5 Major Problems of E-commerce Businesses in Nigeria

These days, you can hardly scroll on social media without seeing at least one e-commerce business on your screen.

E-commerce businesses in Nigeria are booming and have become a major business route and are perceived as a guaranteed path to financial success for solo entrepreneurs, small business enterprise owners, and startups.

This is not far from the truth.

E-commerce in Nigeria is indeed profitable as there are currently between 50,000 and 200,000 e-commerce businesses operating in Nigeria daily. Plus, this number is expected to generate US$9.02 billion in 2023 and reach US$ 22.9 Billion by 2030.

Though these numbers show that the Nigerian E-commerce sector is a booming market, however, the reality is that operating an e-commerce business in Nigeria is far more challenging than it appears.

From the perspective of e-commerce businesses in Nigeria, a common challenge Nigerian customers face is what we call “what I ordered” vs “what I got”, which describes the disappointed state of customers when they receive products below their expectations.

This, plus many other challenges is significantly affecting the profitability of several e-commerce businesses in Nigeria.

In this article, we’d highlight the 5 Major Problems of E-commerce Businesses in Nigeria:

1. Delivery Problems and Inability to Effectively Manage Inventory

2. Inability to Manage Product Returns and Exchanges

3. Trust Issues

4. High Cost of Shipping

5. Poor Marketing and Brand Awareness

1. Delivery Problems and Inability to Effectively Manage Inventory

Delayed deliveries, failed orders, and the high cost of delivery using dispatch riders and logistics companies are stifling the growth of several e-commerce businesses in Nigeria.

Otherwise known as order fulfillment, this crucial step in the e-commerce process can significantly impact a business’s profitability and competitiveness.

The inflated delivery costs often translate into higher prices for customers, potentially deterring purchases and limiting market reach.

Additionally, the unpredictable nature of delivery times and the potential for lost or damaged goods can further affect customer trust and hinder business growth.

Inability to Manage Inventory

Managing a wide range of products across different specifications has become a complex problem for e-commerce businesses operating without the help of an e-commerce CRM tool such as Selligate.

Ensuring accurate inventory tracking and timely order fulfillment is crucial to avoid stockouts, delays, and customer dissatisfaction.

Solution: Adopt an E-commerce all-in-one CRM tool to manage your order fulfillment and inventory management goals.

2. Inability to Manage Product Returns and Exchanges

Dealing with product returns can be a significant operational burden for e-commerce businesses in Nigeria.

This is a problem that leads to losses and high operating costs for many Nigerian e-commerce businesses, as it involves managing logistics, processing refunds, and handling customer complaints.

The complexities of Nigeria’sroad infrastructure, particularly in terms of transportation and last-mile delivery, make it even harder to handle returned products.

Also, establishing clear return policies, handling return shipping, and inspecting returned items for restocking can be time-consuming and costly.

Solution: Adopt a Distribution system that ensures you do not incur losses in times of product returns and exchanges.

3. Trust Issues

Nigeria is still largely a cash-based economy, and many consumers are hesitant to trust online transactions due to concerns about quality service delivery, security, and fraud.

This can hinder the adoption of e-commerce and limit payment options for online businesses. This mistrust has several consequences for e-commerce businesses in Nigeria, such as limited payment options and a reduced customer base.

Businesses are often restricted to offering limited payment options, primarily cash on delivery (COD), which can increase operational costs and logistical complexities.

Also, the hesitancy to engage in online transactions limits the potential customer base for e-commerce businesses, hindering their growth and market penetration.

Solution: Integrate trusted payment gateways and embrace conventional payment methods such as Cash On Delivery and Pay on delivery to drive sales.

Selligate successfully uses this method and protects e-commerce businesses. Read here.

4. High Cost of Shipping

For e-commerce businesses that depend on the importation of products, the high cost of shipping is a significant challenge.

This issue is caused by various factors, such as taxation, bribery and corruption by border officials, infrastructure limitations, and high transportation expenses in times when the price of fuel increases.

The high cost of shipping has several detrimental consequences for e-commerce businesses in Nigeria such as:

Reduced Profit Margins
Limited Customer Reach
Competitive Disadvantage
Increased Consumer Resistance to Price

Solution: Adopt a hyper-network distribution network model so you can cut costs on shipping.

5. Poor Marketing and Brand Awareness

The scope of marketing these days has partly switched to video marketing and content creation, especially for the e-commerce niche.

While some business owners have adjusted to the new paradigm shift, others are finding it too difficult to adapt.

Reaching a wide audience and establishing brand awareness in Nigeria’s competitive e-commerce market requires effective marketing strategies.

Utilizing social media, search engine optimization (SEO), and targeted advertising can be costly and time-consuming.

Solution: Study what works and optimize. Try new things and be consistent at it.

In other words, delivery problems, failure to manage returned goods, mistrust, high cost of shipping, and poor marketing are the major five problems of E-commerce Businesses in Nigeria.