Nigeria's retail sector leads the way in terms of digital innovation

20 November 2018 3 min. read

The advent of a digital revolution in Africa has coincided with substantial growth in its consumer market, leading the continent to “leapfrog” western markets in terms of digital retail methods, according to a new report from global management and technology consultancy Bearing Point. 

The population across Africa is rapidly digitalising. Recent reports have indicated that the total number of online connections on the continent might surpass 1 billion by as early as 2022. In addition to most accessible costs, this increase in digital consumers can be attributed to an overall increase in prosperity levels.

According to a new report from Bearing Point, prosperity on the continent is increasing rapidly and will continue to do so in the near future. Currently, the middle class in Africa is comprised of as many as 350 million people, a figure that is expected to reach 900 million people by 2040.

Shopping Profiles of Africa

Growing prosperity brings with it a tendency to consume, and the African consumer market has already entered a phase of steady growth. Nevertheless, the retail market is currently comprised of small brick and mortar companies, and lacks the infrastructure to meet this considerable growth in expected demand.

As a result, retailers turned to innovation to leverage the growing digital population to develop their capabilities in the ecommerce and m-commerce segments. Firms are essentially working on agile and flexible models that will allow them to cope with expanding and increasingly nuanced demands.

As explained by Bearing Point, “Infrastructure challenges such as lack of transport, banking infrastructure, and inadequate logistics services have inspired sub-Saharan retailers to develop alternative approaches leveraging the platform economy. They are leveraging communities of consumers to conduct some retail functions.”

CHART: The customer as a partner,

The report narrows the infrastructure challenges on the continent down to three shortcomings, namely the poor quality and accessibility of transport infrastructure, poorly organised postal address systems, and what the report terms as “difficult and heterogeneous frontier management.”

Africa’s largest economy by GDP – Nigeria – is a prime example of a market that has leveraged technological enhancements to solve some of these issues in its retail sector. Perhaps the biggest substantiation of this claim is the pan-African ecommerce giant Jumia, which was established in Nigeria in 2012.

Such vast online networks are also aided by an evolving population, which is increasingly receptive to online markets. As per the report, Nigeria’s online activity exceeds that of massive markets such as China in certain sectors, including the proportion of online shoppers amongst early adopter.