Homegrown Ecommerce On The Rise In Africa

Africa and eCommerce don’t initially seem like a match, though for countries like Nigeria — the economically-booming nation driven by its large oil stake — it has found a way onto the eCommerce map.

In a stark contrast to some of the most impoverished nations in the world, the more developed emerging African countries have managed to make a name for themselves in the eCommerce retail market. The online shopping growth has even seen an uptick from Black Friday sales. This includes a $500 million e-Commerce platform that has emerged in Nigeria.

One huge retailer in particular is Jumia, headquartered in Lagos, Nigeria, imported the concept of Black Friday into their regions. According to Forbes: “Jumia had over 1.5 million visits on Black Friday, it said, up 10 times over Black Friday 2013.” Sure, that’s nothing compared to Amazon or Alibaba, but for a developing county it speaks volumes. Jumia may be a startup but its got big backers like Rocket Internet, a German-based company, which raised $150 million for the eCommerce business.

As Nigeria’s top online retailer, Jumia’s growth rate is worth noting. The company started with three employees and has grown to 1,500 employees and delivers to all 36 states in Nigeria. The eCommerce company was started to mimic Amazon by offering a diverse amount of products and now has a presence in nine countries, including Nigeria, Egypt, Morocco, Kenya and Cote d’Ivoire and Uganda. Last year, the company released a mobile application allowing customers to choose shop from an online base of 50,000 products.

Growing eCommerce in developing African nations takes time, but Jumia has focused its efforts on growing while building consumer trust. Pay on delivery is one option the eCommerce company offers to assure customers they will only pay for a product once received, eliminating potential trust issues. For startups in these countries, it’s not about getting people to shop, it’s about getting them to shop online. That’s quite the opposite of some U.S. retailers.

“For these companies, Black Friday isn’t just a chance to increase sales or push their ledgers into the black — it’s a way to convert people to a new way of buying,” Author Elizabeth MacBride wrote in Forbes.

Beyond eCommerce, there’s the concept of mobile payments that’s emerging in Africa. It’s in early stages, but it’s developing with the help of mobile payment companies wanting to capture the market. Many firms are entering the African market, but companies like TrustPay want to in a more comprehensive manner.

“Perhaps one of the biggest problems faced by the African mobile payments space is that there are several firms involved, and some firms actually stop working when they butt up against another country’s border,” Payment Week reported. But TrustPay works to unite merchants instead of working to simply get consumers to use the platform. “With TrustPay however, firms can actually work better together, being connected into a central and cohesive nexus of sorts. …Since the TrustPay system can be added to almost any payment system via an API, that lends credence to the argument that TrustPay might prove to be something of a universal platform.”

To spur mobile payments and eCommerce growth, that also means ensuring Africa has a effective payment system that can “handle micro payments with transaction costs that are reasonable. Microsoft and Skill have teamed up with a solution the companies say will bridge the gap between affordable and accessible payment options.

“Through the platform, users will now be able to use their mobile wallets and digital currency to buy from Africa’s online merchants, including iROKOtv, Spinlet, and a range of social gaming providers – all at a fraction of the cost of a typical online transaction. It can also be used to send international remittances more cost effectively,” Business Tech reported, which suggested the payments option is a good start for the region. “Skrill may turn out to be an answer rather than the answer to Africa’s payments pain barrier but something that unlocks digital payments is as good a start as we’re going to get. More and better will follow as the mobile operators get the hang of content and services and people paying for them.”

Africa’s fast urbanization and growing youthful population that embrace technology is reason enough to help booster eCommerce in developing countries, according to Nilesh Pandya, SVP of emerging markets at Skrill.

“Disposable incomes are rapidly increasing, making discretionary spend on e-commerce an immediate reality. These conditions deliver the perfect storm for a massive surge in consumer demand for digital payments,” he said in an African Business Review article. “However, a high percentage of Africans remain unbanked and so have no means of paying for global online brands. Even banked Africans often find that global online merchants are reluctant to serve these markets for credit and debit card transactions due to perceived fraud risks.”

Putting mobile payments aside, just how big of a force will eCommerce be in Africa? It’s going to “dominate African retail markets,” said Elias Schulze, CEO of Africa’s eCommerce site Kaymu.com.

“We believe the knock-on effects in terms of democratizing commerce for the hungry SME sector will be tremendous … from increasing market efficiency and price finding to creating literally millions of jobs to support Africa’s demographic shifts, he told PC World. “We anticipate various adoption rates based upon how quickly internet penetration deepens, education levels grow, GDP per capita shifts and existing retail backbone shifts. Overall, we shouldn’t be surprised if significant portion of retail, and perhaps the majority in key markets, is captured within eCommerce by 2020.”

That eCommerce forecast aligns with that of Thecla Mbongue, a senior research analyst at Ovum, a London-based firm. The firm’s Digital Africa Survey reported “46 percent of the poll’s respondents believe that eCommerce will be the most important digital service generating increased revenue for African industry over the next five years.”

“The increased level of data connectivity, mobile financial services and usage of smartphones will boost traffic on e-commerce platforms,” Mbongue said. “I believe we are all working to crack, at varying degrees of success depending on the firm, the inherent challenges of working in frontier Africa —- logistics, infrastructure, internet penetration and seller/buyer awareness.”

Although Africa’s eCommerce trend is on the move, some analysts aren’t quite as optimistic.

“I believe it’s possible for certain e-commerce verticals to represent the lion’s share of African retail in key markets — but that’s not the full story,” Johann van Tonder, told PC World. Tonder is a consultant with AWA digital, made up of eCommerce conversion specialists in the U.K. and South Africa. He predicted that by 2025, eCommerce would account for 10 percent of all retail sales across Africa’s emerging markets.

“I don’t see eCommerce on the whole achieving this status within 5 years,” Tonder said.

Africa may not produce the next Amazon or Alibaba, but for a region facing its own series of challenges, having African nations on the eCommerce map speaks to the power or localized and global eCommerce as an industry. Who knows? Maybe someday Africa will produce the next major eCommerce platform. At the rate it’s growing, Africa’s developed regions are poised to produce online.