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E-commerce is the activity of buying or selling products online. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems.

These business transactions occur either business-to-business (B2B); business-to-consumer (B2C); consumer-to-consumer (C2C), or consumer-business (C2B). E-commerce covers a wide range of transactions effected via mobile telephones and other devices such as personal computers and tablets, and purchases are often made by using applications and platforms.

In 2017, retail e-commerce sales worldwide amounted to $2.3 trillion and e-retail revenues are projected to grow to $4.88 trillion in 2021. While the massive opportunities in B2C commerce are becoming too big to ignore, B2B e-commerce worldwide is growing at monstrous rates, hitting $7.7 trillion in 2017. China accounts for about 30 per cent of global B2C e-commerce and 78 per cent of global B2B e-commerce. Despite these amazing stories of growth in other parts of the world, especially Asia, Nigeria’s e-commerce sector, with internet penetration of about 40 per cent is arguably estimated at just $13 billion.

With the low e-commerce penetration in the country, the Standards Organisation of Nigeria (SON) organised a stakeholders forum in Lagos last week to discuss the role of “Standards and quality regulation in electronic commerce” in Nigeria and how to boost the sector. Speakers at the event highlighted the following factors as some of the ways to drive the sector in the country.

Infrastructure

Guest speaker at the forum, Mr. Oluwadamilare Ogunleye, CEO of Survenia.com, pointed out that there were infrastructural deficits that need to be overcome for the success and growth of e-commerce in Nigeria. Of the lot, there are five infrastructure deficits that are critical: payments, logistics, local manufacturing, digital identity, and credit.

The importance of seamless digital and highly-penetrative payments is unassailable in e-commerce. However, Nigeria’s unbanked population remains quite high. A report in March 2016, by Ericsson, showed that 47 per cent of Nigeria’s population was not in the banking system at all. For e-commerce to really take off, there has to be massive innovations in the areas of mobile payments and wallets, digital currencies as well as the adoption of scalable technologies like blockchain, that not only captures the bulk of transactions still happening in the informal company, but also guarantees the ease of exchange of value online.

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Logistics

Another severe constraint on the development of e-commerce in Nigeria is the inefficient logistics systems. E-commerce thrives on a robust infrastructure network of rail system, roads network and safe waterways. Citing an instance, he said, “Just over a decade ago, the local logistics system in China was poorly developed, primitive and unreliable, presenting difficulties to the development of e-commerce in China for large-scale B2B and small-scale B2C transactions. The Chinese Post Office was also inefficient and in lack of staff skilled in e- commerce. Today, the turnaround of the logistics industry in China has been nothing short of a miracle. The past decade saw the birth and rapid development of the logistics industry.”

Without doubt, government’s aggressive investment in rails, roads and waterways paved the way. Coupled with this was the rapid growth of the manufacturing sector, which led to a boom in third party logistics services, which in turn led to healthy competition in the industry. Therefore, government needs to invest in this regard.

Manufacturing sector

The success and growth of local manufacturing is an important recipe for a vibrant e-commerce economy. E-commerce is a disruption of the traditional distribution channel of conglomerates and large organisations. These channels are huge, and serve as very high barrier to entry for new entrants. E-commerce eliminates this barrier. However, for e-commerce to thrive, it must deliver value at scale by aggregating a large set of sellers and drive price advantage because of seller competition.

This combination can only happen in a manufacturer-seller market, as against a wholesaler-seller market. E-commerce players must see their existence as a symbiotic relationship with the growth of the local manufacturing sector, and think of ways to encourage it. A careful examination of Alibaba’s rural Taobao model may help e-commerce players in Nigeria design a more effective model that factors in local manufacturing and by extension boost the e-commerce space.

Trust

One of the most severe restraining factors for the proliferation of e-commerce is the lack of trust between buyers and sellers. The bigger challenge with trust is that, just like justice, trust must not only be established, it must also be seen to be established. Trust-building programs must therefore be understood from the applicable operations of different platforms, and must always be evident to all stakeholders.