidly, with an estimated growth rate of 25 percent annually.

According to an online researcher, emarketer, while e-commerce across the rest of the world is growing at 16.8 per cent, Africa’s e-commerce space is growing at a rate of 25.8 per cent – making it the fastest growing in the world. Nigerians are notorious for their love of shopping. The Euromonitor Nigeria in a 2011 report revealed that Nigerians spend $6.3 billion per year on clothing. In a recent survey conducted by Philip Consulting 38 percent of Nigerians prefer to buy products through the internet. Middle class consumers are the biggest purchasers online. Nigeria’s middle class now accounts for 28 percent of the population, and the middle class are well educated, with 92 percent having completed a post-secondary school education. This middle class is brand conscious and tech savvy and their technology of choice is a mobile device.

Mobile phone shopping
A Terragon Group study in 2014 shows 63 per cent of Nigerian internet users had bought at least one item online. 60 percent of these buyers claimed to have used their mobile phones for these purchases. 86 percent of the respondents to the Terragon Group study claim to carry out research about an item before making a purchase, and 80 per cent pointed at mobile as their major platform for research. Mobile is the first and major point of access for all internet activities. Nigeria is the largest mobile market in Africa and the 10th largest in the world. 71 million Nigerians access Internet via mobile phones according to statistics released by the Nigerian Communications Commission (NCC) and Nigeria was number eight among the top 10 internet user countries in the world.

connectivityOne of the keys to growth in e-commerce is connectivity. Internet access in the past has been spotty at best, but is getting better. Nigeria’s internet subscriber base rose from 48.2 million in June 2013 to 67.4 million in June 2014. This represents a density of 40 percent, placing the country above the African average of around 16 percent, as estimated by McKinsey & Company. Nigeria’s internet access market is set to witness a huge boost, as the federal government has set the target of a five-fold increase in broadband penetration by 2018. This is continued good news for e-commerce in Nigeria and Nigeria’s Minister of Communications Technology, Dr. Omobola Johnson, has said that Nigeria’s e-commerce market has a potential worth of $10 billion with about 300,000 online orders currently being made on daily basis.

Even with all the potential and the good that is currently happening there are still core issues. The lack of basic infrastructure, the failed postage system, power supply, expensive broadband internet and poor road networks are greatly inhibiting the rapid growth of e-commerce business in Nigeria. Nigeria’s notoriety for online fraud has further hindered growth. In 2005, PayPal closed all Nigerian accounts and denied registration to any user traced to a Nigerian IP address. PayPal has since changed that policy and entered the Nigerian market this past summer. Outdated myths can be hard to shake and unfortunately some still see Nigeria as a haven to scam artists and fraud. Another area of concern is cybercrime. The lack of legislation that specifically targets cybercrime or cyber security has no doubt continually hampered accelerated growth in the e-commerce sector. Legal intervention will need to be raised to deal with future nefarious activities online.

Nigerians shopping
There are tremendous opportunities for e-commerce growth. In Nigeria shopping is a task that takes an incredible amount of time and effort. Many wealthy Nigerians still travel abroad to shop. Some of the reasons for going abroad are limitations on what one can buy online and the challenges associated with online shopping systems. Increased internet access, more affordable data costs, mobile connectivity, the convenience offered by online shopping, and a better product offering should attract more Nigerian consumers to make use of e-commerce sites. Two of Nigeria’s largest e-commerce sites, Jumia and Konga, have seen continued growth and as more players enter the market not only will the consumer benefit, but the Nigerian economy should benefit as well.

Anthony Bio for Blogs