With The Shopping Season Round The Corner, Here Is A Sneak Peek At The African E-Commerce Industry
A report by International Post Corporation predicts that global e-commerce sales will go up by 141% between 2016 and 2021. Today it’s rare to find a smartphone without an application for online shopping. People find it much more convenient to sit at home and choose from a vast variety to save themselves from the trouble of going out and hunting for the right product in 10 different shops.
Amazon and Alibaba are the largest players with Amazon’s market cap touching USD 1 trillion in September 2018, and Alibaba nearing half a trillion. They have avoided mainly direct competition by dominating different parts of the world, but they are widening their reach by buying up the smaller local platforms. Their acquisitions mean that the global e-commerce landscape is consolidating. While Amazon currently dominates North America and Europe, Alibaba controls China and has made a web of strategic partnerships and investments in Southeast Asia.
However, there lies fierce competition in some economies, especially in burgeoning e-commerce markets of India, Australia, and Singapore. In India, the two are already in direct competition, where Alibaba and its affiliate Ant Financial have more than 50% stake in local payments and e-commerce platform Paytm Mall. While homegrown giant Flipkart, the second largest player in the market with 40% market share, has lately closed a deal to sell 77% stake to Walmart. Amazon here leads with 44% share.
Singapore is seeing Amazon struggle against local biggie Lazada which Alibaba had acquired and operates as a marketplace in the six Southeast Asian countries: Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. In China, apart from Alibaba’s TMall and Taobao, JD.com, Suning and Vip.com are the major players. While Amazon is a clear leader in Europe, regional players like Zolando, Otto, Casino and plenty of others.
What’s up with Africa?
A combination of several factors, amongst which the dearth of internet access, high illiteracy rate, and inefficiencies in logistics are considered the most telling drawbacks, form the bulk of the reason why eCommerce in Africa hasn’t exactly hit the heights or reached its full potential. While most of these problems are far from taken care of, the penetration of mobile devices – most notably, smartphones – which can be attributed to advancements in technology and innovation, have made access to the internet and mobile payment systems something of a given for millions of Africans.
By virtue of this development, it might not be exactly out of place to refer to the continent as the next big thing when it comes to online shopping. And it does seem like the numbers are in favor of this claim as data from Statista estimates that the African eCommerce industry is expected to rake in around USD 29 Bn in revenue by 2022, and that is after generating up to USD 16.5 Bn in 2017.
According to data from Emergent Payments, despite boasting a population of around 1.25 billion people drawn out from 54 countries, the penetration of the internet on the continent still stands at only 35 percent. This can be construed to imply that there might still be a lot of work left to do in that regard. More so, of the proportion of the continent’s consumer base who can lay claim to having internet access, only a relatively meager fraction can be said to utilize desktop or laptop computers to surf the web.
Putting two and two together might suggest that Africa’s eCommerce market is predominantly mobile-based. It will be accurate to add that in combination with mobile-friendly payment systems, mobile devices have largely been the ‘go-to guy’ in the area of exploring the prospects of eCommerce on the continent. And this can be thought to have provided a pathway for the exploration of shopping opportunities in locations that would be otherwise unreachable due to the absence of physical stores and other infrastructure.
The Challenges Of eCommerce In Africa
- Due to drawbacks associated with logistics and even fraud, the posture of African towards eCommerce can be considered somewhat apprehensive. In other words, Africans do not exactly jump at the idea of shopping online because of an inherent lack of trust in the system. Although significant progress has been made in this regard in recent times, as is evident in the increasing number of Africans that are known to now favour the online route for their shopping activities, there is still some work to be done in the area of imparting a more relaxed mindset and a receptive demeanor to Africans on the subject.
- eCommerce on the continent is hampered by the shortage of far-reaching and widespread street address systems in a considerable number of African countries. Throw that in with the lack of infrastructure in the form of good road networks which doesn’t fill global logistics companies with optimism and there looms another problem. This brings about the high cost of logistics as last mile deliveries and transportation come at abnormally exorbitant costs in parts of the continent. The situation that has made motorcycles something of the most-used mode of transport for deliveries. There also exists a tracking and communication gap as customers are often left with no choice but to incur extra expenses by using calls to keep track of their purchases, which often discourages interest in shopping online.
- There is also a challenge in that a significant proportion of the African population is unbanked. In spite of that, nearly 280 million Africans are known to have mobile wallets; a figure that is over three times the number of African who possess bank accounts. More so, the average of African digital consumer is placed at a relatively precocious 19 years. And this could imply that older African consumers are more suited to the cash-on-delivery (COD) arrangement, which actually still represents the most favored method of payment on the continent.
eCommerce In Some African Countries
eCommerce can be considered to have done reasonably well in such countries as Nigeria, South Africa, and Kenya — three countries that are known to top the charts in African eCommerce sales.
With a population of over 180 million people, Nigeria is considered Africa’s most populous nation, and the country is also known to be the largest economy on the continent in terms of Gross Domestic Product (GDP). Accounting for up to 40 percent of Africa’s eCommerce ventures, the country is home to the most number of eCommerce platforms on the continent. But in spite of all these somewhat impressive figures, internet penetration still stands at somewhere around 48 percent in the country.
Weighing in at a population of around 55.5 million is South Africa, which also boasts a significant population of middle-class citizens and probably the best offerings when it comes to cross-border potential. The country could, however, do better than the 54 percent which represents the degree of the reach of the internet in the country at present.
Kenya does serve up an interesting prospect, though. The East African country whose population is placed around 48.5 million does weigh in with an impressive 79 percent in the area of internet penetration. M-Pesa; a mobile wallet provider that is the creation of mobile telecom provider, Safaricom, is known to have garnered considerable interest and use from Kenyans since it came into existence.
According to a GSMA report, M-Pesa is currently seeing use from over 40 percent of Kenyan adults. Its creators, Safaricom, are also reported to have recently sealed partnership with global fintech giants, PayPal, which will see Kenyans make money transfers between PayPal and M-Pesa mobile wallets with relative ease. And this partnership could well serve to help Kenyan enterprises that wish to sell abroad gain access into the global markets. Essentially, the narrative from Kenya might be suggestive that eCommerce thrives under an atmosphere that is buoyed by secure payment systems, as well as far-reaching and reliable internet access.
Notable African eCommerce Platforms
Africa is not exactly a haven when it comes to selling products and services online. This claim is afforded even more substance when thought is given to the fact that even global eCommerce giants like Amazon have not done much to demonstrate any real interest in launching a major onslaught on the African market.
There are over 200 startups in Africa that are known to be plying the eCommerce route, and it has not been exactly a profitable journey as a significant proportion of these enterprises are a long way off from actually garnering substantial revenue. It also evokes mixed reactions that enterprises from only a handful of African countries account for the bulk of investments in this venture.
Having raised USD 150 Mn in 2014 alone, Africa’s best-funded eCommerce startup can be found in Nigeria-based Jumia Group which now has presence in 14 countries in Africa and the Middle East (with each country having its site), while employing up to 3,000 people since coming into existence in 2012 as the creation of Berlin-based Rocket Internet.
Since announcing its presence in Nigeria, the company is believed to have made significant strides in the country’s eCommerce sector by putting together a logistics infrastructure that incorporates over 500 motorbikes and trucks. This is known to facilitate its deliveries in major Nigerian cities. As has been earlier highlighted, COD which is largely favored as a payment method in Africa is also accepted by Jumia.
Another Nigerian eCommerce startup, Konga, started with the sales of baby and beauty products when it first hit the scene in 2012. Although the eCommerce platform only has operations in Nigeria, the site is believed to possess a customer base that is on the threshold of a million, as well as 300,000 visitors daily.
The company opened a third-party marketplace called Seller HQ in 2014, while also boasting its own logistics network called KOS Deliveries which has over 200 vehicles (vans, trucks, and motorbikes) set aside for the purpose of making deliveries. Pick-up points and distribution centers in various locations are also available on the platform, as well as a unique payment system, KongaPay, which is featured on some Nigerian banking platforms. The platform is known also to serve up a unique offering which provides that the money of customers are held in escrow until sales transactions are completed.
Local hardware and information technology services company, Zinox, are reported to have acquired the company earlier this year with such factors as financial losses and the inability to fund growth allegedly playing a role in the sale.
Kenya’s Kilimall is another notable African eCommerce platform. The company which is known to also sell in Nigeria and Uganda offers both affiliate and seller programs to small African businesses. Also worthy of mention is Kenya’s Sky.Garden which essentially offers a SaaS mobile platform and is believed to now also have more than 3,000 sellers and 23,000 unique products in 30 different categories. For good measure, the platform is known to only accept M-Pesa payments, which is the same mode it employs in making payments to its merchants.
South Africa’s Takealot also appears to be holding its own in the African eCommerce environment. The company came into existence in 2011 after Tiger Global Management acquired an existing eCommerce company. Takealot is known to have received a capital boost when its parent company invested USD 100 Mn in the eCommerce platform back in 2014. The infusion of funds is believed to have been instrumental to the subsequent purchase of logistics company, Mr. D Delivery, which afforded Takealot its delivery network with as many as 900 drivers on the roster. In addition to deliveries, Takealot claims to offer pick-ups from its warehouse in Cape Town every day of the week, while also offering such services as storage, fulfillment, and delivery, as well as customer service to its merchants.
Africa’s shortcomings in physical retail infrastructure might come across as a drawback at first glance, but a view from a different perspective would reveal that it does put cross-border eCommerce in a favorable position.
This is largely true for individuals who are looking to purchase western products from local online businesses whose platforms support payments in the local currency. In any case, Africa is not exactly an easy terrain when it comes to online selling so best practices might dictate that cross-border merchants leverage existing local platforms for their sales.
China is known to currently lead proceedings in cross-border sales in Africa as it would appear the continent favors the sale of products that are relatively inexpensive — and this happens to be the forte of the Chinese. Goods from the U.K. also appear to be holding their own in African countries that are British colonies.
More so, countries like Kenya, Nigeria, and South Africa are expected to deliver most of the sales in cross-border eTrade, and individuals from some of these countries are known to be already thronging British, American, and Chinese online shopping sites. With that in mind, it might be advisable for cross-border sellers in those countries to form business relationships with local payment platforms and providers of courier services.
Small local businesses are largely the focus of Africa-based eCommerce sites as most of these platforms are known to support third-party sellers. However, Nigeria’s Mall for Africa is known to be towing a slightly different line as it believed to afford Africans the opportunity to shop from around 250 online platforms in the U.S. and U.K., with DHL Express shipping services available in over 60 of those including names as Amazon and eBay.
The company is known to currently be operational in 15 African countries including Nigeria, Ghana, Kenya, South Africa, Uganda, and Rwanda. It also boasts numerous pick-up locations in these countries which serve to make purchased goods easily obtainable for people living in locations that lack standard physical address systems. Also incorporated into the platform is its very own debit card which allows for shopping in over 180 online platforms in the U.S. and U.K.