For a long time the global investors have viewed the African market as skeptical and late adopters to technology, e commerce included. However, in recent times there has been a significant rise in the African market trusting the platforms and shopping online. Despite there being several factors that have contributed to rise of e commerce in Africa, the major boost within the last two years has been the effect of the pandemic. Less contact with people and being indoors meant looking for alternative ways to shop.
Understanding E commerce
Before I get ahead of myself I would like to pause for a moment, and explain a little bit about e commerce and what it means to Africa. We can say that e commerce is trading electronically or online, according to Investopedia, e commerce is a business model that allows companies to buy and sell goods and services online. An infamous example of an e commerce platform is Amazon.
Having a bit of background on e commerce, we may proceed with the e commerce space in Africa. According to a 2022 report conducted by Statista, one of the world leading statistics companies, Africa boasts of a population of 281 million online shoppers. Despite this being significantly less than the global online shopping population, it has been a tremendous increase. Among the key markets of interest for the e commerce industry in Africa are Nigeria, South Africa, Morocco, Kenya and Egypt where the survey report showed most people preferred to buy online.
There are number of e commerce platforms in Africa, but I will focus on the biggest players on the continent: Jumia famously regarded as ‘the amazon of africa’ is considerably the biggest e commerce platform in Africa with a footprint in over 23 countries. Despite being on the continent for just a decade, Jumia has outshined most of its competitors. Takelot which has been undoubtedly the largest and dominant online retail store in South Africa. Other key platforms are Kilimall of Kenya, konga of Nigeria and bidorbuy of South Africa.
There are four major categories of e commerce business models :
- Business to Consumer – Preferably called B2C, this business model refers to business selling their products or services directly to their customers online. An example here is Amazon.
- Business to Business – B2B business model, this model refers to businesses targeting to sell or buy products and services from other businesses online. An example of B2B is Salesforce.
- Consumer to Consumer – Also known as C2C, in this business model the e commerce creates a marketplace where consumers can sell to other consumers. A good example is eBay.
- Consumer to Business – C2B, this business model allows individuals to sell their services or products to companies. An example of C2B is Google AdSense.
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Lessons for e commerce in Africa
The African space is unique and has its own unique challenges and opportunities. So, what are these valuable factors that we can learn about the e commerce space in Africa. Here are four key factors to put into consideration:
It is worth noting that in most African countries there is poor road infrastructure. This has proven to be a huge hindrance to the logistics plans of e commerce companies. Despite this challenge, there is light at the end of the tunnel, the motorbike industry. Companies have seen the huge effect of this lucrative business in Africa, especially for the last mile deliveries. Adding to the fact that postal services in most African countries are very little or non-existent, this booming industry solves the issue. Motorbike riders are an advantage as they can slip through the traffic jams, local riders also have a good understanding of the environment. Tapping into this 1-billion-shilling-a-day industry would certainly give an edge to the e commerce companies.
It is no secret that that most popular mode of payment across the continent is mobile payment. The convenience, affordability and easy access to mobile money has proven to be a key factors in its growth across Africa compared to traditional banking services. This can be evidenced clearly by the fact that Africa accounts 70% of the world’s 1-trillion-dollar mobile money value. Having an understanding of this, the e commerce can and have been able to use this to their advantage as well as to serve their customers. A great example of an e commerce company using this is Jumia in Kenya, where there allow payments of goods through M-pesa, M-pesa owned by Safaricom is a continental giant of mobile money in Africa. To breakthrough ecommerce, mobile money is not only important but a necessity.
Young tech savvy generation
Having grown in a digital age, the internet has become a basic need for most young people. Africans have not been left behind. With online shopping providing convenience and variety of choice at the comfort of homes, young people are continually preferring shopping online to physical stores. This has led to e commerce companies tailoring their services and platforms more for the young people than the older generation.
Mobile and internet penetration
According to a study by Statista, the mobile penetration in Sub-saharan Africa as of 2020 was at 46% and is expected to grow in the coming years. With this growth and the rise of internet users on the continent. E commerce industry will definitely have a positive growth. More government are reducing and removing sanctions and policies against internet usage, welcoming e commerce platforms in the process.