Amazon-style Web sites flourish in Nigeria

Amazon-style Web sites flourish in Nigeria

LAGOS, Nigeria – Mary Enweasor, who runs a tiny shop selling drinks and snacks in Nigeria’s biggest city, had saved up for some new shoes but was unsure where to buy them. The quality of footwear in Lagos’s sprawling markets was questionable. The door-to-door saleswoman’s range was limited. The flashy new mall was too expensive.

So Enweasor called her sister, who had Internet access at work. The next day, a motorcycle stopped on the narrow, potholed road outside Enweasor’s shop, and the courier handed her a package containing two pairs of ballerina-style shoes.

“Very, very fine,” Enweasor said, inspecting her purchase before handing over 7,500 naira, or about $47. “And fast service.”

As African economies such as Nigeria’s have taken off, consumers and an emerging middle class have become increasingly important parts of the continent’s growth story. And, much like its counterparts in the developed world, that middle class is going online to shop.

Although it has 160 million people, Nigeria has relatively few formal retail outlets. With Internet use growing fast, Amazon-style Web sites such as Konga and Jumia are fulfilling close to 1,000 orders nationwide between them each day, a little more than six months after their launch. By offering everything from underpants to iPads, and allowing customers to pay cash on delivery, the start-ups ? and the foreign investors who have snapped up stakes in them ? believe they can capture a significant portion of the consumer market.

Nigerian entrepreneur Sim Shagaya founded Konga last July in a four-bedroom apartment, with 20 staff members. Today the company has 150 employees and a large warehouse in Lagos packed with clothes, books, DVDs, freezers, flat-screen televisions, toys and cosmetics. It also has depots in the capital, Abuja, and Port Harcourt and promises to deliver anywhere in the country within five days.

For Shagaya, the company’s early success is proof of the hunger for consumer goods in the slowly emerging middle class in Nigeria, which has experienced gross domestic product growth of more than 6 percent a year since 2006.

Nigeria’s infrastructure challenges and the lack of quality bricks-and-mortar stores has also helped. While several Western-style shopping centers have opened across the country in recent years, the high cost and the scarcity of suitable land in densely packed cities such as Lagos have curtailed retail development.

Lagos, which has 12 million people, still has only two international-standard malls of at least 24,000 square yards, according to the private equity fund Actis, compared with 74 in Johannesburg, South Africa, which has a population of 4 million. Frequent gridlock is a further disincentive for people to leave home.

“It’s not so much there’s this appetite for online shopping, as that there’s an appetite for shopping,” Shagaya said. “Retail here is still mostly informal, fragmented and inefficient. People want convenience, which gives us the opportunity to leapfrog with e-commerce.”

Konga and its competitors have had to tailor the traditional Internet shopping model to local conditions. Many Nigerians do not have bank cards, and people are wary of online fraud and scams. So customers pay cash when their goods arrive. And because the postal service is unreliable, vendors have had to build their own courier fleets of motorbikes, vans and the auto rickshaws known as tuk-tuks, for orders in the big cities. DHL delivers parcels farther afield.

Konga wants to change not only the way Nigerians buy things, but also how they sell. Like Amazon, it has moved into “third-party retailing.” Vendors, from established companies to small traders who purchase wholesale goods in China or Dubai, can sell their products through the Konga Web site. It handles warehousing and delivery in return for a commission. Jumia, its main rival, also allows distributors to use its platform.

The e-commerce buzz in Nigeria has sounded far beyond its borders. The Swedish investment company Kinnevik and the South African media giant Naspers bought stakes in Konga. Jumia, which has sister sites in Egypt, Morocco and Kenya, has even deeper pockets. It is part of Rocket Internet, a German company that has launched e-commerce sites across the world. Additional investment has come from the investment group Summit Partners, JPMorgan and the mobile company Millicom.

After going live in June last year, Jumia now employs 350 people in Nigeria. It has agreements with distributors of brands including LG, Samsung, BlackBerry and Nokia to help prevent stock-outs of popular devices and appliances. But for clothing ? the best-selling category on the site ? ensuring a consistent supply can be challenging, especially for popular labels such as Ralph Lauren and Zara, according to Tunde Kehinde, joint managing director of Jumia Nigeria.

The site gets close to 100,000 unique visitors a day, Jumia says. And despite the vast increase in Internet penetration in Nigeria, which rose to 28.4 percent from 6.8 percent between 2007 and 2011, according to the International Telecommunications Union, Kehinde believes there is huge scope to grow.

“We have captured a lot of early adopters, but there’s a much larger market out there that still needs to be educated about buying online,” he said.

To do that, Jumia employs more than 100 salespeople who are equipped with tablet devices and who visit companies, churches and homes to show potential customers what they can buy. It has a call center for phone orders.

Smaller, more specialized start-ups are launching online all the time, selling everything from sunglasses to maternity wear and supermarket goods.

Olumide Olusanya, a doctor who made money in e-payment systems, started Buycommonthings last year in the hope of becoming “the Ocado of Nigeria,” a reference to the online grocery story that is a favorite of the British middle class.

Customers in Lagos can order products such as eggs, milk, cornflakes, soap and toilet rolls online and have them delivered the same day for free for orders above 3,000 naira ($19).

“Everything has come together at the right time for e-commerce here,” Olusanya said. “We are still paddling ahead of the wave, but when it comes, it is going to be huge.”