Boston Computer Exchange, BCX, the world’s first e-commerce company, opened for business in 1982. BCX was an online marketplace for people buying or selling used computer equipment. Over ten years later, Amazon (1995) and eBay (1998) launched, and the rest, they say, is history. With over 33% of the world’s population shopping online and online transactions currently accounting for over 20% of retail transactions globally, the e-commerce industry has been valued at over US $6 trillion.

Africa’s e-commerce journey began when South African platforms - Kalahari.com and Bidorbuy.com launched in 1998 and 1999, respectively. Over a decade later, Jumia and Konga launched in 2012, taking centre stage as the lead horses in a two-horse race for the African e-commerce market.

The Nigerian E-Commerce Market

The early 2000s saw the emergence of the first online shops—ShopNigeria.com and DeNiger—in Nigeria. It was, however, not until 2012 that e-commerce took off in Nigeria with the launch of Jumia and Konga. Since then, like the rest of Africa and the world, e-commerce in Nigeria has grown in leaps and bounds year on year. According to  GoGlobe, Nigeria is the 38th largest market for e-commerce, with an estimated market size of US$8.53 billion in 2024, and is expected to reach US$14.92 billion by 2029. The three main e-commerce channels have been identified as e-commerce platforms, brand websites and the rapidly growing social commerce platforms.  Through these channels, 89% of internet users in Nigeria make purchases online, with another 24% planning to do so in the near future, according to Go-Globe.

The remarkable growth of e-commerce can be attributed to a confluence of factors. Increasing internet penetration and growing smartphone usage have provided a solid foundation, enabling widespread access to online platforms. Internet penetration has grown from about 28% in 2018 to 42% (45%, according to another report) in 2024 and is projected to hit 48% in 2027.

Similarly, modern online payment systems have positively impacted the e-commerce market in several significant ways, including streamlining and accelerating the completion of online purchases. Innovative solutions like Google and Apple Pay and the development of payment gateway providers like Paypal, Stripe, Paystack and Flutterwave allow payments to be made in just a few seconds without manually filling out forms. That said, Nigerian consumers still rely strongly on cash payment methods for online sales. 65% of the payments and 23% of online sales in Nigeria are made in cash, one of the highest figures in the Middle Eastern and African markets.

Additionally, the COVID-19 pandemic accelerated the shift to online shopping. Consumers turned to e-commerce during the pandemic for convenience, safety, and necessity. According to the International Trade Administration, the pandemic increased the e-commerce sales growth projection for 2020 by 19% globally. Although reports show a dip in global e-commerce figures post-lockdown as consumers tried to return to pre-pandemic offline sales, online sales shares are still projected to increase globally.  

The rise of e-commerce has presented both challenges and opportunities for business owners and consumers alike. For consumers, in addition to the convenience of shopping at the click of a button, e-commerce has democratised the retail market, granting consumers unprecedented access to a global market and the opportunity to purchase directly from manufacturers or vendors based in other jurisdictions, often at lower prices than those found in domestic stores. Consumers using e-commerce platforms, however, have to deal with challenges around quality guarantee, product inspection, security and fraud concerns, and the unreliability of internet connections.

For businesses, reports have shown a decline in foot traffic as consumers increasingly turn to online shopping for convenience. For example, local bookstores face increasing competition from online book platforms like Amazon and digital /e-book websites/apps. In 2020, Credit Insurance Company Euler Hermes reported that “56,000 stores, or 10.7% of the discretionary retail footprint, have closed in the U.S. and 670,000 net jobs (9.6% of the total) have been lost since 2008”.  This reduction in physical shoppers has led some retailers to downsize their store space or, in more extreme cases, to transition entirely to online platforms and restructure their workforce, with traditional roles such as cashiers and sales floor staff being in lesser demand every day.

However, e-commerce does not solely spell doom for brick-and-mortar stores. Smaller or no physical store space significantly reduces overhead costs such as rent, utilities, and in-store staff wages. Moreover, the ease of setting up an online store has led to a surge in new entrants into the Nigerian market, including international corporations, intensifying competition within the market. Additionally, those brick-and-mortar stores that have successfully adapted and integrated e-commerce capabilities into their business models gain access to a global market that was previously out of reach.

Challenges Facing the E-commerce Market in Nigeria

Even with its rapid growth, the e-commerce sector in Nigeria faces numerous challenges that hinder its scalability. Some of these platforms met with initial success have been unable to replicate and sustain the success and momentum of e-commerce platforms in other jurisdictions, lending further credence to the position that you cannot transplant products from one jurisdiction to another without considering peculiarities unique to the target market. Some of the general challenges faced include securing funding to scale, limited financial resources of consumers, limited digital skills among businesses, regulatory gaps and a need for comprehensive laws tailored to the digital market.

Trust and security concerns, exacerbated by frequent cyberattacks and scams, also pose significant challenges to e-commerce in Nigeria. Every year, security threats in e-commerce cost online retailers billions of dollars and the e-commerce industry accounts for 32.4% of all cyberattacks globally. Additionally, the low uptake of digital payments, poor payment infrastructure in specific regions and inadequate logistics infrastructure pose significant barriers to the market expansion of e-commerce in Africa. Other challenges include the cost of internet access, hardware devices, unreliable access to electricity, and slow or unreliable internet connection.

The Future of Retail

As new technologies and trends emerge, e-commerce continues evolving, with social and mobile commerce at the forefront.  Mobile commerce means buying and selling through wireless handheld devices like smartphones and tablets. With over 44% (97 million) of the Nigerian population having access to smartphones and a forecast of smartphone users growing beyond 140 million by 2025, mobile commerce constitutes over 70% of online transactions in Nigeria. Social commerce, on the other hand, introduced by Yahoo in 2005, involves using social media network(s) in the context of e-commerce transactions from browsing to checkout without ever leaving the social media platform. Platforms like Facebook, Instagram, TikTok, and Pinterest have evolved into new e-commerce channels, with Facebook and TikTok launching the Facebook Marketplace and TikTok shop, respectively. The social commerce market is valued at US$1.2 trillion as of 2024 and is projected to reach $6.2 trillion by 2030.

Another growing retail trend is the Buy Now Pay Later (BNPL) model. BNPL is a payment method where customers are allowed to take possession of products bought immediately, with payment for such products spread over a period of time. From 2.9% of the global value of e-commerce transactions reached in 2021 (valued at US$125 billion), Worldpay forecasts indicate that BNPL will grow to 5.3% by 2025 and reach US$326 Billion in value by 2030. The rise of BNPL is revolutionising the way consumers approach online shopping. With the option to shop now and pay in instalments, BNPL taps into the psychology of instant gratification as consumers are more inclined to make purchases they may have otherwise hesitated on.

Artificial intelligence (AI) and extended reality are also beginning to play an important role in e-commerce. AI is utilised to improve consumer experience, provide personalised recommendations, and secure systems. The global market for the use of Artificial Intelligence (AI) in retail was valued at about US$4.84 billion in 2021, and the market is projected to grow continually, reaching US$31.18 billion by 2028. Specifically, the global generative AI market in e-commerce was valued at US$721 million in 2023 and is projected to grow to over US$3 billion in 2034.

From AI-driven e-commerce advertising, personalised AI shopping recommendations, AI-generated translations, AI Chatbots, and AI-generated FAQs, the possibilities are endless. Augmented reality is also gaining some traction in e-commerce, with some platforms allowing shoppers to visualise apparel items on themselves—like a virtual fitting room—and solicit feedback through social media tools before making a purchase. The global virtual fitting room market size was estimated to be worth approximately US$3.42 billion, forecast to increase to US$4.86 billion in 2023 and projected to grow to almost US$15 billion by 2029. Other trends to watch include voice commerce and a growing focus on sustainability and ethical sourcing. As Nigeria continues to address the challenges previously outlined and innovators continue to leverage technological advancements to improve consumer e-commerce experiences, the potential for e-commerce growth in Nigeria is boundless.

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