Consequently, the continent could be the next emerging market to make substantial strides in online shopping. Research firm Statista estimates the ecommerce industry in Africa generated $16.5 billion in annual earnings in 2017 and forecasts earnings of $29 billion by 2022.
Africa is home to 54 states and 1.25 billion people. Internet penetration is only 35 percent based on Emergent Payments, a payment platform provider. Few consumers own laptop or desktop computers.
Thus Africa is mainly a mobile ecommerce marketplace. Mobile devices, in combination with mobile-friendly payment systems, have opened up new shopping opportunities in areas where physical shops often don’t exist, and infrastructure is lacking.
Impediments to Ecommerce
- Africans are apprehensive to buy online because of fraud and delivery problems.
- The lack of a national road address system in most African countries is an important obstacle. The delivery person and the client often have to remain in constant touch by mobile phone on the day of shipping. In combination with the lack of paved streets, keeps international logistics companies from most countries. Last mile shipping is extraordinarily expensive, and transport costs are at least three times greater than they are in developed countries. Couriers riding bikes or motorbikes make most deliveries in Africa.
- A big sector of the African American population is unbanked. However, nearly 280 million Africans have mobile pockets, which is three times greater than the number of Africans with bank accounts. The average African digital consumer is young — the average age is 19. Older consumers prefer cash on delivery, which remains the dominant method of payment in Africa.
- Ecommerce merchants must set up country-specific websites due to payment problems (most payment solutions operate in just 1 nation ), logistics issues, cultural differences, and taxation.
Three countries — Nigeria, Kenya, and South Africa — dominate ecommerce sales.
Nigeria, with a population of 195 million individuals, is the most populous country in Africa and is the largest economy in terms of gross domestic product. Additionally, it has the most ecommerce sites — 40 percent of Africa’s ecommerce ventures have headquarters in Nigeria. However, it’s an online penetration of just 48 percent.
South Africa with a population of 55.5 million has a 54 percent internet penetration. It has a significant middle class and is possibly the nation with the finest cross-border potential.
Kenya has a population of 48.5 million and an impressive 79 percent internet penetration. This is because Kenya is home to M-Pesa, the mobile wallet supplier started by mobile telecom provider Safaricom. The availability of a safe payment system promotes internet access and internet buying.
More than 45 percent of Kenyan adults use M-Pesa based on Emergent Payments. Safaricom also recently launched a partnership with PayPal to enable Kenyan clients to easily transfer cash between PayPal and M-Pesa mobile wallets. This collaboration will open international marketplaces to Kenyan entrepreneurs and companies that wish to sell overseas.
Neighborhood Ecommerce Platforms
Selling online in Africa isn’t straightforward. Even Amazon has demonstrated no interest in the African American market. Seventy percent of ecommerce startups are unprofitable based on writer Disrupt Africa’s report”Afri-Shopping: Assessing the African E-commerce Start-up Ecosystem Report 2017.”
Disrupt Africa counts 264 ecommerce start-ups throughout the continent. The biggest websites are in English. The report also claims that 90 percent of investment will startups in five African countries.
Nigeria-based Jumia Group, which was founded in 2012 from the Berlin-based Rocket Internet, has over 3,000 employees and is Africa’s best-funded ecommerce startup. It works in 14 countries in Africa and the Middle East, with each nation having its own website.
Nigeria-based Jumia is Africa’s best-funded ecommerce startup.
In Nigeria, Jumia has produced a logistics infrastructure with over 500 motorbikes and trucks that deliver to clients in the nation’s eight largest cities. Jumia accepts COD, which, again, is the preferred payment method for most Africans. Jumia is also one of Africa’s best-funded ecommerce websites, having raised $150 million in 2014 alone.
Konga.com was set in 2012 in Nigeria and originally sold only baby and beauty products. It doesn’t operate outside of Nigeria. In 2014, Konga opened Seller HQ, a third party marketplace. The site has about 1 million customers and receives over 300,000 unique visits every day.
Konga has its own logistics community — KOS Deliveries — using a fleet of over 200 vehicles (vans, trucks, and motorbikes). Also available are pick-up points and distribution facilities in every part of Nigeria. Konga.com has about 1 million customers.
Konga also provides its own payment system — KongaPay — which works with all banks in Nigeria. The app makes sure that the customer’s cash is held in escrow until a sales transaction is completed successfully.
Kilimall, with headquarters in Kenya, also sells in Nigeria and Uganda. It provides affiliate programs for small African companies in addition to seller programs. Additionally, it sells products from China.
Launched in 2017, Kenyan ecommerce startup Sky.Garden is a SaaS mobile commerce platform which has increased $1.2 million from Scandinavian businesses. Over 3,000 sellers have Sky.Garden web shops and provide 23,000 unique products in 30 distinct categories. It only takes M-Pesa payments from customers and pays all merchants using M-Pesa.
Tiger Global Management formed South Africa’s Takealot in 2011 as a result of an acquisition of an existing ecommerce company. In 2014 Tiger Global spent $100 million in Takealot. Observing that investment, Takealot bought an current logistics firm, Mr. D Delivery, giving it its own delivery system with over 900 drivers.
Besides delivery, Takealot provides pick-ups from its Cape Town warehouse seven days per week. For its market merchants, Takealot offers storage, delivery and satisfaction, and customer support.
South Africa’s Takealot was formed in 2011 as a result of an acquisition. It now owns a shipping company.
The absence of physical retail infrastructure in most of Africa has created a favorable atmosphere for cross-border ecommerce, particularly among millennials who desire Western products, but they wish to buy them from local online businesses offering mobile payment systems in the local currency. But online selling in Africa is so daunting it is a good idea for cross-border merchants to market via an current local platform.
Presently, China dominates cross-border earnings as Africans value inexpensive things, which Chinese merchants can supply in abundance. In countries which were once part of the British Empire, U.K. products are also highly appreciated.
Cross-border sellers must expect most sales to come from Kenya, Nigeria, and South Africa. South Africans are already shopping online on U.S., U.K., and Chinese sites. It’s necessary that cross-border vendors in these states form partnerships with local payment and delivery suppliers.
While the majority of the Africa-based ecommerce websites are marketplaces that welcome third party sellers, they concentrate on small regional businesses. The 1 site that focuses on U.K. and U.S. sellers is Nigeria-based Mall for Africa, which affords Africans the chance to purchase from about 250 U.S. and U.K. sites — such as Amazon, Amazon U.K., and eBay. More than 60 of these websites offer DHL Express shipping.
Offered in 15 countries such as Nigeria, Kenya, Ghana, Rwanda, and Uganda, Mall for Africa has pick-up places in a number of the states it serves so that individuals without physical addresses can receive their goods. Mall for Africa provides its own debit card named Webcard, which is used to store on over 180 U.S. and U.K. websites. Users may reload it with funds through an internet transfer, wire, or via a local credit card. There’s absolutely no transaction fee.