Ecommerce in Africa- Rise of the Machines.

  |   Business   |   13 Comments

Contrary to popular belief, ecommerce and online shopping is becoming more and more popular in the African continent. From large business houses to small startups all are looking forward to harness the convenience of an online store. This is the one business model that is churning out the most number of success in the continent. With drastically less capital equity investment ecommerce is providing a very short ROI and breakeven to African businesses. Continue reading Ecommerce in Africa- Rise of the Machines.

The ecommerce ecosystem

 

The world of ecommerce constitutes of a variety of players who are all contributing to this ecosystem to make it easy and convenient for any entrepreneur to enter. While the African countries financial regulators are creating policies that favor electronic transactions in order to create a cash less society, aggressive banks are reaching out to the mass with convenient electronic payment systems. Private switch and gateway providers are slashing their onboard fees to tap the growing ecommerce industry and ICT companies are creating inexpensive shopping carts to provision a complete ecommerce site within a fortnight. Telecom companies are providing a far more stable data connection when compared to 5 years ago and with year on year reduced rates on data consumers are finding it very easy to do online shopping rather than driving to a conventional store. The logistics and shipping companies have also become more professional and economical in their services allowing buyers in remote African towns to buy latest consumer products online, which earlier was not possible in a conventional brick and mortar model.

Ecommerce Hubs in Africa

 

In recent years, the fastest movement on ecommerce is being observed from all 4 directions within Africa. While South Africa is leading the quantum on online shopping in the South, countries like Nigeria is fast becoming the ecommerce hub for Western Africa, while Kenya for the East African markets. Egypt is leading the ecommerce industry for the Northern African markets. Nigerian Banks like UBA and GTB are spreading its operations across the Sub Saharan Africa providing the banking convenience to the online buyer and seller, online payment gateway providers like Interswitch and eTransact are also operating aggressively in more than 8 Sub Saharan countries to harness the electronic payment space while providing a local and easy platform for online shopping. Large global players like Paypal have chosen not to operate within Africa, which has provided an uncompetitive market to local African players to gain its market share.

Top Nigerian Ecommerce Sites.

Barriers to Success

 

One large, yet surmountable, barrier that stands between many African entrepreneurs and a successful business is the continents diverse payment landscape. Due to less competition in the payment gateway space, onboarding and transaction commissions are still on the higher side.

 

M-Pesa, for example, is popular in Kenya, Tanzania and Uganda – three countries where there are more mobile money accounts than bank accounts. However, some merchants are wary of M-Pesa and other mobile money providers because the system is arguably new and not fully understood by all in business. In the case of M-Pesa, entrepreneurs are fighting misinformation and misunderstanding more than they are any form of scam because direct cash transfer systems like M-Pesa is incredibly safe.

 

Conversely, Nigerians tend to prefer the Interswitch Verve card – offered through over a dozen major banks in the country. Ten million Interswitch Verve cards are in circulation – far outnumbering MasterCard and Visa, so anybody who wishes to sell to the Nigerian market will want to accept Verve payments and carefully weigh their other options to ensure they are selling to a wide audience while keeping an eye on the costs of processing payments from such a variety of payment options.

 

Many ecommerce startups are still ignoring the global standards of trust and security compliance which is still causing a barrier to a large amount of consumers to shop online.

Read the 5 biggest Mistakes when starting an e-commerce website. 

 

Market Potential

 

A MasterCard Worldwide Online Shopping Survey showed significant increase in online shopping among South Africans in 2013, with 58% of respondents saying they use the Internet for online shopping. This is an increase from the 44% who did online shopping in 2009, and 53% from 2010.

 

In Nigeria and other African countries, a growing generation of young, internet-savvy individuals have embraced new, online technology. The International Telecommunication Union (ITU) has documented an increased internet penetration in sub-Saharan Africa. The numbers of users are still far below the world average of around 30%, but are increasing as Africans become more familiar and proficient with online shopping. E-commerce activities have expanded in Nigeria, South Africa and Kenya both due to the proliferation of mobile phones and availability of faster internet networks.

 

In South Africa, 51% of individuals with internet access shop online. In Kenya, 18-24% make online purchases. In Nigeria approximately 28% of the population has internet access according to ITU figures. The number of mobile cell phone subscriptions has topped 87 million. A new group of internet developers are eager to increase buying options by providing discounted deals on a wide range of products and services. Analysts indicate that a lack of convenient and reliable electronic payment services for online shoppers is a major problem confronted throughout Africa.

Check the info graphic on Online Vs Offline shopping.

 

 

About STPL

 

STPL provides complete end to end consulting to start an ecommerce business. With global best practice consultants, STPL provides quality advice on strategy, go to market, SEO and online marketing, security compliance, online store management, retail best practice, IT infrastructure and shopping cart.

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Palash Bagchi

Executive Director at STPL Global
Palash is an experienced business leader with exposure to industries of Civil and Construction, Education, Information Technology, Banking and Financial Services, Telecommunications, and Energy & Utility. He has been engaged with the world's top organizations and imbibed skills of process standardization, global risk management, sales and marketing, and alliance management. Palash is experienced in various emerging markets including Africa, South Asia and South East Asia and has lived and operated in these geographies. He holds a Bachelors Degree in Civil Engineering and has studied Finance from IIM, Calcutta. He provides strategic direction to his organization and is instrumental in creating the operating ecosystem.

Latest posts by Palash Bagchi (see all)

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