Rethinking local businesses in e-commerce era

The rapid growth of e-commerce in Nigeria has brought numerous benefits. However, the change towards online shopping is undermining various aspects of the local economy, impacting market traders, small businesses and the overall trade landscape. In this report, MOYOSORE SALAMI examines how e-commerce is affecting trade business and the broader implication for Nigeria’s economy.

With increased Internet penetration in human activities, e-commerce has become a critical component of Nigeria’s economy. Both online and local businesses have been significantly affected by the growth of these platforms over the years. Suffice it to say that online platforms have expanded the marketplace by bringing together buyers and sellers across the nation and offering customers goods at reasonable prices.

Many argue that e-commerce is not only a key component of the contemporary digital world, it has brought ease in doing business, especially with the sustained strengthening of supply chains and reduced supplier costs, alongside the provision of a wide array of products and services.

For e-commerce apostles, the platforms are veritable tool for sustainable economic growth and development. Utilising the platforms has allowed local traders to reduce traditional retail overhead costs and redirect those savings towards improving product quality and customer service .

However, the rise of e-commerce is causing mixed feelings among local business owners and market women as local business owners and traders are finding it difficult to compete with the pricing, reach and convenience offered by e-commerce platforms.

The Guardian checks show that these online stores leverage economies of scale to offer lower prices and wider selection of goods, which local vendors cannot match owing to higher operational costs and limited inventory.

Although, local businesses and markets, considered long been the backbone of commerce in Nigeria, are now experiencing a decline in traffic as more consumers turn to online shopping for better prices, convenience, and a wider selection of goods.

Despite this, local and petty traders, who often lack access to the technological tools or infrastructure to compete online, are at a disadvantage. E-commerce platforms’ competitive pricing, enabled by bulk purchasing and direct sourcing from manufacturers, places additional pressure on traditional retailers who cannot match these prices.

Local small businesses often lack resources to compete with established e-commerce giants. The digital divide exacerbates this issue, as many businesses cannot invest in online platforms, limiting their ability to attract and retain customers who are increasingly shopping online. They argue that this change could lead to job losses in local retail sectors, with market traders, and other roles tied to physical retail spaces are at risk as sales decline.

The Guardian learnt that reduced activity in local businesses can lead to lower tax revenues for the government, which depends on market fees and taxes from brick-to-mortar establishments since the reduction in revenue could impact public services and infrastructure development in the country.

Reports have it that the current market opportunity for e-commerce in Nigeria valued at over N255 billion yearly, growing at a rapid rate of 25 per cent per year and has attracted over $200 million in foreign investment is currently worth about $13billion (about N4.01 trillion) and projected to $50billion (N15.45 trillion) over the next decade.

A local business owner, Chinedu Okafor, who sells tiles, lamented the changes brought by e-commerce; saying it has created a challenging business clime, which petty and local traders are struggling to keep pace with.

“We don’t have the same reach or technological expertise as big online stores. They can offer lower prices and home delivery, which we struggle to match. It’s putting us at a significant disadvantage. We rely on walk-in customers, and with more people shopping online, our sales have dropped significantly,” Okafor said.

Seyi Adedayo pointed out, “we don’t have the technology or know how to set up an online store. Even if we did, competing with established online retailers would be tough. The government and industry bodies need to support us with training and resources to bridge this gap.”

Local businesses thrive on personal relationships and direct interactions with customers, which build trust and loyalty. The impersonal nature of e-commerce eliminates this vital aspect of traditional trade.

A trader in Gbagi Market, Yetunde Akindele, noted, “online shopping is convenient, but it lacks the personal touch. We know our customers by name, understand their preferences, and provide personalised service. This relationship is lost with e-commerce.”

Sharing her experience about online scams, an online consumer, Titilope Adeniji, said, “I shop online frequently because it’s convenient and saves time, but I have had some negative experiences with fraud and poor-quality products, there have been instances where the items delivered did not match the descriptions or images online, and getting refunds or exchanges was a hassle. I have encountered fraudulent sellers who took my money and never delivered the goods. These experiences make me wary and sometimes hesitant to trust new online stores, even though the convenience of online shopping is hard to resist.”

The decline in local market activity has broader economic implications and reduced number of potential customers in markets affects not just the vendors but also a range of ancillary businesses, such as suppliers, transporters, and food vendors. The entire ecosystem that supports market operations is disrupted, leading to job losses and reduced economic activity.

Lamenting, Toyosi James said: “Many of us don’t have the skills or resources to sell online. We depend on daily sales to feed our families. When people stop coming to the market, it hurts everyone, not just the traders.”

While e-commerce offers convenience, it also brings risks that can undermine consumer confidence, such as fraud, data breaches, which are important concerns. Many Nigerians consumers have experienced issues with online scams, counterfeit products and unreliable delivery services.

However, e-commerce still faces several obstacles. The regulatory environment for e-commerce in Nigeria is still evolving with inconsistent regulations and a lack of comprehensive policies creating a condition where local businesses face stricter regulations compared to their online counterparts.

Another challenge is the unreliable power supply and limited Internet penetration in certain areas hinder the operation of online shopping, affecting both online and offline businesses.

Building trust and security among customers is crucial for vendors to succeed. Concerns about product authenticity, payment security, and data privacy hinder consumer adoption of online platforms.

An e-commerce expert and Co-Founder of Sharesell, Praise Olaoluwa, argued that e-commerce is not damaging local markets and businesses in Nigeria.

Olaoluwa said e-commerce operates as a complementary layer to local markets, relying on the products and services they offer.

“While e-commerce may reduce the presence of middlemen, it ultimately relies on the foundation laid by local markets, in fact, e-commerce has proven beneficial for local markets that embrace it, allowing them to reach a wider consumer base in a shorter time frame and increase sales at a lower cost,” Olaoluwa noted.

For the Sharesell boss the perception of e-commerce undermining local markets often stems from a lack of adoption or recognition of its benefits.

He envisioned the future of commerce in Nigeria as social, with local markets leveraging platforms like Facebook, WhatsApp, Instagram, TikTok, and others to market and distribute their products effectively.
He pointed out that tools such as Sharesell, Bumpa and Selar can help local markets connect with buyers more efficiently.

Olaoluwa urged stakeholders to embrace technological advancements and recognise how they empower businesses rather than resisting them.
Also, an online business owner and Creative Director of Rikes Decor, Busayomi Adebayo, said she has experienced a significant growth in customer base and sales since starting the business as an online store.

“Starting Rikes Decor as an online store has impacted our customer base and increased sales by reaching a wider audience across various states in Nigeria,” Adebayo said.

She noted that online advertising has been an advantage in expanding her market but acknowledged the challenges of operating without a physical store.

“Sponsored ads have allowed me to target customers who can purchase our products from the comfort of their homes and have them delivered, however, convincing customers of our legitimacy has been challenging. I have to build trust through transparent communication, showcasing customer reviews, and posting my pictures from time to time.”

Funmi Ojo, who sells fabrics, said she is gradually embracing social media to expand her business reach. “I started using Instagram and Facebook to showcase my products through the help of my children. It has helped me reach customers beyond Lagos, and my sales have increased,” she explained.

A consumer, Israel Adegbulugbe, who spoke on his preferences and concerns regarding online shopping in Nigeria, said: “It depends, but mostly, I prefer buying goods physically so I can inspect them well, things like cooked food, and special items like clothes or gadgets such as computers or phones, I prefer to inspect them myself. Sometimes people sell fake or used products. Ordering online can be risky.”

Adegbulugbe emphasised the need for improvements in the e-commerce sector, particularly, in faster delivery of goods and better customer experience.
He also noted the potential impacts of emerging technologies like AI and chatbots, which could improve customer service but might also lead to job losses.

“I would like e-commerce to improve on faster delivery of goods and better customer experience because this is a problem I and multiple people have faced. Sometimes, delivery of goods tends to take longer than the anticipated period. For the customer service part, it isn’t always smooth reaching out all the time.

“AI and chatbots could improve customer service, but the incorporation of advanced technologies like AR/VR in physical stores might cause job losses. As we speak, lots of jobs are being replaced by AI. It may not be very common, but I know someone who replaced a couple of his staff with an AI tool.

“Efficient delivery systems like drone delivery or automated warehouses may become common. Hopefully, if Nigeria improves, we can achieve these things. The future is both scary and exciting. Adaptation is inevitable.”

Similarly, Olaoluwa Ajayi, who prefers physical shopping, expressed a desire for increased transparency and improved customer experience within the e-commerce sector.

“I typically shop in physical stores, but it depends on the product. However, I believe the e-commerce sector needs to prioritise transparency and enhance the customer experience, ensuring that customers’ feel heard when they have complaints.

“Online shopping is undeniably convenient and offers a wide range of choices, but there’s something special about the personal interaction and immediate gratification of buying from a physical store. Walking into a store, browsing through the shelves, and interacting with knowledgeable staff adds a level of satisfaction that online shopping can’t replicate.”

“Plus, being able to touch, feel and try out products before making a purchase gives me confidence in my decision. While online shopping has its advantages, I often find myself longing for the sensory experience and human connection that comes with shopping in person.”

Ajayi pointed out that customers need to feel confident that their complaints would be addressed when shopping online.

Ajayi envisioned a future in Nigeria where online shopping becomes more prevalent due to its convenience, noting that for this transition to occur seamlessly, people must have trust in the online shopping experience.

“The integration of physical and online shopping can thrive only if consumers have faith in the reliability of the online services offered to them.”