E-Commerce in Africa

August 6, 2015

Africa’s e-commerce sector is expected to see continued strong growth, of 20-29 per cent this year. More and more players are getting into the e-commerce game, such as online merchants, payment-service providers, order fulfilment providers, tech start-ups and telecoms, and foreign interests as well, encouraged by “digital economy” initiative being implemented across the continent. Undoubtedly,e-commerce in Africa is very tough and competitive sector.According to the latest study, there is going to be tough competition for e-commerce. Large players will have to spend a lot of money to gain a share of the market. We recommend that small and medium-sized e-commerce businesses should focus on segmented marketing targeted at their particular market.The rapid increase in mobile Internet users had been helping e-commerce to grow actively in the last few years. According to research,by 2020, Africa is projected to have nearly 300 million smartphone users, with mobile-phone penetration reaching 90 per cent, giving the continent the 4th-largest smartphone-user population worldwide.This rapid increase of smartphone penetration and mobile Internet users is the key factor driving rapid growth of online shopping in Africa.

This has obliged all stakeholders included retailers, e-commerce businesses, e-marketplaces, e-payment providers, and logistics companies to focus more on this sector. If they do not, they will lose customers to the other online shopping sites or miss business opportunities.I know of several South Africa and East Africa companies that would launch a new e-commerce service next quarter as part of their strategy to grow by 10-30 per cent this year. “This year, our growth comes from an increase in merchant numbers, adjusted internal processes, focusing on the mobile channel, and conducting marketing and promotion. We have a marketing budget of more than $4m” an insider for one the Cape Town recently revealed to me.In Kenya,telecom-related including devices, accessories, SIM cards, and premium packages and content are some of the fastest selling with Safaricom being the market leader. The sales goal of Safaricom online Store this year is to sell hundred of thousands of mobile phones, while the marketing goal is to be a “top of mind” store for Kenyans and East African region in general.

M-Pesa convenient payment is one of the factors in the Safaricom shop’s success. In South Africa, customers can pay cash on delivery or via credit or debit cards, automated teller machines, Internet banking, or over the counter at outlets nationwide.”Online business in South Africa is rapidly increasing. According to the latest research in June, a lot of people do online shopping via smartphone. South Africa has the highest ratio with 27 per cent of smartphone users doing mobile shopping. Therefore, there are huge opportunities for online business in South Africa,” thats according to a senior manager of an online shopping firm based in Cape Town.However, one of the disadvantages faced by online businesses in Africa right now is price wars. Many players have absorbed losses after offering big discounts to attract customers to their online shops. Meanwhile, logistics costs in Africa are still high especially in landlocked countries.”Online shopping cannot allow customers to try and touch products before purchase. Card use is still limited as people are concerned about security,””according to a study conducted last year.

“We see our digital-channel footprint from a holistic perspective where all channels can benefit from each other. In terms of portfolio, we used to have the same portfolio of handsets, packages and offers as the other channels, but especially due to advanced customer understanding we can now offer more and more personalized products and services. And this portfolio will only continue to grow in the big-data age,” a Tanzanian based e-commerce firm manager revealed to your blogger.”When you look at growth rates for e-commerce transactions we have just started, I think overall revenue through digital channels will double in the coming year in Arusha, Dar Es Salaam, Mwanza and Tanga” he said.E-commerce in Africa currently accounts for about 2 per cent of the retail industry, while globally, it is more like 6 per cent. By 2020, it should pass 20 per cent.Leading companies strategy is to harness their strengths, both online and offline, to increase the competitiveness such as next-day delivery, flash deals, and click and collect. Several companies have prepared thousands of square-metre warehouse that can support online sales of up to $2m. For now, they offers online shopping via websites and mobile sites only.With consumers going online for shopping, merchants who are not part of the e-commerce trend will be out of the era and unable to reach a large number of customers.

Contador Harrison