Africa: An Emerging E-Commerce Market With Many Challenges


Africa has been lagging behind in e-commerce for many reasons, including lack of Internet access, poverty, high rates of illiteracy and high unemployment. logistical inefficiency. Most of these problems persist but technological advances – including smartphones – have allowed millions more Africans to access the Internet and mobile payment systems.

Therefore, the continent could be the next emerging market to make significant progress in online shopping. The research firm Statista estimates that the e-commerce sector in Africa has generated revenues of $ 16.5 billion in 2017 and forecasts revenues of $ 29 billion by 2022.

Africa is home to 54 countries and 1.25 billion people. Internet penetration is only 35% according to Emergent Payments, a payment platform provider. Few consumers own desktops or laptops.

Thus, Africa is primarily a mobile e-commerce market. Mobile devices, coupled with mobile-enabled payment systems, have opened new shopping opportunities in places where physical stores often do not exist and where infrastructure is lacking.

Obstacles to Electronic Commerce

  • Africans are afraid to buy online because of fraud and delivery difficulties.
  • The absence of a national system of addresses in most African countries is a major obstacle. The delivery person and the customer must often stay in constant contact by mobile phone on the day of delivery. This, combined with the lack of paved roads, prevents global logistics companies from getting out of most countries. Last mile delivery is extraordinarily expensive and transportation costs are at least three times higher than in developed countries. Couriers driving bicycles or motorcycles make most deliveries to Africa.
  • A large part of Africa's population is unbanked. However, nearly 280 million Africans have mobile wallets, which is three times more than the number of Africans with bank accounts. The typical African digital consumer is young – the average age is 19 years old. Older consumers prefer money on delivery, which remains the dominant payment method in Africa.
  • Online merchants need to create country-specific sites because of payment issues (most payment solutions work in one country), logistical issues, cultural differences, and taxes.

Country

Three countries – Nigeria, Kenya, and South Africa – dominate online sales.

Nigeria, with a population of 195 million, is the most populous country in Africa and the largest economy in terms of gross domestic product. It also has the largest number of e-commerce sites – 40% of e-commerce businesses in Africa are headquartered in Nigeria. However, it has an Internet penetration of only 48%.

South Africa with a population of 55.5 million inhabitants has an Internet penetration rate of 54%. It has a substantial middle class and is perhaps the country with the best cross-border potential.

Kenya has a population of 48.5 million and an impressive penetration of 79%. This is because Kenya is home to M-Pesa, the mobile wallet provider launched by the mobile telecommunications provider Safaricom. The availability of a secure payment system encourages Internet access and online shopping.

Over 45% of Kenyan adults use M-Pesa according to Emergent Payments. Safaricom recently partnered with PayPal to allow Kenyan customers to easily transfer money between PayPal and M-Pesa mobile wallets. This collaboration will open global markets to Kenyan entrepreneurs and businesses that want to sell abroad.

Local Electronic Commerce Platforms

Selling online in Africa is not easy. Even Amazon has shown no interest in the African market. Seventy percent of e-commerce startups are not profitable according to Disrupt Africa's publisher's report "Afri-Shopping: Exploring the Africa Ecommerce Start-Up Ecosystem Report."

Disrupt Africa has 264 e-commerce start-ups across the continent. The largest websites are in English. The report also indicates that 90% of investments are for start-ups in five African countries.

Jumia Group, based in Nigeria and founded in 2012 by Rocket Internet in Berlin, has more than 3,000 employees and is Africa's best-funded e-commerce start-up. It operates in 14 countries in Africa and the Middle East, each country having its own site.

<img class="wp-image-154458 size-full" src="https://www.practicalecommerce.com/wp-content/uploads/2018/06/Jumia-Screen-Shot-.png" alt=" Jumia is the best-funded e-commerce start-up in Africa. "Width =" 640 "height =" 289 "/>

Jumia is the best-funded e-commerce start-up in Africa

In Nigeria, Jumia has created a logistics infrastructure with more than 500 motorcycles and trucks delivering to customers in the eight largest cities in the country. Jumia accepts the refund, which, again, is the preferred method of payment for most Africans. Jumia is also among the best-funded e-commerce sites in Africa, raising $ 150 million in 2014.

Konga.com was founded in 2012 in Nigeria and initially sold only baby products and beauty products. It does not work outside Nigeria. In 2014, Konga opened Seller HQ, a third-party market. The site has approximately 1 million customers and receives more than 300,000 unique visits per day.

Konga has its own logistics network – KOS Deliveries – with a fleet of more than 200 vehicles (vans, trucks and motorcycles). Pick-up points and distribution centers are also available in all parts of Nigeria. Konga.com has about 1 million customers.

Konga also offers its own payment system – KongaPay – which works with all banks in Nigeria. The application ensures that the client's money is escrowed until a sales transaction is successfully completed.

In March 2018, Konga was acquired by a local computer and computer hardware company, Zinox. Financial losses and inability to finance growth contributed to the sale.

Kilimall, with headquarters in Kenya, also sells in Nigeria and Uganda. It offers affiliate programs for small African businesses as well as vendor programs. He also sells goods from China.

Launched in 2017, Kenyan ecommerce startup Sky.Garden is a SaaS mobile commerce platform that raised $ 1.2 million from Scandinavian companies. More than 3,000 vendors have Sky.Garden online stores and offer 23,000 unique products in 30 different categories. It only accepts M-Pesa payments from customers and pays all merchants using M-Pesa.

Tiger Global Management formed Takealot in South Africa in 2011 as a result of the acquisition of an existing e-commerce company. In 2014, Tiger Global invested $ 100 million in Takealot. Following this investment, Takealot purchased an existing logistics company, Mr. D Delivery, giving it its own delivery network with over 900 drivers.

In addition to delivery, Takealot delivers pickups from its Cape Town warehouse seven days a week. For its merchants, Takealot offers storage, delivery and delivery as well as customer service.

<img class="wp-image-154460 size-full" src="https://www.practicalecommerce.com/wp-content/uploads/2018/06/taekalot.png" alt=" Takealot of South Africa was formed in 2011 as a result of an acquisition. She now owns a delivery company. "Width =" 1230 "height =" 507 "/>

Takealot, a South African company, was established in 2011 as a result of an acquisition and now owns a delivery company.

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Cross-Border Opportunities

The lack of physical infrastructure in most African countries has created a favorable environment for cross-border e-commerce, especially among millennials who want Western products, but they want to buy them from D & C. Online local businesses that offer mobile payment systems. motto. However, selling online in Africa is so daunting that it is advisable for cross-border traders to sell via an existing local platform.

Currently, China dominates cross-border sales as Africans appreciate low-cost items that Chinese merchants can provide in abundance. In countries that were once part of the British Empire, US property is also very popular.

Cross-border sellers should expect most sales to come from Kenya, Nigeria, and South Africa. South Africans are already buying online from American, American and Chinese websites. It is important that cross-border sellers in these countries form partnerships with local payment and delivery providers.

While most e-commerce sites in Africa are third-party vendor markets, they focus on local small businesses. The seller-centric site in the United Kingdom and the United States is the Nigeria-based Mall for Africa, which offers Africans the opportunity to buy around 250 American and American sites, including Amazon, Amazon and eBay. More than 60 of these sites offer DHL Express shipping.

Available in 15 countries including Nigeria, Kenya, Ghana, Rwanda and Uganda, Mall for Africa has withdrawal points in many countries for people without a physical address to obtain their property. Mall for Africa offers its own debit card called Webcard, which can be used to shop at more than 180 websites in the United States and the United Kingdom. Users can recharge with funds via online, cable or local credit card transfer. There are no transaction fees.

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