From the early days of trade by barter to the days of online shopping, commerce has come a long way. Consumers no longer have to wait long periods to get their goods delivered or limit themselves to trading within their environs. Now, consumers can place orders from the comfort of their homes and have them delivered in a short time, ranging from a few hours to a few days.
This increase in convenience has led to a corresponding increase in consumer spending. In Africa, the average spending by online shoppers has risen steadily over the years.
How much progress has the industry made?
In 2020, the African e-commerce market was estimated to be worth $20 billion, and between 2014 to 2018, the number of online shoppers on the continent increased annually, at an average growth rate of 18%, higher than the global average of 12%.
At the Future Of Commerce, experts from across the continent will discuss the most important trends happening in e-commerce and the industry’s growth potential. Click here to sign up for the event.
The e-commerce industry is a powerful driver of development in the African economy, positively impacting sellers, buyers, and the market in general. E-commerce is eroding the geographical walls that once limited trade between parties on different continents.
For sellers, they can now expand their geographical reach to target more customers, while buyers now have more options to choose from. Having more options means that they can get more value for their purchases and shop as it suits their convenience. The industry has seen growth driven by the likes of Jumia, Konga, Takealot, Kilimall and other players.
The pandemic has also contributed to the growth of the industry. The resulting lockdowns caused a surge in the use of e-commerce platforms as it meant that online shopping became more of a necessity than a preference. This has resulted in a corresponding increase in digital and economic transformation.
What are the challenges?
The current growth trajectory of e-commerce on the continent is burdened primarily by issues around logistics, internet penetration, payments, regulation and consumer trust.
Efficient last-mile delivery is hindered by the paucity of functioning transport networks, which results in delayed deliveries; as well as the poor naming and numbering of streets which results in shipping errors. These factors limit the efficiency of intra-national and international trade.
E-commerce is also nothing without payment gateways and solutions. By 2019, 57% of Africa’s adult population was underbanked, and even though fintech companies consistently churn out payment solutions in a bid to cater to the needs of consumers, cash on delivery (CoD) remains a fan favourite where payment is concerned.
Cash is tangible, and to a lot of consumers, more trustworthy. However, CoD comes with a high amount of risk, both for merchants and delivery agents. This means that the problem is not necessarily about increasing the availability of safe and convenient digital payment solutions, but rather increasing adoption.
What about internet penetration? In 2020, only 28% of African households in urban areas had access to the internet. This may be due to the high cost of internet data in some African countries, and even the cost of smartphones. “For penetration rates to reach their potential, high smartphone costs need to be addressed. Ensuring there are no tariffs on smartphones, especially on more affordable models, will help individuals in villages afford the technology,” said Juliet Anammah, Chairwoman of Jumia Nigeria and Group Chief Sustainability Officer.
“This will encourage more people to migrate from traditional mobiles to smartphones, thus increasing internet access and penetration,” she added. GSMA estimates that mobile internet users in Africa will increase to 475m by 2025, nearly double the 272m users in 2019, but to meet these estimates, these limiting factors have to be addressed first.
At the Future Of Commerce, stakeholders in e-commerce, payments and logistics will discuss the biggest growth indicators for commerce on the continent and the major shifts coming to how we buy and sell. Click here to sign up for the event.
How can we build the future?
Charting a path forward for commerce must take into consideration improvements in connectivity, logistics and payments. In logistics, for instance, drone delivery and crowdsourced delivery can be the solution to navigating the poor road network in many African countries.
Consumer trust, on the other hand, will increase by further educating consumers about the safety and transparency of digital payments. To support this, data protection and consumer protection laws should also be put in place, as consumer confidence will spring not only from the efforts of e-commerce platforms but regulators and policymakers as well.
On the 24th of September, TechCabal will be hosting the Future of Commerce conference to discuss all the major shifts coming to how we buy and sell. The conference will feature industry heavyweights like Juliet Anammah – Chairwoman, Jumia Nigeria and Group Chief Sustainability Officer, Ray Youssef – CEO, Paxful, Nkebet Mesele – Senior Director (Solutions Management), Visa Sub-Saharan Africa and many others.